FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


                       For the quarter ended May 31, 1997

                          Commission file number 0-6953


                             LILLY INDUSTRIES, INC.

             (Exact name of registrant as specified in its charter)



                  INDIANA                                  35-0471010
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                          Identification No.)




                              733 SOUTH WEST STREET
                           INDIANAPOLIS, INDIANA 46225
               (Address of principal executive offices) (Zip Code)

               Registrant's telephone number, including area code:
                                 (317) 687-6700




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  periods 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 registrant's classes of
common stock, as of the latest practicable date.


                 Number of shares outstanding at June 30, 1997:

                      Class A Common            22,735,000
                      Class B Common               312,000



                                  Page 1 of 13



<PAGE>




                          PART I. FINANCIAL INFORMATION


Item 1.  Financial Statements.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)


                                                           Three Months Ended
                                                           May 31       May 31
                                                            1997           1996
                                                         -----------------------

Net sales                                                $ 154,238    $ 131,711

Costs and expenses:
 Cost of products sold                                      95,045       84,237
 Selling, administrative and general                        36,062       28,585
 Research and development                                    4,656        4,618
 Restructuring charge                                            0        9,607
                                                         ---------    ---------

                                                           135,763      127,047
                                                         ---------    ---------

                            OPERATING INCOME                18,475        4,664

Other income (expense):
 Sundry                                                        (29)         173
 Interest expense                                           (4,989)      (3,153)
                                                         ---------    ---------

                                                            (5,018)      (2,980)
                                                         ---------    ---------

                            INCOME BEFORE INCOME TAXES      13,457        1,684

Income Taxes                                                 6,056        1,068
                                                         ---------    ---------

                            NET INCOME                   $   7,401    $     616
                                                         =========    =========

Cash dividends per share--Note B                         $    0.08    $    0.08
                                                         =========    =========
Average number of shares and equivalent shares
 of capital stock outstanding--Note B                       23,400       23,000
                                                         =========    =========

Net income per share--Note B                            $     0.32    $    0.03
                                                         =========    =========


See notes to consolidated condensed financial statements.




                                  Page 2 of 13



<PAGE>



CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)

LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)


                                                             Six Months Ended
                                                           May 31       May 31
                                                            1997         1996
                                                         -----------------------

Net sales                                                $ 296,398    $ 204,982

Costs and expenses:
 Cost of products sold                                     185,157      133,447
 Selling, administrative and general                        70,063       43,454
 Research and development                                    9,251        7,790
 Restructuring charge                                            0        9,607
                                                         ---------    ---------

                                                           264,471      194,298
                                                         ---------    ---------

                            OPERATING INCOME                31,927       10,684

Other income (expense):
 Sundry                                                        121          339
 Interest expense                                          (10,029)      (3,624)
                                                         ---------    ---------

                                                            (9,908)      (3,285)
                                                         ---------    ---------

                            INCOME BEFORE INCOME TAXES      22,019        7,399

Income Taxes                                                 9,908        3,297
                                                         ---------    ---------

                            NET INCOME                   $  12,111    $   4,102
                                                         =========    =========

Cash dividends per share--Note B                         $    0.16    $    0.16
                                                         =========    =========
Average number of shares and equivalent shares
 of capital stock outstanding--Note B                       23,400       23,000
                                                         =========    =========

Net income per share--Note B                             $    0.52    $    0.18
                                                         =========    =========


See notes to consolidated condensed financial statements.




                                  Page 3 of 13




<PAGE>



CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)


                                                         May 31     November 30
                                                          1997         1996
                                                        ------------------------

ASSETS

CURRENT ASSETS
 Cash and cash equivalents                              $   9,321     $   6,790
 Accounts receivable, less allowances
  for doubtful accounts (5/31/97, $2,817;
  11/30/96, $2,706)                                        82,024        84,592
 Inventories--Note C                                       48,681        47,546
 Other                                                     12,219        19,790
                                                        ---------     ---------

                            TOTAL CURRENT ASSETS          152,245       158,718


OTHER ASSETS                                               24,971        23,749

INTANGIBLE ASSETS                                         251,387       258,811

PROPERTY AND EQUIPMENT
 Land, buildings and equipment                            131,153       127,538
 Allowances for depreciation (deduction)                  (50,653)      (46,956)
                                                        ---------     ---------
                                                           80,500        80,582
                                                        ---------     ---------

                                                        $ 509,103     $ 521,860
                                                        =========     =========















See notes to consolidated condensed financial statements.







                                  Page 4 of 13



<PAGE>



CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)


                                                           May 31    November 30
                                                            1997         1996
                                                        ------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
 Accounts Payable                                        $  50,447    $  56,593
 Other                                                      32,844       35,022
 Current portion of long-term debt                          20,520       16,524
                                                         ---------    ---------

                            TOTAL CURRENT LIABILITIES      103,811      108,139


LONG-TERM DEBT                                             230,261      245,037

OTHER LIABILITIES                                           43,665       46,795

SHAREHOLDERS' EQUITY Capital stock:
  Class A (limited voting)                                  15,213       15,103
  Class B (voting)                                             300          300
 Additional capital                                         77,033       75,433
 Retained earnings                                          71,452       62,990
 Currency translation adjustments                              (65)          88
 Cost of capital stock in treasury
  (deduction)                                              (32,567)     (32,025)
                                                         ---------    ---------
                                                           131,366      121,889
                                                         ---------    ---------
                                                         $ 509,103    $ 521,860
                                                         =========    =========











See notes to consolidated condensed financial statements.










                                  Page 5 of 13



<PAGE>



CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>

                                                             Six Months Ended
                                                            May 31       May 31
                                                             1997         1996
                                                         ------------------------
OPERATING ACTIVITIES:
<S>                                                       <C>          <C>      
 Net income                                               $  12,111    $   4,102
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation                                              4,449        3,008
    Amortization of intangibles                               5,881        3,142
    Restructuring charge                                          0        9,607
    Deferred income taxes                                     1,610       (4,000)
    Changes in operating  assets and  liabilities,
      net of effects from acquired business:
       Accounts receivable                                    2,568       (2,475)
       Inventories                                           (1,135)      (4,707)
       Accounts payable and accrued expenses                 (8,324)       1,409
    Sundry                                                      (74)       4,428
                                                          ---------    ---------
      NET CASH PROVIDED BY OPERATING ACTIVITIES              17,086       14,514

INVESTING ACTIVITIES:
 Purchases of property and equipment                         (6,202)      (6,505)
 Payment for acquired business                                    0     (235,000)
 Sundry                                                       4,908         (879)
                                                          ---------    ---------
      NET CASH USED BY INVESTING ACTIVITIES                  (1,294)    (242,384)

FINANCING ACTIVITIES:
 Cash dividends paid                                         (3,649)      (3,606)
 Proceeds from short-term and long-term borrowings                0      278,000
 Principal payments on long-term debt                        (8,780)     (59,578)
 Net payments on revolving note                              (2,000)           0
 Sundry                                                       1,168          779
                                                          ---------    ---------
      NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES      (13,261)     215,595

                                                          ---------    ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              2,531      (12,275)

Cash and cash equivalents at beginning of year                6,790       20,260
                                                          ---------    ---------
      CASH AND CASH EQUIVALENTS AT END OF PERIOD             $9,321    $   7,985
                                                          =========    =========
</TABLE>



See notes to consolidated condensed financial statements.


                                  Page 6 of 13



<PAGE>



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

LILLY INDUSTRIES, INC. AND SUBSIDIARIES

MAY 31, 1997

NOTE A--BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  For further  information,  refer to the  consolidated  financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended November 30, 1996.


NOTE B--SHARE AND PER SHARE AMOUNTS

Equivalent  shares of capital stock represent  additional  shares assumed issued
upon exercise of stock options.


NOTE C--INVENTORIES

The  principal   inventory   classifications   are  summarized  as  follows  (in
thousands):

                                              May 31         November 30
                                               1997              1996

         Finished products                   $ 26,560           $ 25,847
         Raw materials                         30,197             29,375
                                             --------           --------
                                               56,757             55,222
         Less adjustment of certain
         inventories to last in,
         first out (LIFO) basis                 8,076              7,676
                                             --------           --------

                                             $ 48,681           $ 47,546
                                             ========           ========

The Company uses the LIFO method in inventory valuation for approximately 82% of
inventories  where an actual  valuation can be made only at the end of each year
based on the inventory levels and costs at that time. Accordingly,  interim LIFO
calculations  must  necessarily be based on  management's  estimates of expected
year-end  inventory  levels and costs.  Since  these are  subject to many forces
beyond management's  control,  interim results are subject to the final year-end
LIFO inventory  valuation.  The Company estimates the annual adjustment for LIFO
and allocates it to quarters based on actual inflation  experienced in a quarter
as it relates to anticipated inflation for the year.





                                  Page 7 of 13



<PAGE>



NOTE D--RESTRUCTURING

In 1996 the Company  implemented  plans for the  consolidation  of manufacturing
facilities related to the Guardsman acquisition. These plans include the closure
of some Lilly and Guardsman plants and workforce  reductions.  It is anticipated
these plans will be completed by the end of fiscal 1997.

Costs  associated  with the planned  closure of Lilly  facilities  and workforce
reductions  were recorded in the 1996 second quarter as a  restructuring  charge
totaling  $9,607,000,  which reduced net income by $5,284,000 or $.23 per share.
The components of the  restructuring  charge and amounts paid or charged against
these reserves are as follows (in thousands):

                                               Costs Paid       Ending
                                   Provision   or Charged       Balance
Facilities, equipment,
  inventories, and other            $7,827       $  836         $6,991
Termination benefits                 1,780          759          1,021
                                    ------       ------         ------
                                    $9,607       $1,595         $8,012
                                    ======       ======         ======

Costs associated with the planned closure of Guardsman  facilities and workforce
reductions  were  recorded as  liabilities  in the opening  balance sheet of the
combined entity as of the acquisition  date. The components of these liabilities
and  amounts  paid  or  charged  against  these  reserves  are  as  follows  (in
thousands):

                                                   Costs Paid     Ending
                                     Liabilities   or Charged     Balance
Facilities, equipment,
  inventories, and other               $6,532        $3,324        $3,208
Termination benefits                    2,476         1,217         1,259
                                       ------        ------        ------
                                       $9,008        $4,541        $4,467
                                       ======        ======        ======


NOTE E--ACQUISITION

On April 8, 1996 the Company  acquired all the  outstanding  shares of Guardsman
Products,  Inc.  ("Guardsman")  for  $235,000,000  in  cash.  The  Company  used
$275,000,000  of senior  secured credit  facilities to finance the  acquisition,
pay-off existing debt and to pay related expenses.  The acquisition was recorded
using the purchase method and the consolidated  financial statements include the
results of operations of Guardsman since the date of acquisition.


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

Second quarter sales and net income were records for a second  quarter.  For the
three months ended May 31, sales rose 17% to $154.2 million compared with $131.7
million for the same quarter last year.  Second quarter net income  increased to
$7.4 million,  up 25% from last year, before last year's  restructuring  charge.
Net income  per share  increased  to  32(cent)  from  26(cent)  last year,  on a
comparable basis.



                                  Page 8 of 13



<PAGE>



The 1997 second  quarter was the best second  quarter in the Company's  history.
Sales, operating income, net income and net income per share each set new second
quarter  records.  Earnings  improved  due  mainly to higher  sales and  greater
manufacturing   efficiencies  realized  from  a  combination  of  new  equipment
installations  and  closings  of older  plants  during the past  twelve  months.
Further cost  reductions  are  anticipated  as new plants in  Charlotte,  NC and
Bowling Green, KY move toward full production in the next six to nine months.

For the six-month  period ended May 31, sales of $296.4 million were up 45% from
last year. Net income of $12.1 million and net income per share of 52(cent) were
up  29%  and  27%  ,  respectively,   from  last  year's  results,   before  the
restructuring  charge.  Sales gains largely reflected ownership of Guardsman for
the full six  months of 1997  compared  with two  months in 1996.  Gross  profit
margin improved 2.6 percentage  points compared to last year due to better sales
mix and manufacturing efficiencies.

Second quarter results and improved financial  position were encouraging.  Total
debt of $251  million  at May 31,  1997 is $24  million  lower  than a year ago.
Current  strategies  for enhanced  shareholder  value include  paying down debt,
consolidating older plants, opening new facilities, developing new technologies,
and expanding  our presence  overseas.  The Company now has  operations in eight
foreign  countries,  having  recently  opened  a Far East  headquarters  site in
Singapore.  A new plant in Ireland will be producing  product by the end of this
year's fourth quarter.

The Board of Directors  declared a quarterly cash dividend of 8(cent) per common
share,  payable on October 1, 1997,  to  shareholders  of record at the close of
business on  September  10, 1997.  This marks the  Company's  234th  consecutive
quarterly cash dividend.











                                  Page 9 of 13



<PAGE>



                           PART II: OTHER INFORMATION


Item 4.  Submission of Matters to a Vote of Security Holders.

At the annual meeting of  shareholders  of Lilly  Industries,  Inc. on April 24,
1997, the following directors were elected by the votes indicated:

                                                                       Votes
                                                                     Withheld,
                                                                   Abstentions
                               Stock                                and Broker
Director                       Class            Votes For            Nonvotes
---------------------          -----            ----------         ------------
James M. Cornelius                A             18,336,260            252,247
John D. Peterson                  A             18,307,330            281,177
Thomas E. Reilly, Jr.             A             18,334,696            253,811
Van P. Smith                      A             18,331,000            257,507
William C. Dorris                 B                342,707              6,836
Paul K. Gaston                    B                342,707              6,836
Douglas W. Huemme                 B                342,707              6,836
Harry Morrison, Ph.D.             B                342,707              6,836
Norma J. Oman                     B                342,707              6,836
Robert A. Taylor                  B                342,707              6,836
                                                               
Shareholders  also approved  adoption of a proposal to amend the Company's  1992
Stock  Option Plan to increase the shares  reserved by one million.  Approval of
this proposal  required the affirmative  vote of a majority of the shares of the
Class A Stock and Class B Stock voting as separate  voting groups.  The proposal
was adopted with 14,265,268 shares, or 64%, of Class A Stock and 348,268 shares,
or 96%, of Class B Stock voting for the proposal. Shares of Class A Stock voting
against were 2,240,042.  Shares of Class A Stock either abstained or the subject
of broker nonvotes were  2,083,197.  Shares of Class B Stock voting against were
1,275.


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


(a)      The following exhibits are included or incorporated by reference 
         herein:

               EXHIBIT 10   First Amendment to Credit Agreement dated April 2,
                            1997, between Lilly Industries, Inc., the Lenders
                            Signatory thereto, NBD Bank, N.A., as Agent, and 
                            Harris Trust and Savings Bank, Comerica Bank,
                            Mercantile Bank of St.Louis, and Bank One, Indiana,
                            N.A., as Co-Agents
                           
               EXHIBIT 11   Computation of Earnings Per Share
                           
               EXHIBIT 27   Financial Data Schedule
                         

(b)      The  Company  did not file any  reports  on Form 8-K  during  the three
         months ended May 31, 1997.



Note:  All other item numbers under this section are not applicable.










                                  Page 10 of 13



<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.

                                     LILLY INDUSTRIES, INC.  (Registrant)

July 15, 1997
                                     /s/ Douglas W. Huemme
                                     ----------------------------
                                     Douglas W. Huemme
                                     Chairman, President and
                                     Chief Executive Officer



                                     PRINCIPAL FINANCIAL OFFICER


July 15, 1997
                                     /s/ John C. Elbin
                                     ----------------------------
                                     John C. Elbin
                                     Vice President and
                                     Chief Financial Officer









                                  Page 11 of 13