SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC  20549

                                  FORM 10-Q
(Mark One)
 [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended               September 30, 1996
                               ------------------------------------------------
                                      OR

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

For the transition period from                        to
                               ----------------------    ----------------------

                                   33-96808
                           (Commission File Number)

                            Crain Industries, Inc.
              (Exact name of Registrant as specified in charter)

                                   Delaware
        (State or other jurisdiction of incorporation or organization)

                                  43-1714086
                     (I.R.S. Employer Identification No.)

                            101 South Hanley Road
                             St. Louis, MO  63105
                                (314) 719-0100
        (Address, including zip code, and telephone number, including
           area code, of registrant's principal executive offices)

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 the latest practicable date:
<TABLE>
<CAPTION>
                                           Outstanding at
                         Class           September 30, 1996
                 ----------------------  ------------------
                 <S>                     <C>
                 Crain Industries, Inc.
                   Common Stock             1,000 shares

</TABLE>


<PAGE>
<TABLE>

                            CRAIN INDUSTRIES, INC.




                                    INDEX
<CAPTION>
                                                                          Page
PART I - FINANCIAL INFORMATION                                            ----    
<S>                                                                      <C>
Crain Industries, Inc. (A Delaware corporation)

Condensed Consolidated Balance Sheets as of September 30, 1996 and
  December 31, 1995......................................................   1
Condensed Consolidated Statements of Operations for the three and nine
  months ended September 30, 1996 and one month ended September 30,
  1995...................................................................   2
Condensed Consolidated Statements of Cash Flows for the nine months
  ended September 30, 1996 and one month ended September 30, 1995........   3
Notes to Condensed Consolidated Financial Statements.....................   4


Crain Industries, Inc. (An Arkansas corporation) (the "Predecessor")

Condensed Consolidated Statements of Operations for the two and eight
  months ended August 25, 1995...........................................   6
Condensed Consolidated Statement of Cash Flows for the eight months
  ended August 25, 1995..................................................   7
Notes to Condensed Consolidated Financial Statements.....................   8

PART II - OTHER INFORMATION..............................................  13

SIGNATURES...............................................................  14

Exhibit 27.1 Financial Data Schedule.....................................  15
</TABLE>



<PAGE>
<TABLE>

                            CRAIN INDUSTRIES, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share data)
<CAPTION>
                                                   September 30,   December 31,
                                                       1996            1995
                                                   ----------------------------
                                                    (Unaudited)
<S>                                                 <C>             <C>
Current assets:
  Cash and cash equivalents.......................  $    1,822      $    1,983 
  Accounts receivable, net of allowance for
    doubtful accounts of $4,042 and $4,093........      42,167          35,987 
  Inventories.....................................      29,147          33,128 
  Prepaid expenses and other......................       2,420           1,313 
                                                    -----------     -----------
    Total current assets..........................      75,556          72,411 
Property, plant and equipment, net................      45,346          41,975 
Deferred financing costs, net.....................      10,778          12,046 
Intangibles, net..................................      50,097          56,341 
Other assets......................................       1,048           1,085 
                                                    -----------     -----------
    Total assets..................................  $  182,825      $  183,858 
                                                    ===========     ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
  Current maturities of long-term obligations.....  $      123      $      122 
  Accounts payable................................      24,670          19,919 
  Accrued and other liabilities...................       9,455          11,827 
  Accrued interest................................       1,751           5,030 
  Accrued payroll and personnel...................       5,211           3,739 
  Income taxes payable............................       1,029              91 
                                                    -----------     -----------
    Total current liabilities.....................      42,239          40,728 
Long-term obligations, less current maturities....     110,177         116,215 
Other long-term liabilities.......................       4,953           2,633 
Stockholder's equity:
  Common stock, $.01 par value, 1,000 shares
    authorized, 1,000 shares issued and
    outstanding...................................          --              -- 
  Contributed capital.............................      24,428          24,528 
  Retained Earnings (Accumulated deficit).........       1,028            (246)
                                                    -----------     -----------
    Total stockholder's equity....................      25,456          24,282 
                                                    -----------     -----------
    Total liabilities and stockholder's equity....  $  182,825      $  183,858 
                                                    ===========     ===========
<FN>

  See accompanying notes to the condensed consolidated financial statements
</TABLE>



<PAGE>
<TABLE>

                                   CRAIN INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (In thousands)
                                        (Unaudited)


<CAPTION>


                               Three Months      Nine Months       One Month
                                   Ended            Ended            Ended
                               September 30,    September 30,    September 30,
                              ---------------  ---------------  ---------------
                                   1996             1996             1995
                              ---------------  ---------------  ---------------
<S>                           <C>              <C>             <C>

Net sales.................... $       83,234   $      226,191   $       28,388

Operating expenses:
  Cost of goods sold.........         65,883          180,111           23,203
  Selling, general and
    administrative...........          9,112           25,206            2,883
  Depreciation and
    amortization.............          2,529            6,567              492
                              ---------------  ---------------  ---------------
Operating income.............          5,710           14,307            1,810
Other expense (income):
  Interest expense...........          3,079           10,851            1,241
  Amortization of deferred
    financing costs..........            422            1,268              149
Other, net...................             (4)             (24)              28
                              ---------------  ---------------  ---------------

Income before income tax 
  provision..................          2,213            2,212              392
Income tax provision.........            800              938              140
                              ---------------  ---------------  ---------------
 Net income.................. $        1,413   $        1,274   $          252
                              ===============  ===============  ===============

<FN>

   See accompanying notes to the condensed consolidated financial statements
</TABLE>


<PAGE>
<TABLE>

                            CRAIN INDUSTRIES, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (Unaudited)

<CAPTION>

                                                       Nine Months  One Month
                                                          Ended       Ended
                                                         Sept 30,    Sept 30,
                                                          1996        1995
                                                       ------------------------
<S>                                                     <C>         <C>
Cash flows provided by (used in) operating
  activities:
  Net income..........................................  $   1,274   $     252 
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation....................................      5,516         410 
      Amortization of intangible assets...............      1,051          82 
      Amortization of deferred financing costs........      1,268         148 
      Change in assets and liabilities:
        Accounts receivable...........................     (6,180)       (514)
        Inventories...................................       (819)      1,969 
        Prepaid expenses and other....................     (1,077)     (1,042)
        Accounts payable..............................      4,751      (3,123)
        Accrued and other liabilities, net............       (921)     (1,890)
        Other long term liabilities, net..............      2,320          -- 
                                                        ----------  ----------
Net cash from operating activities....................      7,183      (3,708)
                                                        ----------  ----------
Cash flows used in investing activities:  
  Acquisitions, net of cash acquired..................         --    (127,340)
  Capital expenditures, net...........................     (8,887)       (534)
                                                        ----------  ----------
  Net cash used in investing activities...............     (8,887)   (127,874)
                                                        ----------  ----------
Cash flows provided by (used in) financing
  activities:
    Proceeds from issuance of long-term obligations...     73,802     117,400 
    Repayment of long-term obligations................    (69,840)         -- 
    Change in contributed capital.....................       (100)     25,028 
    Financing fees and other..........................         --      (7,572)
    Deferred purchase price payment...................     (2,319)         -- 
                                                        ----------  ----------
Net cash provided by financing activities.............      1,543     134,856 
                                                        ----------  ----------
Net change in cash and cash equivalents...............       (161)      3,274 
Cash and cash equivalents at beginning of the period..      1,983           1 
                                                        ----------  ----------
Cash and cash equivalents at end of the period........  $   1,822   $   3,275 
                                                        ==========  ==========
<FN>

  See accompanying notes to the condensed consolidated financial statements
</TABLE>



<PAGE>
                            CRAIN INDUSTRIES, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (In thousands, except per share data)
                                 (Unaudited)


1.   THE COMPANY

     Crain Industries, Inc. (a Delaware corporation) ("Crain" or the "Company")
     was formed on May 25, 1995 to participate in the acquisition of Crain 
     Industries, Inc. (an Arkansas corporation) (the "Predecessor") and the
     transactions related thereto (the "Acquisition").  Crain is a wholly owned
     subsidiary of Crain Holdings Corp. (a Delaware corporation)("Holdings"). 
     Prior to the Acquisition, Crain conducted no operations other than those 
     incident to the Acquisition.


2.   BASIS OF PRESENTATION

     Unaudited Interim Condensed Consolidated Financial Statements
     -------------------------------------------------------------
  
     The unaudited interim condensed consolidated financial statements reflect
     all adjustments consisting only of normal recurring adjustments which are,
     in the opinion of management, necessary for a fair presentation of
     financial condition and results of operations.  The results for the three
     and nine months ended September 30, 1996, are not necessarily indicative
     of the results that may be expected for a full fiscal year.

     Financial Statements Presented
     ------------------------------

     The Company was acquired on August 29, 1995 from the Predecessor.  The
     Condensed Consolidated Statements of Operations included herein represent
     the three and nine months ended September 30, 1996 and the one month ended
     September 30, 1995.  The Condensed Consolidated Statements of Cash Flows
     included herein represent the nine months ended September 30, 1996 and the
     one month ended September 30, 1995. The one month ended September 30, 1995
     information is provided to enable the users to combine the Company's
     results for the current periods disclosed, with the Predecessor's results
     for the two months and eight months ended August 25, 1995 to provide
     comparable prior year data.

     Statement of Cash Flows
     -----------------------
 
     Interest paid for the nine months ended September 30, 1996 and the one
     month ended September 30, 1995, is approximately $14,304 and $4 
     respectively.  Income taxes paid for the nine months ended September 30,
     1996 and the one month ended September 30, 1995, is approximately $101
     and $0 respectively.

     Income Taxes
     ------------

     The Company accounts for income taxes, in accordance with the provisions
     of SFAS No. 109.


3.   INVENTORIES
<TABLE>
<CAPTION>
     The composition of inventories at September 30, 1996, is as follows:

     <S>                                                           <C>
     Raw materials...............................................  $    21,144
     Finished goods..............................................        8,003
                                                                   -----------
       Total.....................................................  $    29,147
                                                                   ===========
</TABLE>
<PAGE>

4.   CONTINGENCIES

     On December 13, 1995, the Company initiated a lawsuit in the District
     Court of Dallas County, Texas styled Crain Industries, Inc., f/k/a/ Crain
     Acquisition Corp. v. Dude, Inc., f/k/a/ Crain Industries, Inc., H.C.
     "Dude" Crain, Jr., et al., Cause No. 95-12997, seeking money damages based
     on certain allegations of misrepresentation, fraud, and breach of contract
     in connection with the Acquisition.  In August, 1996, the Company settled
     all litigation with the sole shareholder of the Predecessor.  The
     settlement amounted to a $10.0 million reduction in purchase price through
     the cancellation of a $10.0 million note payable owed to the sole
     shareholder of the Predecessor, which resulted in a purchase price
     adjustment to inventory and goodwill.

5.   ASSET PURCHASE AGREEMENT

     On August 30, 1996, the Company signed a definitive agreement to acquire
     the assets of the Comfort Clinic Division ("Comfort Clinic") of Bio
     Clinic Corporation, a subsidiary of Sunrise Medical, Inc. for an aggregate
     cash consideration of $14.0 million. The purchase was consummated on
     October 18, 1996, at which time the Company acquired substantially all of
     the assets of Comfort Clinic, assumed certain liabilities and entered into
     certain leases.  Comfort Clinic is a major manufacturer and distributor of
     therapeutic comfort products, primarily mattress pads and pillows.

<PAGE>
<TABLE>

                            CRAIN INDUSTRIES, INC.
                          (AN ARKANSAS CORPORATION)
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (In thousands)
                                 (Unaudited)

<CAPTION>
                                                     Two Months    Eight Months
                                                       Ended          Ended
                                                     August 25,     August 25,
                                                        1995           1995
                                                    ------------   ------------
<S>                                                 <C>            <C>
Net Sales.......................................... $    44,594    $   172,524 

  Operating expenses:
    Cost of goods sold.............................      36,030        140,953 
    Selling, general and administrative............       7,535         22,372 
    Depreciation and amortization..................         841          3,529 
                                                    ------------  -------------
  Operating income.................................         188          5,670 
    Other expense (income):
      Interest expense.............................         654          2,355 
      Gain on insurance settlement.................          --         (2,434)
      Other, net...................................         166           (531)
                                                    ------------  -------------
  (Loss)income before income tax provision.........        (632)         6,280 
  Income tax provision.............................          --             -- 
                                                    ------------  -------------
  Net(loss)income.................................. $      (632)  $      6,280 
                                                    ============  =============
<FN>


 See accompanying notes to the condensed consolidated financial statements
</TABLE>

<PAGE>

<TABLE>

                            CRAIN INDUSTRIES, INC.
                          (An Arkansas corporation)
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (Unaudited)

<CAPTION>

                                                                   Eight Months
                                                                       Ended
                                                                    August 25,
                                                                       1995
                                                                   ------------
<S>                                                                  <C>
Cash flows provided by (used in) operating
  activities:
  Net income......................................................   $   6,280 
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation................................................       3,312 
      Amortization of intangible assets...........................         217 
      Change in assets and liabilities:
        Accounts receivable.......................................      (2,961)
        Inventories...............................................      (1,297)
        Prepaid expenses and other................................        (472)
        Accounts payable..........................................       5,233 
        Accrued and other liabilities, net........................         946 
                                                                     ----------
Net cash from operating activities................................      11,258 
                                                                     ----------
Cash flows used in investing activities:
  Capital expenditures, net.......................................      (4,887)
                                                                     ----------
Net cash used in investing activities.............................      (4,887)
                                                                     ----------
Cash flows provided by (used in) financing
  activities:
    Proceeds from issuance of long-term obligations...............      48,099 
    Repayment of long-term obligations............................     (47,630)
    Dividends.....................................................      (2,901)
    Changes due from stockholder..................................      (1,516)
                                                                     ----------
Net cash used in financing activities.............................      (3,948)
                                                                     ----------
Net change in cash and cash equivalents...........................       2,423 
Cash and cash equivalents at beginning of the period..............       1,634 
                                                                     ----------
Cash and cash equivalents at end of the period....................   $   4,057 
                                                                     ==========
<FN>

  See accompanying notes to the condensed consolidated financial statements
</TABLE>



<PAGE>
                            CRAIN INDUSTRIES, INC.
                           (AN ARKANSAS CORPORATION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (In thousands)
                                 (Unaudited)

1.   BASIS OF PRESENTATION

     Unaudited Interim Consolidated Financial Statements
     ---------------------------------------------------

     The unaudited interim consolidated financial statements reflect all
     adjustments consisting only of normal recurring adjustments which are, 
     in the opinion of management, necessary for a fair presentation of 
     financial position and results of operations.  The results for the two and
     eight months ended August 25, 1995, are not necessarily indicative of the
     results that may be expected for a full fiscal year.

     Financial Statements Presented
     ------------------------------

     Crain Industries, Inc., (an Arkansas corporation) (the "Predecessor") was
     acquired by Crain Industries, Inc., (a Delaware corporation) (the 
     "Company") on August 29, 1995.  The unaudited Condensed Consolidated
     Statements of Operations for the two and eight months ended August 25,
     1995 and the unaudited Condensed Consolidated Statements of Cash Flows for
     the eight months ended August 25, 1995 are presented herein to enable the
     users to combine the Predecessor's results with those of the Company for
     the one month ended September 30, 1995 to arrive at comparable period
     data.

     Statement of Cash Flows
     -----------------------

     Interest and taxes paid for the eight months ended August 25, 1995 were
     $1,247 and $349, respectively.

     Income Taxes
     ------------

     The Predecessor elected to be taxed under the provisions of subchapter S
     of the Internal Revenue Code, accordingly, taxable income of the
     Predecessor was allocated to the sole shareholder of the Predecessor who
     was responsible for payments of taxes thereon.

<PAGE>
PART I

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The following comments should be used in reviewing the discussion and analysis
of results of operations and liquidity and capital resources.  Crain
Industries, Inc. (a Delaware corporation) (the "Company") was organized in
May, 1995 for the purpose of accomplishing the acquisition of certain assets
and liabilities of Crain Industries, Inc. (an Arkansas corporation) (the
"Predecessor") (the "Acquisition") and prior to the Acquisition, the Company
was not engaged in any activities other than those incidental to the
Acquisition.  The Company has accounted for the Acquisition in accordance with
the purchase method of accounting.

The Company believes that the operating results of the Predecessor are not
directly comparable to the Company's operating results for post-Acquisition
periods due to, among other things, (i) purchase accounting adjustments
relating to the Acquisition, including the amortization of goodwill and
intangibles, (ii) increases in interest expense relating to the financing of
the Company and (iii) anticipated cost savings resulting from the elimination
of certain expenses related to the sole shareholder of the Predecessor.

RESULTS OF OPERATIONS

The following discussion and analysis is based on the historical unaudited
results of operations for the three months ended September 30, 1996 and the
unaudited results of operations for the three months ended September 30, 1995,
along with the historical unaudited results of operations for the nine months
ended September 30, 1996 and the unaudited results of operations for the nine
months ended September 30, 1995.  Included in the three and nine months ended
September 30, 1995 is the two months and eight months ended August 25, 1995 of
the Predecessor and the one month ended September 30, 1995 of the Company.
<TABLE>
<CAPTION>

                                     Three Months Ended    Nine Months Ended
                                        September 30,         September 30,
                                       1996      1995       1996       1995
                                    --------------------  --------------------
                                       (In Thousands)
<S>                                 <C>        <C>        <C>        <C>
Net sales.......................... $ 83,234   $ 72,982   $226,191   $200,912 
Cost of goods sold.................   65,883     59,233    180,111    164,156 
Selling, general and
  administrative...................    9,112     10,418     25,206     25,255 
Depreciation and amortization......    2,529      1,333      6,567      4,021 
                                    ---------  ---------  ---------  ---------
Operating income...................    5,710      1,998     14,307      7,480 

Interest expense...................    3,079      1,895     10,851      3,596 
Amortization of deferred
  financing costs..................      422        149      1,268        149 
Gain on insurance settlement.......       --         --         --     (2,434)
Other (income) expenses............       (4)       194        (24)      (503)
                                    ---------  ---------  ---------  ---------
Income (loss) before income taxes..    2,213       (240)     2,212      6,672 
Provision for income taxes (1).....      800        140        938        140 
                                    ---------  ---------  ---------  ---------
Net income (loss).................. $  1,413   $   (380)  $  1,274   $  6,532 
                                    =========  =========  =========  =========
EBITDA (2)......................... $  8,239   $  3,331   $ 20,874   $ 11,501 
                                    =========  =========  =========  =========
Cash flows from operating
  activities....................... $    (87)  $  9,200   $  7,183   $  7,550 
                                    =========  =========  =========  =========

</TABLE>
<PAGE>

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(1) The Predecessor elected to be taxed under the provision of Subchapter
    S of the Internal Revenue Code.  Accordingly, taxable income of the
    Predecessor was allocated to the sole shareholder of the Predecessor who
    was responsible for the payment of taxes thereon.

(2) Earnings before interest, taxes, depreciation and amortization
    ("EBITDA") is not a defined term under Generally Accepted Accounting
    Principles ("GAAP") and is not an alternative to operating income or cash
    flow from operations as determined under GAAP.  The Company believes that
    EBITDA provides additional information for determining its ability to 
    meet future debt requirements; and EBITDA is also one of the financial
    measures in the covenants under the Company's debt instruments.



THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995

Net sales for the three-month period ended September 30, 1996 were $83.2
million, up 14.0% over the $73.0 million of sales for the comparable period of
1995.  This sales growth is primarily the result of an increase in carpet pad
prices necessitated by an increase in raw material prices for scrap foam,
which is a major component of carpet cushion, as well as the strong market
penetration of the Company's carpet pad products, combined with strong sales
in the Company's consumer products.

Cost of goods sold for the third quarter of 1996 increased $6.7 million, to
$65.9 million, over the comparable period of 1995.  As a percentage of sales,
cost of goods sold for the three-month period ended September 30, 1996,
improved to 79.2% from 81.1% for the comparable period of 1995.  The increase
in cost of goods sold over the prior year is due to an increase in sales
volume.  The decrease in cost of goods sold as a percentage of sales was due
to the cost reduction activities put in place by  new management and a shift
in product mix, along with the benefit of utilizing internally produced scrap
in the production of carpet cushion, during the period of scrap price
increases.

Selling, general and administrative expenses for the third quarter of 1996
were $9.1 million, down $1.3 million from the comparable period of 1995. 
Expressed as a percentage of sales, selling, general and administrative
expenses decreased to 10.9% for the three months ended September 30, 1996 from
14.3% for the three months ended September 30, 1995.  The decrease in selling,
general and administrative expenses as a percentage of sales was attributable
to various cost reduction activities implemented by new management, higher
absorption due to the increased sales volume and the elimination of
administrative charges incurred by the Predecessor associated with the sale of
the Company.

<PAGE>

Interest expense increased to $3.1 million for the three months ended
September 30, 1996 from $1.9 million for the three months ended September 30,
1995.  The $1.9 million represents $.7 million for the Predecessor's two
months ended August 25, 1995 and $1.2 million for the Company's one month
ended September 30, 1995.  The increase in interest expense is the result of
the higher debt levels associated with the acquisition.


NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995

Net sales for the nine-month period ended September 30, 1996 were $226.2
million or a 12.6% increase over the $200.9 million of sales for the
comparable period in 1995.  This sales growth is primarily the result of a
price increase necessitated by an increase in higher raw material prices, as
well as the strong market penetration of the Company's carpet pad and consumer
products.

Cost of goods sold for the nine-month period ended September 30, 1996
increased $16.0 million, to $180.1 million, over the comparable period of
1995.  As a percentage of sales, cost of goods sold for the nine-month period
ended September 30, 1996 improved to 79.6% from 81.7% for the comparable
period of 1995.  The increase in cost of goods sold over the prior year is due
to an increase in sales volume and raw material costs.  The decrease in cost
of goods sold as a percentage of sales was due to the cost reduction
activities put in place by new management and a shift in product mix, as well
as the benefit of utilizing internally produced scrap for use in the
production of carpet cushion, during the period of raw material price
increases.

Selling, general and administrative expenses for the nine-month period ended
September 30, 1996 were $25.2 million, down $0.1 million from the comparable
period of 1995.  Expressed as a percentage of sales, selling, general and
administrative expenses decreased to 11.1% for the nine month period ended
September 30, 1996, from 12.6% for the nine-months ended September 30, 1995. 
The decrease in selling, general and administrative expenses as a percentage
of sales was attributable to the higher absorption of fixed costs due to the
increased sales volume and various cost reduction activities implemented by
new management, along with increased administrative charges incurred by the
Predecessor associated with the sale of the Company.

Interest expense increased to $10.9 million for the nine months ended
September 30, 1996 from $3.6 million for the nine month period ended September
30, 1995. The $3.6 million represents $2.4 million for the Predecessor's eight
months ended August 25, 1995 and $1.2 million for the Company's one month
ended September 30, 1995.  The increase in interest expense is the result of
the higher debt levels associated with the Acquisition.


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Interest payments on the Company's senior subordinated notes (the "Notes") and
under the Company's revolving credit agreement (the "Revolving Facility"),
represent significant obligations of the Company.  The Notes require
semiannual interest payments of approximately $6.8 million, on each February
15 and August 15.  Borrowings under the Revolving Facility bear interest at
floating rates and require interest payments on varying dates.  All amounts
under the Revolving Facility outstanding will mature in 2000.

In addition to its debt service obligations, the Company's remaining liquidity
demands are for capital expenditures and for working capital needs.  For the
nine months ended September 30, 1996, the Company spent approximately $8.9
million on capital projects, compared to $5.4 million on capital projects for
the comparable period of 1995.  The Company expects to spend approximately
$6.0 million to $10.0 million annually on capital projects, of which
approximately $3.0 million will be used for maintaining facilities and
equipment.

Net cash provided by operating activities was $7.2 million for the nine months
ended September 30, 1996, which compares to $7.6 million provided by operating
activities for the comparable period of 1995.  The fluctuation is due to the
increase in accounts receivable, partially offset by the increased levels of
payables during 1996, both of which are attributable to increased volumes and
timing of collections and payments.  Cash used in investing activities was
$8.9 million for the nine months ended September 30, 1996 compared to $132.2
million of cash used in investing activities for the nine months ended
September 30, 1995.  The $132.2 million of cash expended during the nine
months ended September 30, 1995 consists primarily of cash paid in association
with the acquisition along with routine capital expenditures.  Cash provided by
financing activities for the nine months ended September 30, 1996 in the amount
of $1.5 million represents a draw down on the Revolving Facility.

<PAGE>
PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings

     On December 13, 1995, the Company initiated a lawsuit in the District
     Court of Dallas County, Texas styled Crain Industries, Inc., f/k/a/ Crain
     Acquisition Corp. v. Dude, Inc., f/k/a/ Crain Industries, Inc., H.C.
     "Dude" Crain, Jr., et al., Cause No. 95-12997, seeking money damages based
     on certain allegations of misrepresentation, fraud, and breach of contract
     in connection with the Acquisition.  In August, 1996, the Company settled 
     all litigation with the Predecessor owner of Crain.  The settlement 
     amounted to a $10.0 million reduction in purchase price through the 
     cancellation of a $10.0 million note payable owed to the Predecessor 
     owner, which resulted in a purchase price adjustment to goodwill and 
     inventory.


Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits

             2.1  Asset Purchase Agreement dated as of August 29, 1996, by and
             among Bio Clinic Corporation, Sunrise Medical Inc., and Crain
             Industries, Inc., previously filed as an exhibit to the Form 8-K
             of Crain Industries, Inc., dated November 1, 1996 and incorporated
             by reference herein.

             27.1 Financial data schedule of Crain Industries, Inc.

         (b) Reports on Form 8-K

             A Form 8-K was filed November 1, 1996 for a notification of the
             acquisition by Crain Industries, Inc., of the assets of the 
             Comfort Clinic Division of Bio Clinic Corporation, which is a
             subsidiary of Sunrise Medical, Inc.

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                                 SIGNATURES





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


                                        CRAIN INDUSTRIES, INC.


Dated:  November 12, 1996               By:        /s/ JAMES N. MILLS
                                            ___________________________________
                                            Name : James N. Mills
                                            Title: Chairman of the Board and
                                                   Chief Executive Officer


                                        By:        /s/ JAMES G. POWERS
                                            ___________________________________
                                            Name : James G. Powers
                                            Title: Chief Financial Officer