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, 1999

                          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, 1999:

            Class A Common                              22,786,000
            Class B Common                                  441,000




                                  Page 1 of 14
<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)
<TABLE>
<CAPTION>


                                                             Three Months Ended
                                                            May 31       May 31
                                                             1999          1998
                                                           --------      --------

<S>                                                        <C>           <C>
Net sales                                                  $171,375      $159,198

Costs and expenses

              Cost of products sold                         104,257        97,404
              Selling, general and administrative            41,278        37,836
              Research and development                        5,358         4,929
                                                           --------      --------

                                                            150,893       140,169
                                                           --------      --------

                           OPERATING INCOME                  20,482        19,029

Sundry expense                                                  254            61
Interest expense, net                                         3,911         4,258
                                                           --------      --------

                           INCOME BEFORE INCOME TAXES        16,317        14,710

Income taxes                                                  6,690         5,995
                                                           --------      --------

                           NET INCOME                      $  9,627      $  8,715
                                                           ========      ========

Cash dividends per share                                   $   0.08      $   0.08

Net income per share
              Basic                                        $   0.41      $   0.38
              Diluted                                      $   0.41      $   0.37
</TABLE>



See notes to consolidated condensed financial statements.



                                  Page 2 of 14
<PAGE>



CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
<TABLE>
<CAPTION>
                                                              Six Months Ended
                                                            May 31        May 31
                                                             1999          1998
                                                           --------      --------

<S>                                                        <C>           <C>
Net sales                                                  $317,514      $302,532

Costs and expenses
              Cost of products sold                         194,340       187,307
              Selling, general and administrative            78,371        72,122
              Research and development                       10,517        10,295
                                                           --------      --------

                                                            283,228       269,724
                                                           --------      --------

                           OPERATING INCOME                  34,286        32,808

Sundry expense                                                  493           128
Interest expense, net                                         8,012         8,792
                                                           --------      --------

                           INCOME BEFORE INCOME TAXES        25,781        23,888

Income taxes                                                 10,570        10,033
                                                           --------      --------

                           NET INCOME                      $ 15,211      $ 13,855
                                                           ========      ========

Cash dividends per share                                   $   0.16      $   0.16

Net income per share
              Basic                                        $   0.65      $   0.60
              Diluted                                      $   0.65      $   0.59
</TABLE>



See notes to consolidated condensed financial statements.


                                  Page 3 of 14
<PAGE>

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)

<TABLE>


                                                      May 31        November 30
                                                       1999            1998
                                                     ---------       ---------
<S>                                                  <C>             <C>
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                          $   7,484       $  13,326
  Accounts receivable, less allowances
       for doubtful accounts (5/31/99, $1,960;
       11/30/98, $1,981)                                92,260          82,039
  Inventories                                           55,827          50,796
  Other                                                  7,293           5,871
                                                     ---------       ---------

                           TOTAL CURRENT ASSETS        162,864         152,032

OTHER ASSETS                                            26,019          21,257

INTANGIBLE ASSETS                                      237,785         241,028

PROPERTY AND EQUIPMENT
  Land, buildings and equipment                        177,250         162,357
  Accumulated depreciation                             (64,607)        (60,189)
                                                     ---------       ---------
                                                       112,643         102,168

                                                     $ 539,311       $ 516,485
                                                     =========       =========
</TABLE>



See notes to consolidated condensed financial statements.



                                  Page 4 of 14
<PAGE>



CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>

                                                    May 31        November 30
                                                     1999            1998
                                                   ---------       ---------
<S>                                                <C>             <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                $  68,894       $  66,156
   Other                                              31,931          35,805
                                                   ---------       ---------

                    TOTAL CURRENT LIABILITIES        100,825         101,961

LONG-TERM DEBT                                       219,800         203,700

OTHER LIABILITIES                                     40,435          45,249

SHAREHOLDERS' EQUITY
   Capital stock:
     Class A (limited voting)                         15,509          15,459
     Class B (voting)                                    300             300
   Additional capital                                 83,187          81,890
   Retained earnings                                 119,411         107,914
   Accumulated other comprehensive income             (3,336)         (4,096)
   Cost of capital stock in treasury                 (36,820)        (35,892)
                                                   ---------       ---------

                                                     178,251         165,575
                                                   ---------       ---------

                                                   $ 539,311       $ 516,485
                                                   =========       =========
</TABLE>



See notes to consolidated condensed financial statements.



                                  Page 5 of 14
<PAGE>



CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>

                                                            Six Months Ended
                                                          May 31         May 31
                                                           1999           1998
                                                         --------       --------
<S>                                                      <C>            <C>
OPERATING ACTIVITIES
Net income                                               $ 15,211       $ 13,855
Adjustments to reconcile net income to net
      cash provided by operating activities:
  Depreciation                                              5,265          4,855
  Amortization                                              5,657          5,092
  Changes in operating  assets and  liabilities net
      of effects from acquired businesses:
         Accounts receivable                              (10,053)          (865)
         Inventories                                       (5,007)          (244)
         Accounts payable and accrued expenses             (1,211)        (4,555)
         Sundry                                           (10,898)         2,924
                                                         --------       --------

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES           (1,036)        21,062

INVESTING ACTIVITIES
  Purchases of property and equipment                     (15,981)        (5,288)
  Payments for acquired businesses                         (2,721)       (11,253)
  Sundry                                                    1,091          4,468
                                                         --------       --------

NET CASH USED BY INVESTING ACTIVITIES                     (17,611)       (12,073)

FINANCING ACTIVITIES
  Dividends paid                                           (3,713)        (3,700)
  Proceeds from borrowings                                 16,100         11,000
  Principal payments on borrowings                              0        (14,200)
  Sundry                                                      418          1,088
                                                         --------       --------

NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES            12,805         (5,812)

                                                         --------       --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           (5,842)         3,177

Cash and cash equivalents at beginning of year             13,326         10,079
                                                         --------       --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD               $  7,484       $ 13,256
                                                         ========       ========
</TABLE>



See notes to consolidated condensed financial statements.


                                  Page 6 of 14
<PAGE>



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
MAY 31, 1999

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, 1998.


NOTE B--NET INCOME PER SHARE

Basic and  diluted net income per share are  computed by dividing  net income as
reported by the average number of shares outstanding as follows (in thousands):

<TABLE>
<CAPTION>

                                                Three Months Ended             Six Months Ended
                                                     May 31                             May 31
                                                1999            1998          1999              1998
                                             ------------------------      ------------------------------
<S>                                           <C>             <C>               <C>               <C>
Basic
    Weighted-average common shares
           outstanding                        23,200          23,138            23,190            23,127
                                              ======          ======            ======            ======
Diluted
    Weighted-average common shares
           outstanding                        23,200          23,138            23,190            23,127
    Dilutive effect of stock options             130             265               140               261
                                              ------          ------            ------            ------
    Average common shares outstanding
           assuming dilution                  23,330          23,403            23,330            23,388
                                              ======          ======            ======            ======
</TABLE>

                                  Page 7 of 14
<PAGE>



NOTE C--INVENTORIES

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

<TABLE>
<CAPTION>
                                   May 31     November 30
                                    1999         1998
                                  -------      -------
<S>                               <C>          <C>
Finished products                 $32,119      $29,761
Raw materials                      29,584       27,411
                                  -------      -------

                                   61,703       57,172

Less adjustment of certain
     inventories to last in,
     first out (LIFO) basis         5,876        6,376
                                  -------      -------

                                  $55,827      $50,796
                                  =======      =======
</TABLE>




The Company uses the LIFO method of inventory valuation for approximately 64% 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.


NOTE D---ACCOUNTING CHANGES

The Company adopted Statement of Financial  Accounting Standards (SFAS) No. 130,
"Reporting  Comprehensive  Income" during the first quarter of fiscal year 1999.
SFAS 130  establishes  new rules for the reporting and display of  comprehensive
income and its components.  SFAS 130 requires the Company to report, in addition
to net income,  other  components of  comprehensive  income,  including  foreign
currency translation adjustments. Total comprehensive income was $10,172,000 and
$8,221,000 for the three months ended May 31,1999 and 1998, respectively.  Total
comprehensive  income was  $15,971,000  and $12,852,000 for the six months ended
May 31, 1999 and 1998, respectively. Adoption of this disclosure standard had no
effect on the Company's operating results or financial position.



                                  Page 8 of 14
<PAGE>


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

Results of Operations

Sales,  operating  income,  net income,  and diluted  earnings per share were at
all-time  record  quarterly  levels.  For the second quarter ended May 31, 1999,
sales  increased 7.7% to $171.4  million,  operating  income was also up 7.6% at
$20.5 million,  and net income rose 10.5% to $9.6 million.  Diluted earnings per
share for the second quarter increased 10.8% to $.41 compared to $.37 last year.

Sales for the six month period ended May 31, 1999 were up 5.0% at $317.5 million
compared to $302.5  million the same period last year.  Net income for the first
half of fiscal year 1999 increased by 9.8% to $15.2 million, or $.65 per diluted
share.

The improved  rate of sales  growth in the second  quarter and first half of the
year was  attributable  to  strong  volume  increases  in wood  coatings,  metal
coatings,  and composites.  Sales growth in these markets was a result of strong
powder coating sales,  increases in market share,  strong domestic  construction
and  transportation  markets,  and improved demand in the  Asia/Pacific  region.
Sales of agriculture and construction  equipment liquid metal coatings  declined
significantly from a year ago due to soft demand in these markets.

Gross profit  margin for the second  quarter of 1999  improved to 39.2% of sales
compared  with  38.8% last year.  For the six  months  ended May 31,  1999 gross
profit  margin  rose  to  38.8%,  compared  to  38.1%  in the  prior  year.  The
improvement results from supply chain management  initiatives which have lowered
raw material costs. Improved gross profit margin was offset by increased selling
expenses associated with business building initiatives, international expansion,
and growth of the fabric protection business.

Liquidity and Capital Resources

Cash  used by  operating  activities  for  the six  months  ended  May 31,  1999
increased $22.1 million over the first half of 1998,  primarily due to increased
working capital,  decreased  non-current  liabilities and increased  non-current
assets.

Cash  used by  investing  activities  for  the six  months  ended  May 31,  1999
increased $5.5 million compared to the same period a year ago,  primarily due to
increased  capital  expenditures  offset  by  decreased  payments  for  acquired
businesses.

Cash provided by financing  activities  during the six months ended May 31, 1999
increased $18.6 million over the same period a year ago as the Company  utilized
credit  facilities to fund a portion of operating  and investing  cash flows for
the first half of the year.

The Company  believes that funds  available  from internal and external  sources
will be sufficient to meet the liquidity needs of the Company.

The Board of Directors  declared a regular quarterly dividend of eight cents per
common share,  payable  October 1, 1999, to  shareholders of record on September
10, 1999.

Year 2000

The Year 2000 issue  ("Y2K" or "Y2K  issue") is the result of computer  programs
being written using two digits rather than four to define the  applicable  year.
Any  computer  programs or any  hardware  that have date  sensitive  software or
embedded  chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a temporary inability to process transactions or
engage in normal manufacturing or other business activities.

The  Company  is  actively  engaged  in a  company-wide  effort to  achieve  Y2K
readiness for both information technology ("IT") and non-information  technology
("Non-IT") systems, and to determine the Y2K readiness of significant suppliers.
The Company is focusing its efforts on IT systems,  Non-IT systems and suppliers
that,  without  Y2K  readiness,  could  have a  material  adverse  effect on the
Company's operations.



                                  Page 9 of 14
<PAGE>

The Company's approach to addressing Y2K preparedness consists of the following:

     o    Inventory - identification of items to be assessed for Y2K readiness.

     o    Assessment - prioritizing the inventoried  items,  assessing their Y2K
          readiness and defining  corrective actions and developing  contingency
          plans.

     o    Deployment - implementing corrective actions, verifying implementation
          and finalizing contingency plans.

The  Company's  IT systems  are  comprised  of  business  computer  systems  and
technical  infrastructure.  In 1996, the Company  determined that the IT systems
supporting its business units could be inadequate to meet business  requirements
after 1999 and thus  implemented  a project to replace all  critical IT systems.
All critical IT systems have been  inventoried and assessed,  and replacement of
non-conforming IT systems began during the fourth quarter of 1998. Deployment of
all critical IT systems is expected to be completed  during the third quarter of
1999.

The Company's  Non-IT  systems are comprised of  manufacturing  and  warehousing
systems and facility support systems. A preliminary  inventory and assessment of
these Non-IT  systems has been  completed and deployment of these Non-IT systems
is expected to be completed during the third quarter of 1999.

The Company is in the process of contacting significant raw material and service
suppliers  regarding  their Y2K  readiness.  The  Company's  supplier  readiness
program focuses on those suppliers  considered essential for the prevention of a
material disruption to the Company's business  operation.  The Company will make
efforts to address  third-party Y2K compliance  issues noted from the inquiries.
However,  there  can  be no  assurance  that  such  third-parties  will  be  Y2K
compliant.  Non-compliance by third parties could have a material adverse impact
on the  Company's  financial  position and business  operations.  The program is
expected to be completed during the third quarter of 1999.

The Company  utilizes both internal and external  resources in all phases of its
Y2K readiness program. The Company estimates the total cost of resolving the Y2K
issue to be approximately $5 million. Of this amount, the Company estimates $1.0
million  will be spent during the  remainder of fiscal year 1999.  Approximately
70% of total Y2K cost is comprised of equipment and software  replacement  costs
with the balance  being  comprised of  assessment  and  remediation  costs.  The
Company  expects all costs to be funded with  operating cash flow. Y2K costs are
expensed as incurred except for new systems and equipment, which are capitalized
and charged to expense over the estimated useful life of the related asset.

While the  Company  believes  that its  efforts  to address  Y2K issues  will be
successfully  completed in a timely manner,  the Company recognizes that failing
to  resolve  Y2K issues  could,  in a  reasonably  likely  worst case  scenario,
increase costs and limit the Company's  ability to conduct business  operations.
The financial impact of such scenario can not be reasonably estimated.

Forward-Looking Statements

Statements   in  this  release  that  are  not   strictly   historical   may  be
"forward-looking"  statements,  which  involve  risks  and  uncertainties.  Risk
factors include general economic and industry  conditions,  effects of leverage,
environmental matters, technological developments, product pricing, raw material
cost changes, and international operations, among others, which are set forth in
the Company's annual report on Form 10-K for the year ended November 30, 1998.

                                 Page 10 of 14
<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The  Company  is subject to market  risk in the form of  interest  rate risk and
foreign  currency  risk.  Both interest rate risk and foreign  currency risk are
considered immaterial to the Company.


                                 Page 11 of 14
<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 22,
1999, the following directors were elected by the votes indicated:

                                     Stock                           Votes
    Director                         Class        Votes For         Withheld
    --------                         -----        ---------         --------

    Thomas E. Reilly, Jr.              A          18,258,748         151,869
    John D. Peterson                   A          18,258,644         151,973
    James M. Cornelius                 A          18,258,713         151,904
    Paul K. Gaston                     A          18,253,552         157,065
    William C. Dorris                  B             437,037               0
    John C. Elbin                      B             437,037               0
    Douglas W. Huemme                  B             437,037               0
    Harry Morrison, Ph.D.              B             437,037               0
    Norma J. Oman                      B             437,037               0
    Robert A. Taylor                   B             437,037               0



Shareholders  of record on February 16, 1999 were  entitled to notice of, and to
vote at, the Annual Meeting of Shareholders.  On that date 22,772,474  shares of
the Company's  Class A Stock and 437,037  shares of the Company's  Class B Stock
were outstanding.


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


(a)       The following exhibit is included herein:

                  EXHIBIT 27            Financial Data Schedule

(b) The  Company  did not file any  reports on Form 8-K during the three  months
ended May 31, 1999.


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



                                 Page 12 of 14
<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 12, 1999


                                       /s/ Douglas W. Huemme
                                       --------------------------------
                                       Douglas W. Huemme
                                       Chairman and
                                       Chief Executive Officer





                                       PRINCIPAL FINANCIAL OFFICER

July 12, 1999


                                       /s/ John C. Elbin
                                       --------------------------------
                                       John C. Elbin
                                       Vice President,
                                       Chief Financial Officer
                                       and Secretary



                                 Page 13 of 14