<PAGE>
 
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ______________________


                                   FORM 10-Q


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

For the quarterly period ended December 31, 1995

                                   OR

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

For the transition period from ........ to ........

Commission file number 1-10307


                         ______________________________


                           IMPERIAL HOLLY CORPORATION
             (Exact name of registrant as specified in its charter)

        Texas                                  74-0704500
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)             Identification No.)

      One Imperial Square, Suite 200, P.O. Box 9, Sugar Land, Texas 77487
          (Address of principal executive offices, including Zip Code)

                                 (713) 491-9181
              (Registrant's telephone number, including area code)


     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

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of February 9, 1996.

                               10,310,910 shares.


                        Exhibit Index Appears on Page 14

                              Page 1 of 55 Pages


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<PAGE>
 
                           IMPERIAL HOLLY CORPORATION


                                     Index

<TABLE>
<CAPTION>
                                                                                      Page
<S>                                                                                   <C>    
PART I - FINANCIAL INFORMATION
 
     Item 1.  Financial Statements
 
           Consolidated Balance Sheets                                                  3
 
           Consolidated Statements of Income                                            4
 
           Consolidated Statements of Cash Flows                                        5
 
           Consolidated Statement of Changes in
           Shareholders' Equity                                                         6
 
           Notes to Consolidated Financial Statements                                   7
 
     Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations                             9
 
PART II - OTHER INFORMATION

      Item 6.  Exhibits and Reports on Form 8-K                                        12
</TABLE> 

                                     - 2 -

<PAGE>
 
                         PART I - FINANCIAL INFORMATION

                  IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                             December 31, 1995     March 31, 1995
                                             ------------------  ----------------- 
         ASSETS                                        (In Thousands of Dollars)
<S>                                          <C>                 <C>
CURRENT ASSETS:
  Cash and temporary investments                      $  6,543           $  1,686
  Marketable securities                                 34,842             35,079
  Accounts receivable                                   46,083             38,234
  Inventories:                                                     
    Finished products                                   92,198            100,540
    Raw and in-process materials                        38,755             22,633
    Supplies                                            11,986             11,990
  Manufacturing costs prior to production                3,295             11,969
  Prepaid expenses                                       4,435              4,394
                                                      --------           --------
      Total current assets                             238,137            226,525
                                                                   
NOTES RECEIVABLE                                         1,216              2,445
                                                                   
OTHER INVESTMENTS                                        6,691              6,450
                                                                   
PROPERTY, PLANT AND EQUIPMENT - net                    126,191            128,952
                                                                   
OTHER ASSETS                                             6,710              9,752
                                                      --------           --------
      TOTAL                                           $378,945           $374,124
                                                      ========           ========
  LIABILITIES AND SHAREHOLDERS' EQUITY                             
CURRENT LIABILITIES:                                               
  Accounts payable -- trade                           $ 53,467           $ 44,756
  Short-term borrowings                                 71,170             61,092
  Current maturities of long-term debt                      13                 51
  Other current liabilities                             28,189             33,421
                                                      --------           --------
      Total current liabilities                        152,839            139,320
                                                                   
LONG-TERM DEBT                                          89,800            100,010
                                                                   
DEFERRED TAXES AND OTHER CREDITS                        25,349             24,817
                                                                   
SHAREHOLDERS' EQUITY                                               
  Preferred stock                                            -                  -
  Common stock                                          32,241             32,046
  Retained earnings                                     71,864             72,854
  Unrealized securities gains - net                      7,410              5,635
  Pension liability adjustment                            (558)              (558)
                                                      --------           --------
      Total shareholders' equity                       110,957            109,977
                                                      --------           --------
      TOTAL                                           $378,945           $374,124
                                                      ========           ========
</TABLE>

                See notes to consolidated financial statements.

                                     - 3 -

<PAGE>
 
                  IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                                  Three Months Ended          Nine Months Ended
                                                     December 31,                December 31,
                                              --------------------------  --------------------------
                                                  1995          1994          1995          1994
                                              ------------  ------------  ------------  ------------
                                                            (In Thousands of Dollars)
<S>                                           <C>           <C>           <C>           <C>
 
NET SALES                                     $   171,569   $   147,776   $   486,179   $   459,172
                                              -----------   -----------   -----------   -----------
 
COSTS AND EXPENSES:
  Cost of sales                                   157,809       130,867       443,944       413,918
  Selling, general and administrative              14,608        14,637        43,213        42,285
  Cost of work force reduction                        475             -           475             -
                                              -----------   -----------   -----------   -----------
    Total                                         172,892       145,504       487,632       456,203
                                              -----------   -----------   -----------   -----------
 
OPERATING INCOME (LOSS)                            (1,323)        2,272        (1,453)        2,969
 
INTEREST EXPENSE                                   (2,723)       (2,870)       (8,445)       (8,057)
 
REALIZED SECURITIES GAINS (LOSSES)- NET             2,226           (89)        5,388         1,649
 
OTHER INCOME -- Net                                   967           724         2,821         3,230
                                              -----------   -----------   -----------   -----------
 
INCOME (LOSS) BEFORE INCOME TAXES                    (853)           37        (1,689)         (209)
 
PROVISION (CREDIT) FOR INCOME TAXES                  (434)          (70)         (506)         (172)
                                              -----------   -----------   -----------   -----------
 
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM              (419)          107        (1,183)          (37)
 
EXTRAORDINARY ITEM - NET OF TAX                       224             -           604             -
                                              -----------   -----------   -----------   -----------
 
NET INCOME (LOSS)                             $      (195)  $       107   $      (579)  $       (37)
                                              ===========   ===========   ===========   ===========
 
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
 
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM       $     (0.04)        $0.01   $     (0.12)  $      -
 
EXTRAORDINARY ITEM - NET OF TAX                      0.02             -          0.06             -
                                              -----------   -----------   -----------   -----------
NET INCOME (LOSS)                             $     (0.02)        $0.01   $     (0.06)  $     -
                                              ===========   ===========   ===========   ===========
 
WEIGHTED AVERAGE SHARES OUTSTANDING            10,305,527    10,268,278    10,297,010    10,262,337
                                              ===========   ===========   ===========   ===========
</TABLE>

                See notes to consolidated financial statements.


                                     - 4 -

<PAGE>
 
                  IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                                         Nine Months Ended
                                                            December 31
                                                          1995       1994
                                                       ---------   --------
                                                      (In Thousands of Dollars)
<S>                                                    <C>         <C> 
OPERATING ACTIVITIES:
 Net income (loss)                                     $    (579)  $    (37)
 Adjustments for non-cash and non-operating items:
  Extraordinary item - net                                  (604)         -
  Depreciation                                             9,434     10,242
  Other                                                   (5,623)    (2,733)
 Working capital changes:
  Receivables                                             (7,849)     8,402
  Advances on raw sugar cargos                                 -     (1,483)
  Inventory                                               (7,776)   (46,184)
  Deferred and prepaid costs                               8,633      7,915
  Accounts payable                                         8,711     17,570
  Other liabilities                                       (5,985)     1,105
                                                       ---------   --------
 Operating cash flow                                      (1,638)    (5,203)
                                                       ---------   --------
INVESTMENT ACTIVITIES:
 Capital expenditures                                     (6,887)    (6,717)
 Investment in marketable securities                      (6,396)    (6,482)
 Proceeds from sale of marketable securities              14,717      4,182
 Proceeds from sale of fixed assets                          847      4,136
 Other                                                     3,688     (1,178)
                                                       ---------   --------
Investing cash flow                                        5,969     (6,059)
                                                       ---------   --------
FINANCING ACTIVITIES:
 Short-term debt:
  Bank borrowings - net                                   23,060     29,826
  CCC borrowings - advancements                          119,833     55,462
  CCC borrowings - repayments                           (132,815)   (70,434)
 Repayment of long-term debt                              (9,319)       (46)
 Dividends paid                                             (411)    (1,231)
 Other                                                       178        130
                                                       ---------   --------
Financing cash flow                                          526     13,707
                                                       ---------   --------
 
INCREASE IN CASH AND TEMPORARY INVESTMENTS                 4,857      2,445
 
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD        1,686        555
                                                       ---------   --------
 
CASH AND TEMPORARY INVESTMENTS, END OF PERIOD          $   6,543   $  3,000
                                                       =========   ========
</TABLE>



                See notes to consolidated financial statements.

                                     - 5 -

<PAGE>
 
                  IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                  For the Nine Months Ended December 31, 1995
                                  (UNAUDITED)

<TABLE>
<CAPTION>
 
                                                       Common Stock
                                                    __________________              Unrealized   Pension
                                                                          Retained  Securities  Liability
                                                    Shares      Amount    Earnings    Gains     Adjustment    Total
                                                  ----------   --------   --------  ----------  ----------   --------
                                                                              (In Thousands of Dollars)
<S>                                               <C>           <C>       <C>       <C>         <C>          <C> 
BALANCE, MARCH 31, 1995                           10,283,445    $32,046   $72,854      $5,635    $ (558)     $109,977

Net income (loss)                                                            (579)                               (579)
 
Cash dividend                                                                (411)                               (411)
 
Employee stock
 purchase plan and
 stock option exercises                               25,381        195                                         195
Change in unrealized
 securities gains - net                                                                 1,775                 1,775
                                                  ----------    -------   -------      ------    -------   -------- 
 
BALANCE, DECEMBER 31, 1995                        10,308,826    $32,241   $71,864      $7,410    $ (558)   $110,957
                                                  ==========    =======   =======      ======    =======   ======== 
</TABLE>


                See notes to consolidated financial statements.

                                     - 6 -

<PAGE>
 
                           IMPERIAL HOLLY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994


  Basis of Presentation -- The unaudited condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect in the opinion
of management, all adjustments, consisting only of normal recurring accruals,
that are necessary for a fair presentation of financial position and results of
operations for the interim periods presented.  These financial statements
include the accounts of Imperial Holly Corporation and its majority owned
subsidiaries (the "Company").  All significant intercompany balances and
transactions have been eliminated in consolidation.  Certain information and
footnote disclosures required by generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.  The financial
statements included herein should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form 10-
K for the year ended March 31, 1995.

  Cost of Sales -- Payments to growers for sugarbeets are based in part upon
the Company's average net return for sugar sold (as defined in the participating
contracts with growers) during the grower contract years, some of which extend
beyond December 31.  The contracts provide for the sharing of the net selling
price (gross sales price less certain marketing costs, including packaging
costs, brokerage, freight expense and amortization of costs for certain
facilities used in connection with marketing) with growers.  Cost of sales
includes an accrual for estimated additional amounts to be paid to growers based
on the average net return realized for sugar sold in each of the contract years
through December 31.  The final cost of sugarbeets cannot be determined until
the end of the contract year for each growing area.  Manufacturing costs prior
to production are deferred and allocated to production costs based on estimated
total units of production for each sugar manufacturing campaign.  Additionally,
the Company's sugar inventories, which are accounted for on a LIFO basis, are
periodically reduced at interim dates to levels below that of the beginning of
the fiscal year.  When such interim LIFO liquidations are expected to be
restored prior to fiscal year-end, the estimated replacement cost of the
liquidated layers is utilized as the basis of the cost of sugar sold from
beginning of the year inventory.  Accordingly, the cost of sugar utilized in the
determination of cost of sales for interim periods includes estimates which may
require adjustment in future fiscal periods.

  Extraordinary Item -- The Company purchased and retired $4.7 million principal
amount in the first quarter and $5.5 million principal amount in the third
quarter of its 8-3/8% senior notes due 1999, resulting in gains which are
reported, net of related income tax expense aggregating $325,000, as an
extraordinary item.

  Pending Acquisition -- The Company has entered into a definitive agreement to
acquire Spreckels Sugar Company, a California based beet sugar processor, for
net working capital plus $3 million, subject to adjustments at closing.


                                     - 7 -

<PAGE>
 
Based on reports provided by Spreckel's parent company, net working capital was
approximately $25 million at December 31, 1995.  Additionally, Spreckels Sugar
Company had non-current liabilities totaling approximately $7 million related
principally to capital leases and employee pension liabilities.  In
consideration of the $3 million, the seller will retain all liabilities for
post-retirement medical costs of Spreckels Sugar Company retirees at date of
closing.  The purchase, which is subject to regulatory approval, is expected to
close during the Company's fourth fiscal quarter.



                                     - 8 -

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

FINANCIAL CONDITION

  The Company finances its working capital and capital expenditure requirements
from a combination of funds generated by operations and short-term borrowing
arrangements, including short-term, secured, non-recourse borrowings from the
Commodity Credit Corporation ("CCC").  CCC loans outstanding at December 31,
1995 totaled $38.2 million.

  The increase in accounts receivable for the nine months ended December 31,
1995 results from higher sales volumes in the current quarter as compared to the
quarter ended March 31, 1995.  The increase in raw and in-process inventory
during the nine months ended December 31, 1995 was primarily due to the seasonal
production schedule of the Company's beet sugar operations.  Net proceeds from
the sale of marketable securities, as well as an increase in short-term
borrowings for the nine months ended December 31, 1995 was used principally to
fund capital expenditures and reduce long-term debt.

  During the nine months ended December 31, 1995, the Company purchased and
retired $10.2 million principal amount of its 8-3/8% senior notes due 1999; the
remaining notes, with an aggregate principal amount of $89.8 million, require
semi-annual interest-only payments prior to maturity. As discussed in the Notes
to Consolidated Financial Statements, the Company has agreed to acquire
Spreckels Sugar Company and expects to incur long-term bank debt to finance the
purchase. Management believes that existing internal and external sources are
adequate to meet its other financing requirements, including fiscal 1996 capital
expenditures, estimated at $8.0 million.

  The Company has entered into a limited partnership agreement with a sugarbeet
growers' cooperative in Washington state to build and operate a new sugarbeet
factory.  The Company's capital commitment primarily consists of certain
production equipment which is not presently in use.

  The Company's marketable securities portfolio is reported at its market value
of $34.8 million at December 31, 1995, $11.4 million in excess of its cost
basis.  In July 1995, the Board of Directors discontinued payment of dividends
on the Company's common stock.

RESULTS OF OPERATIONS

  The Company's results of operations continue to be adversely affected by a
combination of low refined sugar prices and high raw cane sugar prices.  The
Company's average refined sugar selling prices, which have been depressed by an
oversupply of refined sugar from expanded beet sugar production in recent years,
have increased modestly in the current fiscal year.  Spot prices began
increasing during the Company's third fiscal quarter as a result of a smaller
domestic beet sugar crop.  Raw cane sugar costs, although reduced from the peak
levels established during the summer months, continue well above previous years'
levels.  A significant portion of the Company's industrial sales



                                     - 9 -

<PAGE>
 
are made under forward sales contract resulting in a lagging effect of market
price changes on the Company's sugar sales.  The Company enters into forward
purchase contracts for raw cane sugar to reduce its exposure to future price
changes.

  Congress is currently formulating a new Farm Bill. The Senate has passed a
version of the bill which would continue raw cane sugar import restrictions,
would provide that CCC loans will be with recourse unless raw cane sugar import
levels are above a specified level and would eliminate marketing allotments. The
Company is not able to predict if the Senate bill or any other proposal will
become law, nor the effects of such legislation on market prices for refined and
raw sugar, the margins received by the Company on the sugar it sells or the
results of operations of the Company. The domestic sugar industry operated under
marketing allotments imposed by the USDA for the year ended September 30, 1995.
The Company is unable to predict if marketing allotments which expired September
30, 1995 will be re-imposed, or, if re-imposed, what the allotment level for the
total market or the Company's share thereof would be, nor the effect of any such
action on raw and refined sugar prices, margins and the Company's results of
operations.

  Net sales increased $23.8 million or 16.1% for the three months ended December
31, 1995, compared to the same period of the prior year, largely as a result of
increased sugar volume sold, combined with moderately higher sales prices. Sugar
sales volume reflected increases in both beet sugar and cane sugar sales.
Average sugar sales prices increased from the year earlier period due to a shift
in product mix and modest increases in selling prices. For the nine month period
ended December 31, 1995, net sales increased $27.0 million or 5.9% attributable
to both increases in average sugar sales price and increases in sugar sales
volume.

    Cost of sales as a percent of sales increased to 92.0% from 88.6% for the
three month and to 91.3% from 90.1% for the nine month periods ended December
31, 1995 when compared to the prior year's periods. A smaller than expected
sugarbeet crop in the Company's Rocky Mountain and Texas growing areas, coupled
with reductions in sugarbeet acreage in Northern California resulting from last
winter's heavy rains, combined to reduce sugar production and correspondingly
increase unit manufacturing costs at the Company's beet sugar factories. The
unit cost of raw cane sugar purchased increased more than the average sales
price resulting in a decrease in unit margins on cane sugar sales. Domestic raw
cane market prices remain higher than the previous year, and absent similar
increases in refined sugar prices, will continue to negatively impact the
Company's results of operations for at least the remainder of the current fiscal
year. Recent increases in the raw cane sugar import quota have not significantly
reduced raw market prices. The Company purchases sugar beets under participatory
contracts which provide for a percentage sharing of the net selling price
realized on refined beet sugar sales between the Company and the grower. Use of
this type of contract reduces the Company's exposure to inventory price risk on
sugarbeet purchases so long as the contract net selling price does not fall
below the regional minimum support prices established by the USDA. Low refined
sugar selling prices resulted in net selling prices falling below such minimum
support levels in some contract areas during previous years, however net selling
prices are currently above


                                     - 10 -

<PAGE>
 
such minimum levels.  Consequently, the increase in the unit selling price of
refined beet sugar resulted in a modest increase in the unit cost of sugarbeets
purchased.

  Selling, general and administrative expenses were virtually unchanged for the
three months and increased $928,000 or 2.2% for the nine months ended December
31, 1995 compared to the same period of the prior year, as volume related
increases in shipping and warehousing costs were largely offset by reductions in
general and administrative costs.  During its third fiscal quarter, the Company
commenced a cost reduction program in the sales, administrative and
manufacturing overhead areas, including a reduction in force, which is expected
to yield annual cost savings of $8,000,000.  In connection with the reduction in
force, which is expected to be substantially complete by March 31, 1996, the
Company recorded a charge to pre-tax earnings of $475,000 in the quarter ended
December 31, 1995 of which $300,000 has been paid through December 31, 1995.

  Interest expense for the three month period ended December 31, 1995 was lower
than the comparable period of the prior year as a result of lower average long
and short-term borrowings.  For the nine month period, higher average short-term
interest rates more than offset lower average borrowings, resulting in an
increase in interest expense.  Other income -- net for the nine months ended
December 31, 1995 includes gains on the sale of assets of $0.6 million compared
to $1.5 million of such gains in the prior year period.  The extraordinary gains
resulted from the purchase and retirement of $10.2 million principal amount of
8-3/8% senior notes.

  The Company's effective tax rate varies from the statutory tax largely due to
the effect of nontaxable interest and dividends included in income (loss) before
income taxes.



----------------
  The statements regarding future market prices and the other statements which
are not historical facts contained in this report on Form 10-Q are forward-
looking statements that involve risks and uncertainties, including, but not
limited to, market factors, the effect of weather and economic conditions, farm
and trade policy, the available supply of sugar and other factors detailed
elsewhere in this and other Company filings with the Securities and Exchange
Commission.

                                     - 11 -

<PAGE>
 
PART II - OTHER INFORMATION


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

  (a) The exhibits required to be filed with this report are listed in the
Exhibit Index which immediately follows the signatures page of this report.

  Registrant is a party to several long-term debt instruments under which in
each case the total amount of securities authorized does not exceed 10% of the
total assets of Registrant and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii) (A) of Item 601(b) of Regulation S-K, Registrant
agrees to furnish a copy of such instruments to the Securities and Exchange
Commission upon request.

 (b) No reports on Form 8-K were filed during the quarter ended December 31,
1995.



                                     - 12 -

<PAGE>
 
SIGNATURES


  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.



                               IMPERIAL HOLLY CORPORATION
                                      (Registrant)


Dated: February 12, 1996              By:  /s/ James C. Kempner
                                           --------------------
                                  James C. Kempner
                                  President,
                                  Chief Executive Officer
                                  and Chief Financial Officer
                                  (Principal Financial Officer)



                                     - 13 -

<PAGE>
 
                           IMPERIAL HOLLY CORPORATION

                                   FORM 10-Q
                    FOR THE QUARTER ENDED DECEMBER 31, 1995



Exhibit Index


Exhibit                                  Sequential Page Number

  4       Stock Purchase Agreement dated       Page 15
          as of January 8, 1996 by and
          between Holly Sugar Corporation
          and Spreckels Industries, Inc.

 11       Computation of Income Per            Page 55
          Common Share.

 27       Financial Data Schedule

                                     - 14 -