UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                        ---------------------------------

                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended: December 31, 1996          Commission File Number: 1-8147



                               MEDIQ Incorporated
             (Exact name of registrant as specified in its charter)



          Delaware                                   51-0219413
  (State or other jurisdiction of                  (I.R.S. Employer
  incorporation or organization)                  Identification No.)



 One MEDIQ Plaza, Pennsauken, New Jersey                    08110
 (Address of principal executive offices)                 (Zip Code)



       Registrant's telephone number, including area code: (609) 662-3200



Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_  No____

As of February 7, 1997, there were 18,513,673 shares of Common Stock, par value
$1.00 per share and 6,300,501 shares of Preferred Stock, par value $.50 per
share, outstanding.


<PAGE>


                                        MEDIQ INCORPORATED AND SUBSIDIARIES
                                          Quarter Ended December 31, 1996

                                                       INDEX

                                                                        Page
                                                                       Number


PART I.  FINANCIAL INFORMATION:

  Item 1.  Financial Statements.

           Condensed Consolidated Statements of Operations-
           Three Months Ended December 31, 1996 and 1995
           (Unaudited)                                                   4

           Condensed Consolidated Balance Sheets-
           December 31, 1996 (Unaudited) and
           September 30, 1996                                            5

           Condensed Consolidated Statements of Cash Flows-
           Three Months Ended December 31, 1996 and 1995
           (Unaudited)                                                   6

           Notes to Condensed Consolidated Financial
           Statements (Unaudited)                                     7-10

  Item 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations.            11-15



PART II.        OTHER INFORMATION:

  Item 5.  Other Information.                                           16

  Item 6.  Exhibits and Reports on Form 8-K.                         16-17

                                       2

<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
                         Quarter Ended December 31, 1996





                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements.



                                       3

<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>


                                                                        Three Months Ended
                                                                           December 31,
                                                                     ------------------------
                                                                        1996           1995
                                                                     ---------       --------

<S>                                                                  <C>            <C>      
Revenues                                                             $  35,483      $  32,093

Costs and Expenses:
  Cost of sales and operating                                           15,589         14,128
  Selling and administrative                                             5,989          5,430
  Restructuring                                                             --          2,200
  Depreciation and amortization                                          7,367          7,423
                                                                     ----------     ---------
                                                                        28,945         29,181
                                                                     ----------     ---------
Operating Income                                                         6,538          2,912

Other (Charges) Credits:
  Interest expense                                                      (6,513)        (6,711)
  Equity participation - repurchase of MEDIQ/PRN warrant               (11,047)            --
  Market appreciation - Cardinal Health stock                            5,192             --
  Other - net                                                              465            414
                                                                     ----------     ---------

Loss from Continuing Operations before
    Income Taxes and Extraordinary Item                                 (5,365)        (3,385)
Income Tax Expense (Benefit)                                             2,126         (1,015)
                                                                     ---------      ----------

Loss before Discontinued Operations and Extraordinary Item              (7,491)        (2,370)

Discontinued Operations (net of taxes)                                  37,241          1,002

Extraordinary Item - Early Retirement of Debt (net of taxes)            (6,464)         1,001
                                                                     ---------      ---------

Net Income (Loss)                                                    $  23,286      $    (367)
                                                                     =========      =========

Earnings per share:
  Primary:
    Continuing Operations                                            $    (.30)     $    (.09)
    Discontinued Operations                                               1.47            .04
    Extraordinary Item                                                    (.25)           .04
                                                                     ---------      ---------
    Net Income (Loss)                                                $     .92      $    (.01)
                                                                     =========      =========

Weighted Average Shares Outstanding                                     25,262         24,581
                                                                     =========      =========

  Fully Diluted:
    Continuing Operations                                            $    (.24)     $    (.06)
    Discontinued Operations                                               1.27            .03
    Extraordinary Item                                                    (.22)           .03
                                                                     ---------      ---------
    Net Income (Loss)                                                $     .81      $      --
                                                                     =========      =========
Weighted Average Shares Outstanding                                     29,230         29,978
                                                                     =========      =========

</TABLE>


            See Notes to Condensed Consolidated Financial Statements

                                       4
<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                   Dec. 31,       Sept. 30
                                                                                     1996           1996
                                                                                   ---------      ---------
                                                                                  (Unaudited)    (See Note)
                                     Assets
<S>                                                                                <C>            <C>
Current Assets:      
  Cash                                                                             $   4,411      $   3,219
  Marketable equity securities                                                               89,604           --
  Accounts receivable - net                                                           37,496         30,233
  Inventories                                                                          6,432          6,614
  Deferred income taxes                                                                4,185          2,447
  Other current assets                                                                 3,796          2,280
                                                                                   ---------      ---------

        Total Current Assets                                                         145,924         44,793

Investment in discontinued operations - restricted                                      --           54,717
Note receivable from MHM                                                               3,775          3,967
Note receivable from NutraMax                                                         13,617           --
Property, plant and equipment - net                                                  121,326        122,706
Goodwill - net                                                                        56,827         58,321
Deferred financing fees                                                                9,254          4,225
Other assets                                                                           8,810          9,134
                                                                                   ---------      ---------

Total assets                                                                       $ 359,533      $ 297,863
                                                                                   =========      =========

                      Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts payable                                                                 $   8,405      $   8,907
  Accrued expenses                                                                    17,957         17,937
  Investment in discontinued operations - net                                          5,050           --
  Federal and state taxes payable                                                      4,732           (310)
  Current portion of long-term debt                                                    8,515          8,520
                                                                                   ---------      --------- 
        Total Current Liabilities                                                     44,659         35,054

Senior debt                                                                          219,651        192,461
Subordinated debt                                                                     27,833         41,229
Deferred income taxes and other liabilities                                           26,395         11,674

Stockholders' Equity                                                                  40,995         17,445
                                                                                   ---------      ---------

Total Liabilities and Stockholders' Equity                                         $ 359,533      $ 297,863
                                                                                   =========      =========
</TABLE>


Note:  The balance sheet at September 30, 1996 has been condensed from the 
       audited financial statements at that date.

            See Notes to Condensed Consolidated Financial Statements


                                       5

<PAGE>

                                                  
                       MEDIQ INCORPORATED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                           December 31,
                                                                                    -------------------------
                                                                                       1996            1995
                                                                                    ---------       ----------
<S>                                                                                <C>              <C>
Cash Flows from Operating Activities:
   Net income (loss)                                                                $  23,286       $    (367)
 
   Adjustments to reconcile net income (loss) to
     net cash provided by (used in) operating activities                              (36,212)          4,188
                                                                                    ---------       ---------     

   Net cash provided by (used in) operating activities                                (12,926)          3,821

Cash flows from investing activities:
   Proceeds from sale of equipment and other assets                                      --               824
   Proceeds from sale of discontinued operations                                       25,265           1,500
   Purchase of equipment                                                               (5,036)         (4,968)
   Repurchase of MEDIQ/PRN warrant                                                    (12,500)           --
   Other                                                                                 (205)           (283)
                                                                                    ---------       ---------     

   Net cash provided by (used in) investing activities                                  7,524          (2,927)

Cash flows from financing activities:
   Borrowings                                                                         214,000          12,042
   Debt repayments                                                                   (199,519)        (14,099)
   Deferred financing fees                                                             (8,151)           --
   Exercise of stock options                                                              264            --
                                                                                    ---------       ---------     

   Net cash provided by (used in) financing activities                                  6,594          (2,057)
                                                                                    ---------       ---------     

Increase (decrease) in cash                                                             1,192          (1,163)
                                                                                    ---------       ---------    

Cash:
   Beginning balance                                                                    3,219           2,966
                                                                                    ---------       ---------     

   Ending balance                                                                   $   4,411       $   1,803
                                                                                    =========       =========
    

Supplemental disclosure of cash flow information:
   Interest paid                                                                    $   7,927       $   3,838
                                                                                    =========       =========     

Supplemental disclosure of non-cash investing and financing activities:
   Equipment financed with long-term debt and capital leases                        $    --         $   2,740
                                                                                    =========       =========
</TABLE>
     


            See Notes to Condensed Consolidated Financial Statements

                                       6


<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note A - Condensed Consolidated Financial Statements

The condensed consolidated balance sheet as of December 31, 1996 and the
condensed consolidated statements of operations and cash flows for the three
months ended December 31, 1996 and 1995 have been prepared by the Company,
without audit. In the opinion of management, all adjustments (consisting only of
normal, recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at December 31, 1996 and for all
periods presented have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's September 30, 1996 Annual Report on Form 10-K.
The results of operations for the period ended December 31, 1996 are not
necessarily indicative of the operating results for the full year.


Note B - Discontinued Operations

On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax";
NASDAQ:NMPC), all of the 4,037,258 shares of NutraMax common stock owned by the
Company at a price of $9.00 per share. The Company received from NutraMax $19.9
million in cash and an interest-bearing promissory note (the "note") in the
amount of $16.4 million. The note matures in July 2003 and bears interest at
7.5% per annum for the first eighteen months. The note is payable when NutraMax
shares owned by the Company, which currently are held in escrow in support of
the Company's 7.50% Exchangeable Subordinated Debentures due 2003, are delivered
to NutraMax upon release from escrow. The NutraMax shares are to be released
from escrow upon the purchase or redemption of the 7.50% debentures. The note
does not bear a market rate of interest for its full term. Accordingly, the
Company discounted the note to $13.6 million and recognized an after-tax gain of
$4.6 million, or $.18 per share. The cash proceeds from this transaction were
used to reduce borrowings under the Credit Agreement (See Note C).

On November 6, 1996, the Company sold substantially all of the assets of MEDIQ
Mobile X-Ray Services, Inc. to Symphony Diagnostics, Inc., a subsidiary of
Integrated Health Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares
of Integrated Health Services common stock with a value of $5.2 million with the
possibility of the Company receiving additional cash consideration based upon
the occurrence of certain future events. The loss on the disposal of these
assets was recorded in fiscal 1996.

On October 11, 1996, PCI Services, Inc., was acquired by Cardinal Health, Inc
("Cardinal"). As a result, the Company received 966,000 shares of Cardinal stock
which, based on the closing price on October 11, 1996, had a market value of
$79.2 million. The Company recognized an after-tax gain of $31.8 million on this
transaction in the first quarter of fiscal 1997. In December 1996, Cardinal's
common stock split 3 for 2 and, as of December 31, 1996, the Company owned
1,449,000 shares which had an aggregate market value of $84.4 million based upon
the closing price of $58.25 per share on that date. Accordingly, the Company
recognized market appreciation of $5.2 million on the Cardinal shares in the
first quarter of fiscal 1997. The


                                       7
<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note B - Discontinued Operations (Continued)

Company sold its Cardinal shares in January 1997 and recognized an additional
pretax gain of $4 million. The Company used a significant portion of the
proceeds to reduce borrowings under the Credit Agreement (See Note C). The
remaining proceeds of approximately $8.2 million were placed in a restricted
account with the Company's lender and such proceeds are available, upon
compliance with certain covenants to repay future indebtedness or to make
investments.

The Company anticipates that the disposal of Health Examinetics, Inc. and
InnoServ Technologies, Inc., its remaining discontinued operations, will be
completed in fiscal 1997.

The investment in discontinued operations as of December 31, 1996 consisted of
(in thousands):

       Current assets                                   $  3,661
       Current liabilities                                 7,046
                                                        --------
       Net current liabilities                            (3,385)
       Net fixed assets                                    2,592
       Other noncurrent liabilities                       (4,257)
                                                        ---------
                                                        $ (5,050)
                                                        ======== 

Revenues from discontinued operations were $1.5 million and $9.8 million in the
first quarter of fiscal 1997 and 1996, respectively.

Note C - Long-Term Debt

On October 1, 1996, the Company, together with MEDIQ/PRN entered into a $260
million Credit Agreement with a group of lenders (the "Credit Agreement"). The
Credit Agreement provides for four separate loans, a Term A loan ($35 million),
a Term B loan ($100 million), an Acquisition Revolver ($100 million) and a
Working Capital Revolver ($25 million). The amounts available under the Credit
Agreement allowed the Company to refinance substantially all of its existing
senior debt, its outstanding lines of credit, all of MEDIQ/PRN's subordinated
debt, and MEDIQ/PRN's $100 million 11 1/8% Senior Secured Notes due 1999. As of
December 31, 1996, the Company had $55 million available under the Acquisition
Revolver and $4 million available under the Working Capital Revolver both of
which were available to the Company upon compliance with certain financial
covenants and/or ratios. In January 1997, the Acquisition Revolver and Working
Capital Revolver were repaid in full from a portion of the proceeds received
from the sale of the Cardinal shares (See Note B).

On January 24, 1997, the Company executed an amendment to the Credit Agreement
increasing the Term B loan by $45 million and the Working Capital Revolver by $5
million. The additional funds are available at the time of consummation of the
acquisition of Universal Hospital Services, Inc. ("Universal") (See Note F).



                                       8
<PAGE>

                       MEDIQ INCORPORATED AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note C - Long-Term Debt (Continued)

The loans bear interest at either the prime rate plus a factor or at a
Eurodollar rate plus a factor. The factor changes quarterly based upon the
Company's leverage ratio. The Company's interest rate on the Term A loan, the
Acquisition Revolver and the Working Capital Revolver is prime (8.25% at
December 31, 1996) plus 1.25% or Eurodollar (5.625% at December 31, 1996) plus
2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar
plus 3.25%. The loans are collateralized by substantially all of the assets of
the Company.

In accordance with the terms of the Credit Agreement, effective November 15,
1996, the Company entered into interest rate hedge transactions which terminate
in January 2000. Under one of these transactions, on $50 million of borrowings,
the Company's base Eurodollar borrowing rate is fixed at 6.26% per annum,
instead of a floating Eurodollar rate. Under the second hedge transaction, on an
additional $50 million of borrowings, the Company's base Eurodollar rate cannot
be lower than 5.25% or greater than 7.43%.

As a result of the refinancing, the Company recognized in the first quarter of
1997, an extraordinary charge of $13 million ($6.7 million net of taxes)
resulting from the write-off of deferred charges and premiums incurred related
principally to the tender offer to purchase the $100 million 11 1/8% Senior
Secured Notes due 1999, and a non-recurring charge of $11 million for the
repurchase of a warrant to purchase 10% of MEDIQ/PRN issued in connection with
financing the KCI acquisition in 1994. The non-recurring charge is reflected in
Other Charges on the Company's Condensed Consolidated Statement of Income.

In October 1996, the Company repurchased $6.7 million of its 7.5% Exchangeable
Debentures at a discount in the open market. The Company recognized an
extraordinary gain of $.3 million, net of taxes and the write-off of deferred
charges related to the debentures in the first quarter of 1997.

Under the terms of the Company's 7.25% Subordinated Convertible Debentures due
2006 ("debentures"), the Company is required to offer to repurchase or redeem a
portion of the debentures if stockholders' equity is $40 million or less at the
end of two consecutive fiscal quarters. As of June 30, 1994 and through
September 30, 1996, the Company's stockholders' equity was less than $40
million. In December 1996 and January 1997, the Company repurchased in the open
market $6.26 million of its debentures at prices approximating face value in
order to satisfy a portion of its redemption obligation. In January 1997, the
Company, through a Special Mandatory Redemption Obligation Offer made to all
bond holders of record on December 28, 1996, repurchased an additional $4.99
million of debentures representing the remaining balance of its obligation to
purchase $11.25 million of debentures for the period ended December 31, 1996. In
addition, the Company repurchased an additional $4.6 million of debentures in
January 1997. The Company's Stockholders' Equity exceeded $40 million as of
December 31, 1996, and as a result, the Company no longer has an obligation to
offer to repurchase or redeem its debentures on June 30, 1997.

On February 13, 1997, the Company notified all holders of its 7.25% subordinated
convertible debentures that the Company has elected to redeem on February 28,
1997 (the "Redemption Date") all of the outstanding debentures at a redemption
price equal to 100% of the principal


                                        9
<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note C - Long-Term Debt (Continued)

amount thereof, together with interest accrued from December 1, 1996 to the
Redemption Date, for a total payment of $1,017.52 per $1,000 principal amount of
debentures. The Company intends to fund the redemption with proceeds from its
existing Credit Agreement, as amended. Accordingly, as of December 31, 1996, the
outstanding balance of the debentures, $27 million has been classified as senior
debt in the Company's Condensed Consolidated Balance Sheet. The debentures were
originally issued in 1986, and an aggregate principal amount of $13.3 million
are currently outstanding.

Note D - Inventories

Inventories, which consist primarily of repair parts for rental equipment and
finished goods held for sale, are stated at the lower of cost (first-in,
first-out method) or market.

Note E - Commitments and Contingencies

On February 10, 1997, the Company was sued in the Superior Court of New Jersey
by its former wholly-owned subsidiary, MHM Services, Inc. ("MHM"; formerly
Mental Health Management, Inc.). The suit challenges the validity of a note
receivable the Company and MHM entered into upon the spin-off of MHM to MEDIQ's
shareholders in August 1993. The Company believes this suit has no merit and
intends to defend the suit vigorously. In addition, MHM has not made the
required February installment on the note. On February 11, 1997 the Company gave
notice to MHM of its default on the note and declared all sums outstanding under
the note to be immediately due and payable. The Company does not believe an
additional reserve on the carrying value of the note receivable is necessary at
this time and is pursuing collection efforts.

Note F - Acquisition of Universal Hospital Services, Inc.

On February 11, 1997, the Company entered into a definitive agreement with
Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the
outstanding shares of Universal for $17.50 per share. Including the assumption
of debt, the total purchase price is approximately $138 million. Universal
provides movable medical equipment to over 3,300 hospitals and alternate care
providers principally through Pay-per-Use equipment management programs. Under
Universal's rental programs, health care providers are charged a per use rental
fee based on actual usage. In addition, Universal sells disposable supplies
related to the equipment it rents. Universal operates in 46 states in five
primary categories - critical care, monitoring, newborn care, respiratory care
and specialty beds.

The transaction is structured as a cash merger that is expected to close in late
March 1997 and is subject to approval by a majority of Universal's shareholders
and Hart Scott-Rodino clearance. The Company will fund the transaction out of
its available funds and existing Credit Agreement, as amended.


Note G - New Accounting Pronouncement

Effective October 1, 1996, the Company formally adopted SFAS No. 123
"Accounting for Stock-based Compensation Plans." The Company will adopt this
statement by disclosing the proforma net income and net earnings per share
amounts assuming the fair value method in the fiscal year end 1997 financial
statements, as required. As a result, the adoption of this statement will not
have any impact on reported results of operations and financial position.

                                       10
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
        RESULTS OF OPERATIONS

The following discussion addresses the financial condition of the Company as of
December 31, 1996 and results of operations for the three month periods ended
December 31, 1996 and 1995. This discussion should be read in conjunction with
the financial statements included elsewhere herein and the Management's
Discussion and Analysis and Financial Statement sections of the Company's Annual
Report on Form 10-K for the year ended September 30, 1996 to which the reader is
directed for additional information.


Results of Operations

Revenues from continuing operations were $35.5 million for the first quarter of
fiscal 1997, as compared to $32.1 million in the prior year period, an increase
of $3.4 million, or 11%. The revenue growth was attributable to a 4.5% increase
in rental revenue and an 11% increase in other revenue, primarily from the sale
of repair parts, accessories and disposable products, and outsourcing services.
The growth in rental revenues was achieved primarily by increased volume through
an expanded customer base, despite a continuing trend in the marketplace of
better utilization of equipment by customers. The Company expects this trend to
continue, with increased potential for its CAMP(R) and CAMP Plus(R) programs as
customers seek to reduce capital and operating expenses.

Operating income increased $3.6 million, or 125%, to $6.5 million, for the first
quarter of fiscal 1997, as compared to $2.9 million in the prior year period.
The improvement in operating income was primarily attributable to revenue growth
and reductions in corporate overhead of $.6 million related to the downsizing of
corporate functions and consolidation of certain activities with the operations
of MEDIQ/PRN that occured in connection with a restructuring. In the first
quarter of fiscal 1996 the Company incurred a restructuring charge of $2.2
million in connection with the downsizing.

Interest expense decreased 3% to $6.5 million for the first quarter of fiscal
1997 primarily as a result of lower interest rates associated with the
refinancing that occurred on October 1, 1996.

In October 1996, the Company incurred a non-recurring charge of $11 million
for the repurchase of a warrant to purchase 10% of MEDIQ/PRN issued in
connection with financing the KCI acquisition in 1994.

The Company's effective tax rates were disproportionate compared to the
statutory rate as a result of the nondeductibility of the expense associated
with the repurchase of the MEDIQ/PRN warrant, goodwill amortization and
non-recognition of certain operating losses for state income tax purposes.

On December 31, 1996, the Company sold to NutraMax Products, Inc. ("NutraMax";
NASDAQ:NMPC), all of the 4,037,258 shares of NutraMax common stock owned by the
Company at a price of $9.00 per share. The Company received from NutraMax $19.9
million in cash and an interest-bearing promissory note (the "note") in the
amount of $16.4 million. The note matures in July 2003 and bears interest at
7.5% per annum for the first eighteen months. The note is payable when NutraMax
shares owned by the Company, which currently are held in escrow in support of
the Company's 7.50% Exchangeable Subordinated Debentures due 2003, are delivered
to NutraMax upon release from escrow. The NutraMax shares are to be released
from escrow upon the purchase or redemption of the 7.50% debentures. The note
does not bear a market rate of interest for its full term. Accordingly, the
Company discounted the note to $13.6 million and recognized an after-tax gain of
$4.6 million, or $.18 per share. The cash proceeds from this transaction were
used to reduce borrowings under the Credit Agreement.

                                       11
<PAGE>


On November 6, 1996, the Company sold substantially all of the assets of MEDIQ
Mobile X-Ray Services, Inc. to Symphony Diagnostics, Inc., a subsidiary of
Integrated Health Services, Inc. (NYSE:IHS) for $5.3 million in cash and shares
of Integrated Health Services common stock with a value of $5.2 million with the
possibility of the Company receiving additional cash consideration based upon
the occurrence of certain future events. The loss on the disposal of these
assets was recorded in fiscal 1996.

On October 11, 1996, PCI Services, Inc., was acquired by Cardinal Health, Inc.
("Cardinal"). As a result, the Company received 966,000 shares of Cardinal stock
which, based on the closing price on October 11, 1996, had a market value of
$79.2 million. The Company recognized an after-tax gain of $31.8 million on this
transaction in the first quarter of fiscal 1997. In December 1996, Cardinal's
common stock split 3 for 2 and, as of December 31, 1996, the Company owned
1,449,000 shares which had an aggregate market value of $84.4 million based upon
the closing price of $58.25 per share on that date. Accordingly, the Company
recognized market appreciation of $5.2 million on the Cardinal shares in the
first quarter of fiscal 1997. The Company sold its Cardinal shares in January
1997 for $88.4 million and recognized an additional pretax gain of $4 million.
The Company used a significant portion of the proceeds to reduce borrowings
under the Credit Agreement. The remaining proceeds of approximately $8.2 million
were placed in a restricted account with the Company's lender and such proceeds
are available, upon compliance with certain covenants to repay future
indebtedness or to make investments.

Revenues and operating loss from discontinued operations were $1.5 million and
$.2 million, respectively, as compared to revenues and operating income of $9.8
million and $1.5 million, respectively, in the prior year period. Estimated
operating results from discontinued operations through the expected date of
disposal were included in the estimated loss on disposal recognized in fiscal
1996.

As a result of the refinancing, the Company recognized in the first quarter of
1997, an extraordinary charge of $13 million ($6.7 million net of taxes)
resulting from the write-off of deferred charges and premiums incurred related
principally to the tender offer to purchase the $100 million 11 1/8% Senior
Secured Notes due 1999.

In October 1996, the Company repurchased $6.7 million of its 7.5% Exchangeable
Debentures at a discount in the open market. The Company recognized an
extraordinary gain of $.3 million, net of taxes and the write-off of deferred
charges related to the debentures in the first quarter of 1997.



                                       12
<PAGE>


The current period reflects several significant non-recurring transactions
as discussed above. In addition, the Company refinanced a significant portion of
its debt and reduced its average borrowing rate. The following table provides a
proforma analysis of the Company's results of operations as if the Company (a)
had not repurchased the MEDIQ/PRN warrant, (b) applied the proceeds from the
sales of its investments in discontinued operations in the first quarter of 1997
to its outstanding debt as of October 1, 1996 and (c) tax affected the
adjustments described in (a) and (b).


<TABLE>
<CAPTION>

                                                 Three Months Ended                          Three Months Ended
                                                  December 31, 1996          Proforma         December 31, 1996
                                                       Actual               Adjustments             Proforma
                                                 ------------------         -----------      -------------------
<S>                                                   <C>                   <C>              <C>     
Revenues                                              $ 35,483                                      $ 35,483

Operating Income                                         6,538                                         6,538

Other (Charges) Credits:
   Interest expense                                     (6,513)                 2,582(b)              (3,931)
   Equity participation - repurchase of
      MEDIQ/PRN warrant                                (11,047)                11,047(a)                --
   Market appreciation - Cardinal Health
       stock                                             5,192                 (5,192)(b)               --
   Other - net                                             465                                           465
                                                      --------                                      --------

Loss from Continuing Operations before
   Income Taxes and Extraordinary Item                  (5,365)                                        3,072
Income Tax  Expense                                      2,126                  (732)(c)               1,394
                                                      --------                                       --------
Loss from Continuing Operations                       $ (7,491)                                     $  1,678
                                                      ========                                      ========
</TABLE>


Liquidity and Capital Resources

Cash used in operating activities was $12.9 million in the current quarter,
as compared to cash provided by operations of $3.8 million in the prior year
period. The decrease was primarily attributable to the payment of interest on
indebtedness more frequently under the Company's new credit facility as compared
to semi-annually in the prior year period, and lower collections of accounts
receivable which were temporarily affected by the implementation of a new
computer system.

Net cash provided by investing activities was $7.5 million, and consisted
cash proceeds from the sales of certain assets of Mobile X-Ray and the Company's
investment in NutraMax aggregating $25.3 million, partially offset by capital
expenditures for equipment of $5.0 million and the repurchase of the MEDIQ/PRN
warrant for $12.5 million.

Net cash provided by financing activities consisted of borrowings of $214
million related to the refinancing, partially offset by debt repayments of
$171.6 million related to the refinancing, $19 million of scheduled debt service
and revolver activity, $8.9 million of subordinated debenture repurchases and
deferred financing fees of $8.2 million related to the refinancing.

On October 1, 1996, the Company, together with MEDIQ/PRN entered into a
$260 million Credit Agreement with a group of lenders (the "Credit Agreement").
The Credit Agreement provides for four separate loans, a Term A loan ($35
million), a Term B loan ($100 million), an Acquisition Revolver ($100 million)
and a Working Capital Revolver ($25 million). The amounts available under the
Credit Agreement allowed the Company to refinance substantially all of its
existing senior debt, its outstanding lines of credit, all of MEDIQ/PRN's
subordinated debt, and MEDIQ/PRN's $100 million 11 1/8% Senior Secured Notes due
1999. As of December 31, 1996, the Company had $55 million available under the
Acquisition Revolver and $4 million available under the Working Capital Revolver
both of which were available to the Company upon compliance with certain
financial covenants and/or ratios. In January 1997, the Acquisition Revolver and
Working Capital Revolver were repaid in full from a portion of the proceeds
received from the sale of the Cardinal shares.

                                       13
<PAGE>


The loans bear interest at either the prime rate plus a factor or at a
Eurodollar rate plus a factor. The factor changes quarterly based upon the
Company's leverage ratio. The Company's interest rate on the Term A loan, the
Acquisition Revolver and the Working Capital Revolver is prime (8.25% at
December 31, 1996) plus 1.25% or Eurodollar (5.625% at December 31, 1996) plus
2.75% and the interest rate on the Term B loan is prime plus 1.75% or Eurodollar
plus 3.25%. The loans are collateralized by substantially all of the assets of
the Company.

In accordance with the terms of the Credit Agreement, effective November 15,
1996, the Company entered into interest rate hedge transactions which terminate
in January 2000. Under one of these transactions, on $50 million of borrowings,
the Company's base Eurodollar borrowing rate is fixed at 6.26% per annum,
instead of a floating Eurodollar rate. Under the second hedge transaction, on an
additional $50 million of borrowings, the Company's base Eurodollar rate cannot
be lower than 5.25% or greater than 7.43%.

Under the terms of the Company's 7.25% Subordinated Convertible Debentures due
2006, (the "debentures") the Company is required to offer to repurchase or
redeem a portion of the debentures if stockholders' equity is $40 million or
less at the end of two consecutive fiscal quarters. As of June 30, 1994 and
through September 30, 1996, the Company's stockholders' equity was less than $40
million. In December 1996 and January 1997, the Company repurchased in the open
market $6.26 million of its debentures at prices approximating face value in
order to satisfy a portion of its redemption obligation. In January 1997, the
Company, through a Special Mandatory Redemption Obligation Offer made to all
bond holders of record on December 28, 1996, repurchased an additional $4.99
million of debentures representing the remaining balance of its obligation to
purchase $11.25 million of debentures for the period ended December 31, 1996. In
addition, the Company repurchased an additional $4.6 million of debentures in
January 1997. The Company's Stockholders' Equity exceeded $40 million as of
December 31, 1996, and as a result, the Company no longer has an obligation to
offer to repurchase or redeem its debentures on June 30, 1997.

On February 13, 1997, the Company notified all holders of its 7.25% subordinated
convertible debentures that the Company has elected to redeem on February 28,
1997 (the "Redemption Date") all of the outstanding debentures at a redemption
price equal to 100% of the principal amount thereof, together with interest
accrued from December 1, 1996 to the Redemption Date, for a total payment of
$1,017.52 per $1,000 principal amount of debentures. The Company intends to fund
the redemption with proceeds from its existing Credit Agreement, as amended. The
debentures were originally issued in 1986, and an aggregate principal amount of
$13.3 million are currently outstanding.

The Company may also use a portion of the new credit facility to redeem or
repurchase its 7.50% exchangeable subordinated debentures. However, except to
the extent required by the terms of the indenture pursuant to which this
debenture was issued, there can be no assurance that any such redemption or
repurchase will occur.

On February 11, 1997, the Company entered into a definitive agreement with
Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the
outstanding shares of Universal for $17.50 per share. Including the assumption
of debt, the total purchase price is approximately $138 million. Universal
provides movable medical equipment to over 3,300 hospitals and alternate care
providers principally through Pay-per-Use equipment management programs. Under
Universal's rental programs, health care providers are charged a per use rental
fee based on actual usage. In addition, Universal sells disposable supplies
related to the equipment it rents. Universal operates in 46 states in five
primary categories - critical care, monitoring, newborn care, respiratory care
and specialty beds. The transaction is structured as a cash merger that is
expected to close in late March 1997 and is subject to approval by a majority of
Universal's shareholders and Hart Scott-Rodino clearance. The Company will fund
the transaction out of its available funds and existing Credit Agreement, as
amended.

                                       14
<PAGE>




The Company expects that its primary sources of liquidity for operating
activities will be generated through cash flows from MEDIQ/PRN. Proceeds from
the sale of discontinued operations and miscellaneous assets will be used to
repay long-term debt. The Company believes that sufficient funds will be
available from operating cash flows, the sale of assets and its credit facility
to meet the Company's anticipated operating and capital requirements.


                                       15
<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
                         Quarter Ended December 31, 1996



PART II.  OTHER INFORMATION


  Item 5.    OTHER INFORMATION.


On February 11, 1997, the Company entered into a definitive agreement with
Universal Hospital Services, Inc. ("Universal") (NASDAQ; UHOS) to acquire the
outstanding shares of Universal for $17.50 per share. Including the assumption
of debt, the total purchase price is approximately $138 million. Universal
provides movable medical equipment to over 3,300 hospitals and alternate care
providers principally through Pay-per-Use equipment management programs. Under
Universal's rental programs, health care providers are charged a per use rental
fee based on actual usage. In addition, Universal sells disposable supplies
related to the equipment it rents. Universal operates in 46 states in five
primary categories - critical care, monitoring, newborn care, respiratory care
and specialty beds. The transaction is structured as a cash merger that is
expected to close in late March or early April 1997 and is subject to approval
by a majority of Universal's shareholders and Hart Scott-Rodino clearance. The
Company will fund the transaction out of its available funds and existing Credit
Agreement, as amended.

On February 13, 1997, the Company notified all holders of its 7.25% subordinated
convertible debentures that the Company has elected to redeem on February 28,
1997 (the "Redemption Date") all of the outstanding debentures at a redemption
price equal to 100% of the principal amount thereof, together with interest
accrued from December 1, 1996 to the Redemption Date, for a total payment of
$1,017.52 per $1,000 principal amount of debentures. The Company intends to fund
the redemption with proceeds from its existing Credit Agreement, as amended. The
debentures were originally issued in 1986, and an aggregate principal amount of
$13.3 million are currently outstanding.

  Item 6.    EXHIBITS AND REPORTS ON FORM 8-K.


    (a) Exhibits:

        Exhibit 4.1(a) - Amendment to Credit Agreement, dated January 24, 1997.
        Exhibit 11     - Computation of Net Income Per Share appears on page 19.
        Exhibit 27     - Financial Data Schedule appears on page 20.

    (b) Reports on Form 8-K

        The Company filed the following report on Form 8-K during the quarter
ended December 31, 1996:

        Date of Earliest Event Requiring Report:  October 11, 1996
        Date of Filing:            October 17, 1996
        Items Reported:            Item 2
        Subject:                   Completion of the previously announced
                                   acquisition of PCI Services,
                                   Inc. by Cardinal Health, Inc.

        Date of Earliest Event Requiring Report:  December 31, 1996
        Date of Filing:         February 4, 1997
        Items Reported:         Items 2, 5 and 7
        Subject:                Sale of Cardinal Health, Inc. common stock in
                                January 1997 and consummation of previously
                                announced sale of Company's investment in
                                NutraMax Products, Inc. on December 31, 1996.


                                       16
<PAGE>


                       MEDIQ INCORPORATED AND SUBSIDIARIES
                         Quarter Ended December 31, 1996


                                    SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                                             MEDIQ Incorporated
                                                            --------------------
                                                                (Registrant)





February 14, 1997
-----------------
    (Date)
                                                 /s/ Michael F. Sandler
                                                 ----------------------------
                                                 Michael F. Sandler
                                                 Senior Vice President - Finance
                                                 and Chief Financial Officer


                                       17
<PAGE>