SECURITIES AND EXCHANGE COMMISSION
                      Washington, DC 20549

                            FORM 10-Q

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

For Quarter Ended                  Commission File No. 0-13829
September 30, 1996

                    PRECISION STANDARD, INC.

     (Exact Name of Registrant as Specified in its Charter)

        Colorado                        84-0985295             
(State of Incorporation)    (I.R.S. Employer Identification No.)

                         One Pemco Plaza
                     1943 50th Street North
                   Birmingham, Alabama 35212        
            (Address of Principal Executive Offices)

                        (205) 591-3009                            
      (Registrant's telephone number, including area code)

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

                    Yes [X]                  No [ ]

The number of shares outstanding of each of the issuer's classes of
common shares, as of the close of the period covered by this
report:

Class of Securities             Outstanding Securities
$.0001 Par Value                12,472,580 shares
Common Shares                   Outstanding at September 30, 1996







PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS
<TABLE>
               PRECISION STANDARD, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS

                                                

                                ASSETS

                                        September 30,    December 31,
                                            1996            1995
                                        (Unaudited)                 
<S>                                    <C>               <C>
Current assets:
  Cash and cash equivalents            $   726,416       $ 1,411,929
  Accounts receivable, net               8,197,151        14,312,946
  U.S. Government request for
   equitable adjustment, net            24,551,632         8,144,522
  Inventories                           17,818,595        21,753,009
  Prepaid expenses and other             1,043,920           981,197
  Deferred taxes                         4,890,862         5,038,205

        Total current assets            57,228,576        51,641,808

Property, plant and equipment,
   at cost:
  Leasehold improvements                10,668,161        10,322,638
  Machinery and equipment               18,174,195        17,933,717


Less accumulated depreciation          (15,211,750)      (13,298,748)

        Net property and equipment      13,630,606        14,957,607

Other assets:
  Intangible assets, net of
     accumulated amortization            4,319,649         4,334,662
  Related party receivable                 269,824           269,824
  Deposits and other                     1,347,680           841,498
  U.S. Government request for
    equitable adjustment, net                  -0-         4,100,000
  Deferred taxes                         2,891,014         4,825,129
                                         8,828,167        14,371,113

        Total assets                   $79,687,349       $80,970,528
<FN>

            The accompanying notes are an integral part of
               these consolidated financial statements.
</FN>
</TABLE>
                                   
<TABLE>
               PRECISION STANDARD, INC. AND SUBSIDIARIES
                CONSOLIDATED BALANCE SHEETS (CONTINUED)

                 LIABILITIES AND STOCKHOLDERS' EQUITY

                                        September 30,    December 31,
                                            1996            1995
                                        (Unaudited)                  
<S>                                     <C>             <C>
Current liabilities:
  Current maturities of long-term
   debt (see Note 4)                    $21,445,205      $   955,155
  Accounts payable and accrued  
   expenses                              24,652,527       28,181,810
  Accrued warranty expenses               1,015,822        1,178,636
  Estimated losses on contracts
   in progress                              100,000          203,922

          Total current liabilities      47,213,554       30,519,523

Long-term debt, net of current
  maturities (see Note 4)                 7,220,279       25,787,030
Long-term portion of self-insured
  workers' compensation reserve           3,717,703        3,717,703
Unfunded accumulated benefit
  obligation                              7,072,103        7,072,103
          Total liabilities              65,223,639       67,096,359

Stockholders' equity:
  Common stock, $.0001 par value,
  300,000,000 shares authorized,
  12,472,580 and 12,455,955 issued
  and outstanding at September 30,
  1996 and December 31, 1995,
  respectively.                               1,282            1,280

  Additional paid-in capital              4,599,303        4,584,394
  Deferred compensation on
   restricted shares                        (21,875)         (87,500)
  Retained earnings                      16,310,795       16,246,824
  Translation adjustments                   142,833          146,202
  Minimum pension liability adjustment   (6,568,628)      (7,017,031)
  Total stockholder's equity             14,463,710       13,874,169
              
        Total liabilities and stock-
           holders' equity              $79,687,349      $80,970,528
<FN>

            The accompanying notes are an integral part of
               these consolidated financial statements.
</FN>
</TABLE>

<TABLE>
               PRECISION STANDARD, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF INCOME
                                                           

                                           Three           Three
                                        Months Ended    Months Ended
                                        September 30,   September 30,
                                            1996            1995    
                                        (Unaudited)     (Unaudited)
<S>                                     <C>             <C>
Net sales                               $38,088,420     $ 29,070,599
Cost of sales                           (28,816,362)     (25,656,315)
     Gross profit                         9,272,058        3,414,284

Selling, general and
  administrative expenses                (5,363,663)      (4,045,013)
Bad debts recovery (expense)               (184,393)          51,256
Research and development expense            (70,043)        (108,387)
     Income (loss) from operations        3,653,959         (687,860)

Other income (expense):
  Interest expense                         (868,861)        (826,228)
  Other, net                              2,850,240           96,366
     Income (loss) before income taxes    5,635,338       (1,417,722)

Income tax expense                       (1,591,160)         (19,075)

     Net income (loss)                  $ 4,044,178      $(1,436,797)


Income (loss) per common share
(see Note 3):
 Primary:
  Before extraordinary item             $       .26     $      (.12)
  Extraordinary item                                               

    Total                               $       .26     $      (.12)

Fully diluted:
  Before extraordinary item             $       .26     $      (.12)
  Extraordinary item                                               

    Total                               $       .26     $      (.12)

Weighted average number of common
shares outstanding                       15,759,114      12,451,577
<FN>

            The accompanying notes are an integral part of
               these consolidated financial statements.
</FN>
</TABLE>

<TABLE>
               PRECISION STANDARD, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF INCOME
                                                                       

                                            Nine          Nine  
                                        Months Ended   Months Ended
                                        September 30,  September 30,
                                            1996           1995     
                                        (Unaudited)    (Unaudited)
<S>                                     <C>            <C>
Net sales                               $100,444,533   $112,422,007
Cost of sales                            (84,763,335)   (96,012,378)
   Gross profit                           15,681,198     16,409,629

Selling, general and
  administrative expenses                (13,308,340)   (12,762,910)
Bad debts expense                           (130,008)      (187,110)
Research and development expense            (298,522)      (443,735)
   Income from operations                  1,944,328      3,015,874

Other income (expense):
  Interest expense                        (2,547,900)    (2,455,671)
  Other, net                               2,967,588        (34,066)
   Income before income taxes              2,364,016        526,137

Income tax expense                        (2,300,045)    (2,040,685)

   Net income (loss)                    $     63,971   $ (1,514,548)

Income (loss) per common share
(see Note 3):
 Primary:
   Before extraordinary item            $       .004   $       (.12)
   Extraordinary item                                              

    Total                               $       .004   $       (.12)

Fully diluted:
   Before extraordinary item            $       .004   $       (.12)
   Extraordinary item                                              

    Total                               $       .004   $       (.12)

Weighted average number of common
shares outstanding                        15,949,524     12,412,906

<FN>
            The accompanying notes are an integral part of
               these consolidated financial statements.
</FN>
</TABLE>


<TABLE>
               PRECISION STANDARD, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF CASH FLOWS
                                                   
                                           Nine              Nine
                                        Months Ended      Months Ended
                                        September 30,     September 30,
                                            1996             1995
                                        (Unaudited)       (Unaudited)
<S>                                     <C>               <C>
Cash flows from operating activities:
  Net income (loss)                     $     63,971      $(1,514,548)
  Adjustments to reconcile
     net income (loss) to net cash
     provided from operating
     activities:
  Depreciation and amortization            2,218,042        2,089,837
  Pension cost in excess of 
     funding                                 448,403        1,396,743
  Provision for losses on 
     receivables                             295,070          187,109
  Provision for warranty expense                 -0-          131,000
  Provision for deferred taxes             2,081,458        1,901,761
  Provision for losses on
     contracts in progress                       -0-        1,567,536
  Loss on disposition
     of equipment                             73,321            2,651

  Changes in assets and liabilities:
          Accounts receivable              5,760,153          819,585
          Inventories                      3,870,290        1,912,713
          Prepaid expenses and
           other assets                      (80,361)        (404,529)
          Intangible assets                 (125,490)         (64,645)
          U.S. Government request for
           equitable adjustment, net     (12,307,110)      (5,498,506)
          Deposits and other                (500,915)         136,971
          Accounts payable and
            accrued expenses              (1,113,998)       5,162,238
          Accrued warranty expense          (162,813)        (402,195)
          Estimated losses on
            contracts in progress           (103,922)      (1,906,894)
          Self-insured workers'
            compensation reserve                 -0-         (165,348)
          Total adjustments                  352,128        6,866,027
     Net cash provided by
     operating activities                    416,099        5,351,479

Cash flows from investing activities:
     Capital expenditures                 (1,066,344)      (1,902,549)
     Insurance proceeds receivable                           (352,928)
     Proceeds from sale of equipment         394,733              550
     Net cash used in
     investing activities               $   (671,611)    $ (2,254,927)

<FN>
            The accompanying notes are an integral part of
               these consolidated financial statements.
</FN>
</TABLE>


<TABLE>
               PRECISION STANDARD, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

                                                   

                                           Nine             Nine
                                        Months Ended     Months Ended
                                        September 30,    September 30,
                                            1996             1995
                                        (Unaudited)      (Unaudited)
<S>                                    <C>              <C>
Cash flows from financing activities:
  Proceeds from issuance of
     common stock                       $     2,579      $      1,285

  Borrowings under revolving
     credit facility                      1,500,000        25,400,000

  Repayments under revolving
     credit facility                     (1,500,000)      (24,100,000)

  Principal payments under
     long-term obligations                 (393,753)       (4,476,832)

     Net cash used in
     financing activities                  (391,174)      (3,175,547)

     Effect of exchange rate changes
     on cash and cash equivalents           (38,827)          78,995

Net decrease in cash
  and cash equivalents                     (685,513)              -0-
  
Cash and cash equivalents
  beginning of period                     1,411,929               -0-

Cash and cash equivalents
  end of period                         $   726,416       $       -0-

Supplemental disclosure of cash
  flow information:
  Cash paid during the period for:
     Interest                           $   407,151       $ 1,834,233
     Income taxes                            99,720           144,855
Supplemental disclosure of
  non-cash investing activities:
  Capital lease obligations incurred
  for new equipment                     $   109,253       $   743,460

  Capitalization of accrued
    interest                            $ 2,207,799       $       -0-
<FN>
            The accompanying notes are an integral part of
               these consolidated financial statements.
</FN>
</TABLE>


            PRECISION STANDARD, INC. AND SUBSIDIARIES
                  NOTES TO FINANCIAL STATEMENTS


1.   CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated interim financial statements included in this
     report have been prepared by the Company without audit.  In
     the opinion of management, all adjustments necessary for a
     fair presentation are reflected in the interim financial
     statements.  Such adjustments are of a normal and recurring
     nature.  The results of operations for the period ended
     September 30, 1996 are not necessarily indicative of the
     operating results for the full year.  The interim financial
     statements should be read in conjunction with the audited
     financial statements and notes thereto included in the
     Company's 1995 10-K.  Certain reclassifications have been made
     to the 1995 financial statements included herein to conform
     with the presentation used in 1996.

2.   INVENTORIES
<TABLE>
     Inventories consist of the following:

                                   September 30,    December 31,
                                      1996             1995
                                   (Unaudited)                 
      <S>                          <C>              <C>
      Work in-process              $35,311,105      $31,050,937
      Finished goods                 3,597,399        3,858,325
      Raw materials and supplies     5,914,362        5,019,629
      Total                        $44,822,866      $39,928,891

      Less progress payments
        and customer deposits      (26,997,642)     (16,901,206)
      Less allowance for estimated
        losses on contracts in
        progress                        (6,629)      (1,274,676)
                                   $17,818,595      $21,753,009 
</TABLE>
3.   EARNINGS PER COMMON SHARE

     The computation of income per common share in 1996 is based on
     the weighted average number of outstanding common shares
     assuming the exercise of stock options and stock warrants. 
     The stock warrants were granted to the Company's primary
     lender in connection with the Senior Subordinated Loan and
     allow for the purchase of 4,215,753 shares of the Company's
     common stock at an exercise price of approximately $.24 per
     share.  The computation of loss per common share in 1995 is
     based on the weighted average number of outstanding common
     shares.  The inclusion of stock options and stock warrants
     would be antidilutive.
                               -8-
4.   NOTES PAYABLE
<TABLE>
                                      September 30, December,31,
                                          1996         1995     
     <S>                              <C>           <C>
     Short-term debt consists of
     the following:

     Term Credit facility             $ 9,207,799
     Senior Subordinated Loan           3,250,000
     Revolving Credit facility          8,000,000

     Note due to individual, bears        447,173   $   447,173
     interest at 10% collateralized
     by a security interest in
     certain equipment

     Other obligations                    540,233       507,982
     collateralized by security        
     interests in certain
     equipment                                                    
                                      $21,445,205   $   955,155

     Long term debt consists of
     the following:                                    

     Term Credit facility                             7,000,000
     Senior Subordinated Loan           6,750,000    10,000,000
     Revolving Credit facility                        8,000,000

     Other obligations,                   470,279       787,030
     collateralized by security
     interests in certain
     equipment                                                 
                                      $ 7,220,279   $25,787,030

     Total short term and long term   $28,665,484   $26,742,185
     debt
</TABLE>
     In October of 1996, the Company reached an agreement with the
     U.S. Government with respect to all outstanding Requests for
     Equitable Adjustment on both its 1990 and 1995 KC-135
     contracts.  The Company and the Government negotiated to
     resolve all disputes associated with the Government's untimely
     provision of government furnished material (GFM), the
     incidence of major structural repair work greatly in excess of
     that contemplated at the time of contract formation, post
     contract increases in inspection requirements, consequent
     delay and disruption costs and other associated costs.  The
     Company believes that the factors cited above caused the
     Company to incur at least $34.8 million in additional costs up
     to the date of the settlement with the Government.  Pursuant
     to the terms of the settlement agreement, the Company received
     $25.0 million in cash from the U.S. Government in October of
     1996.  (See also Part I, Item 2 "Management's Discussion and
     Analysis - KC-135 Contract").

     Also in October of 1996, the Company and its primary lender
     negotiated the terms and conditions of amendments to the
     credit and warrant agreements.  These amendments, which are
     anticipated to be formalized in November of 1996, include a
     payment of principal of $15.0 million from the proceeds of the
     settlement with the Government, with $2.8 million to be
     applied to the Senior Subordinated loan, $4.2 million to the
     Term Credit facility and $8.0 million to fully repay the
     Revolving Credit facility.  The agreement also provides for
     the forgiveness of approximately $1.3 million of accrued but
     unpaid interest for the period of May through September of
     1996.  Interest payment terms and rates subsequent to
     September of 1996 will remain substantially unchanged. 
     Repayment of the remaining $5.0 million Term Credit facility
     will be made via three quarterly payments of $1.7 million, to
     be paid on January 31, April 30 and July 31, 1997.  The
     repayment of the remaining $7.2 million Senior Subordinated
     loan will be paid in sixteen quarterly payments of $450,000,
     beginning on September 30, 1997.  The agreement provided for
     no prepayment penalty for either the Term Credit facility or
     Senior Subordinated Credit facility.  The agreement also
     provides that all existing breaches of loan covenants are
     waived or amended.

     The amendments to the warrant agreement require mandatory
     redemption of the primary lender's common stock purchase
     warrant in eight equal quarterly installments beginning on
     December 31, 1996.  The redemption is payable in cash or
     common stock, which will be freely tradable by the primary
     lender with no restriction.  The choice as to the form of
     redemption payment is at the Company's sole discretion.  The
     redemption price of one-half of the warrant (2,107,877 shares)
     is based on the average trading price during the fifteen days
     before and the fifteen days after the public release by the
     Company of its financial results for the third quarter of
     1996.  The redemption price of the remaining half of the
     warrant (2,107,876 shares) will be established at each
     quarterly redemption date in a corresponding manner.

     The Company remitted $15.0 million to its primary lender in
     October of 1996 in accordance with the provisions of the
     agreement.  The Company expects to recognize an extraordinary
     gain of $1.3 million in the fourth quarter of 1996 because of
     the aforementioned forgiveness of unpaid interest.  (See also,
     Part I, Item 2 "Management's Discussion and Analysis -
     Liquidity and Capital Resources" and Part II, Item 3 "Defaults
     Upon Senior Securities.")


ITEM 2.

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

INTRODUCTION

The following discussion should be read in conjunction with the
Company's consolidated financial statements and notes thereto
included herein.

RESULTS OF OPERATIONS

KC-135 Contract

For nine months through September of 1996, the Company's KC-135
contract with the U.S. Government accounted for approximately 46%
of the Company's total revenues and approximately 69% of the
Company's sales to the U.S. Government.  In October of 1996, the
Company reached an agreement with the U.S. Government with respect
to all outstanding Requests for Equitable Adjustment (REA) on both
its 1990 and 1995 KC-135 contracts.  The Company and the Government
negotiated to resolve all disputes associated with the Government's
untimely provision of government furnished material (GFM), the
incidence of major structural repair work greatly in excess of that
contemplated at the time of contract formation, post contract
increases in inspection requirements, consequent delay and
disruption costs and other associated costs.  The Company believes
that the factors cited above caused the Company to incur at least
$34.8 million in additional costs up to the date of the settlement
with the Government.  Pursuant to the terms of the settlement
agreement, the Company received $25.0 million in cash from the U.S.
Government in October of 1996, $24.6 million of which has been
recorded as a current receivable at September 30, 1996.  The
agreement attributed $12.5 million of the settlement to the 1990
contract and $12.5 million to aircraft expected to be redelivered
to the Government through September 30, 1996 under the 1995
contract.  In anticipation of a settlement with the Government, the
Company previously had $4.1 million of this settlement as revenue
in 1995, $0.8 million as revenue in the first quarter of 1996 and
$4.9 million as revenue in the second quarter of 1996.  The Company
has recorded $14.8 million of the balance of the settlement as
revenue and other income in the third quarter of 1996, with the
remaining $0.4 million to be recorded in the fourth quarter of
1996, as it relates to aircraft redelivered after September 1996. 
The Company classified $3.3 million of the $14.8 million settlement
recorded in the third quarter as other income, designating $1.8
million as reimbursement for withholding tax penalties and $1.5
million for interest costs, both of which were incurred by the
Company due to the cash constraints caused by the excessive cost
impacts cited in the Company's REAs.  The remaining $11.5 million
of the $14.8 million was recorded as revenue in the third quarter
of 1996.

The Company also reached an agreement with the U.S. Government for
additional pricing in respect of aircraft in work at September 30,
1996, to compensate the Company for the cost impact of the directed
and constructive changes to the contract cited above, and the
Government also exercised its option for Programmed Depot
Maintenance (PDM) of the KC-135 aircraft for the 1997 fiscal year,
beginning on October 1, 1996.  The Company's contract for this
option year was amended to include additional pricing for the
aforementioned directed and constructive changes to the contract
and incorporated a fixed-price incentive firm target type provision
to the contract, which contains limited cost/benefit sharing
provisions.  The U.S. Government delivered forty-five aircraft to
the Company under the first year of the contract and thirty-four
aircraft under the first option year of the contract.  To date, the
Government has scheduled twenty aircraft to be delivered for PDM
work under the second option year of the contract, which began on
October 1, 1996.

Three months ended September 30, 1996
Versus three months ended September 30, 1995

Revenues for the third quarter of 1996 increased 31%, or $9.0
million, from $29.1 million in 1995 to $38.1 million in 1996.  The
Company's sales to the U.S. Government increased 86%, from $15.5
million in the third quarter of 1995 to $28.9 million in 1996,
primarily due to $11.5 million of revenue recognized for the
aforementioned settlement of the Company's REAs (see "KC-135
Contract" above) compared with $3.1 million of REA revenue recorded
in the third quarter of 1995 in conjunction with the REA that was
settled with the Government in February of 1996.  KC-135 contract
revenues also increased $3.7 million due to an increase in the
number of KC-135 Programmed Depot Maintenance (PDM) aircraft
redeliveries in the quarter.  Seven aircraft were redelivered in
the third quarter of 1996 versus three redeliveries in 1995.

The Company also recorded a $0.8 million increase in Government
sales at its Targets division and a $1.0 million increase at its
Space Vector Division. Partially offsetting these increases to
revenues was a $1.0 million reduction of sales under the Company's
C-130 PDM contract.  The Company redelivered two PDM C-130 aircraft
and two Drop-In aircraft in the third quarter of 1996 versus three
PDM aircraft and ten Drop-In aircraft in 1995.

Lower aircraft conversion revenue, resulting at least in part from
a shortage of aircraft available due to high passenger traffic
volumes, caused commercial sales to decline 32%, from $13.5 million
in 1995 to $9.2 million in 1996 (no conversion redeliveries in the
third quarter of 1996 versus six redeliveries in 1995).  Partially
offsetting this decline in sales was an increase in the volume of
maintenance and modification services, other than cargo conversion
aircraft, performed at the Dothan, Alabama facility.

As a result, the Company's mix of business between government and
commercial customers shifted to 76% government and 24% commercial
in the third quarter of 1996, from 53% government and 47%
commercial in 1995.

The ratio of cost of sales ($28.8 million in 1996; $25.7 million in
1995) to net sales ($38.1 million in 1996; $29.1 million in 1995)
decreased from 88% in the third quarter of 1995 to 76% in 1996. 
The resultant increase in gross profit was primarily due to $11.5
million of revenue recognized in the third quarter of 1996 in
conjunction with the Company's settlement with the Government (see
"KC-135 Contract", above).  Partially offsetting this increase to
gross profits were increased costs on military aircraft redelivered
in the third quarter of 1996 as compared to 1995 and reduced
volumes under the Company's B-727 cargo conversion product line. 
The costs associated with military redeliveries in the third
quarter of 1996 increased in part due to disruption caused by the
work stoppage of the Company's United Auto Worker (UAW) employees. 
(All of the Company's approximately 900 UAW employees stopped work
on July 22, 1996 and remained on strike during the balance of the
third quarter--see "Contingencies" below.)

Selling, general and administrative expenses increased from $4.0
million in the third quarter of 1995 to $5.4 million in 1996 but
remained a constant 14% of sales for both periods.

Interest expense was $0.9 million in the third quarter of 1996
versus $0.8 million in the third quarter of 1995.  In the second
quarter of 1996, $2.2 million of deferred interest was capitalized,
increasing total consolidated indebtedness from $26.4 million at
September 30, 1995 to $28.7 million at September 30, 1996.  The
effective average interest rate in the third quarter of 1996 on the
Term Credit facility and the Revolving Credit facility was 10.14%,
versus 9.09% in the third quarter of 1995.  (See, also, Footnote 4
for a discussion of the agreement reached with the Company's
primary lender.)

The Company recorded a net of $2.9 million of other income in the
third quarter of 1996.  Approximately $3.3 million of the Company's
settlement with the U.S. Government was classified as other income;
$1.8 million as reimbursement for withholding tax penalties and
$1.5 million for excessive interest costs, both of which were
incurred by the Company due to the cash constraints caused by the
cost impacts cited in the Company's REAs (see "KC-135 Contract",
above).  The Company also recorded approximately $0.2 million of
payroll tax penalties in the third quarter.

The Company recorded $1.6 million of state and federal income tax
expense in the third quarter of 1996 and reduced its deferred tax
assets by $1.5 million.  The change in deferred tax assets resulted
primarily from the utilization of federal net operating loss
carryforwards and the liquidation of inventory which had been
reserved.

Nine months ended September 30, 1996
Versus nine months ended September 30, 1995

Revenues for the first nine months of 1996 decreased 11%, from
$112.4 million in 1995 to $100.4 million in 1996.  Government sales
increased 2%, from $66.0 million in 1995 to $67.5 million in 1996. 
Commercial sales decreased 29%, from $46.4 million in 1995 to $32.9
million in 1996.  The Company's mix of business between government
and commercial customers shifted to 67% government and 33%
commercial in 1996 from 59% government and 41% commercial in 1995.

The Company's sales to the U.S. Government increased in the first
nine months of 1996 primarily due to $17.2 million of revenue
recognized for the settlement of the Company's REAs on both its
1990 and 1995 KC-135 contracts (see "KC-135 Contract", above).  In
the first nine months of 1995, the Company recognized $5.2 million
of REA revenue recorded in conjunction with the REA that was
settled with the Government in February of 1996.  Largely
offsetting this increase in revenues was an $11.8 million reduction
in KC-135 contract revenues, resulting from a decrease in the
number of KC-135 Programmed Depot Maintenance (PDM) aircraft
redeliveries.  Twenty-three aircraft were redelivered in the first
nine months of 1996 versus twenty-nine redeliveries in 1995.  The
reduced number of aircraft redeliveries in 1996 was caused by
disruption to the Company's operations for the factors cited in the
Company's REAs, which delayed redelivery of aircraft, as well as by
a reduction in the number of aircraft input to the Company for PDM
work. The Government delivered forty-five aircraft to the Company
under the first year of the contract, which began October 1, 1994
versus thirty-four aircraft under the first option year of the
contract, which began October 1, 1995.

The Company also realized increases in sales of $2.0 million under
the Company's H-3 helicopter program, which is worked at its Dothan
facility, $1.3 million at the Company's Targets division and $1.0
million at the Company's Space Vector division.  The Company only
redelivered five C-130 PDM aircraft and two drop-in aircraft in
1996 versus eleven PDM aircraft and seventeen drop-in aircraft in
1995, which adversely impacted year-over-year Government sales by
$3.6 million.  

Although commercial aircraft maintenance sales increases of $1.6
million and $1.0 million were recorded by the Company's operations
in Dothan, Alabama and Copenhagen, Denmark, overall commercial
sales declined due to a reduction in aircraft conversions (one B-
727 redelivery in 1996 versus twelve redeliveries in 1995), no B-
737 redeliveries in 1996 versus three redeliveries in 1995 and no
B-727 Combi conversion redeliveries in 1996 versus one redelivery
in 1995).  The Company believes that the decline in cargo
conversion sales is a result, at least in part, of a shortage in
aircraft available for conversion due to increased passenger
traffic volumes.  Commercial sales increases of $0.9 million were
recorded by the Company's Pemco Air Support Services facility
(PASS) in Copenhagen, Denmark and $0.8 million by the Company's
Pemco Nacelle facility in Clearwater, Florida.

The ratio of cost of sales ($84.8 million in 1996; $96.0 million in
1995) to net sales ($100.4 million in 1996; $112.4 million in 1995)
decreased from 85% in 1995 to 84% in 1996.  The primary favorable
impact to gross profit in 1996 was $17.2 million of REA revenue
recognized in conjunction with the Company's settlement with the
Government in October of 1996 (see "KC-135 Contract, above), as
compared with $5.2 million of REA revenue recognized in 1995,
related to the REA that was settled with the Government in February
of 1996.  Partially offsetting this increase to gross profit were
increased costs on KC-135 aircraft redelivered in 1996 as compared
to those redelivered in 1995.  The cost of 1996 KC-135 redeliveries
increased primarily due to the escalation and accumulation of the
cost factors cited in the Company's REA and partially due to
disruption caused by the work stoppage of the Company's United Auto
Worker (UAW) employees.  (All of the Company's approximately 900
UAW employees stopped work on July 22, 1996 and remained on strike
during the balance of the third quarter--see "Contingencies",
below.)

While the Company's previously recorded losses on its KC-135 PDM
program were substantially mitigated by the settlement of its REAs,
gross profit was also negatively impacted in the first nine months
of 1996 as compared to 1995 due to increased losses on its C-130
program, the lack of redeliveries under the Company's B-737 and B-
727 cargo conversion programs, and actual and anticipated losses
required to be recorded under various commercial aircraft
maintenance contracts performed at the Company's Dothan facility. 
Conversely, the Company reduced the losses at its Copenhagen
aircraft facility by $1.8 million or 50% for the first nine months
of 1996 versus 1995, while revenues for the period increased 16%. 
The Company also improved the profit margin and increased the
volume of sales for its Targets product line in 1996.

Selling, general and administrative expenses increased from $12.8
million in the first nine months of 1995 to $13.3 million in 1996
and increased as a percentage of sales from 11% in 1995 to 13% in
1996.

Interest expense was $2.5 million in both the first nine months of
1996 and 1995.  Average consolidated indebtedness for the two
periods remained relatively constant while the effective average
interest rate in 1996 on the Term credit facility and the Revolving
Credit facility was 10.70%, versus 9.02% in 1995.

The Company recorded a net of $3.0 million of other income in the
first nine months of 1996.  Approximately $3.3 million of the
Company's settlement with the U.S. Government was classified as
other income; $1.8 million as reimbursement for withholding tax
penalties and $1.5 million for excessive interest costs, both of
which were incurred by the Company due to the cash constraints
caused by the cost impacts cited in the Company's REAs (see "KC-135
Contract", above).  The Company had recorded approximately $0.4
million of the reimbursed payroll tax penalties in 1996.

The Company recorded $2.3 million of state and federal income tax
expense in the first nine months of 1996 versus $2.0 million in
1995 and reduced its deferred tax assets by $2.1 million and $1.9
million in each respective year.  The change in deferred tax assets
in 1996 resulted primarily from the utilization of federal net
operating loss carryforwards and the liquidation of inventory which
had been reserved.  The Company also increased its valuation
allowance in 1996 for certain state net operating loss
carryforwards which have been disallowed based on the findings of
an Alabama state tax audit.  The state tax audit involves tax years
prior to the Company's acquisition of Hayes International
Corporation (now Pemco Aeroplex, Inc.) and thus, while the Company
intends to vigorously defend its position with the State, the
valuation allowance has been increased due to the uncertainty of a
successful resolution.  The change in deferred tax assets in 1995
resulted primarily from a reduction of percentage of completion
based profits in work in process and the usage of net operating
loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

In October of 1996, the Company reached an agreement with the U.S.
Government with respect to all outstanding Requests for Equitable
Adjustment on both its 1990 and 1995 KC-135 contracts.  The Company
and the Government negotiated to resolve all disputes associated
with the Government's untimely provision of government furnished
material (GFM), the incidence of major structural repair work
greatly in excess of that contemplated at the time of contract
formation, post contract increases in inspection requirements,
consequent delay and disruption costs and other associated costs. 
The Company believes that the factors cited above caused the
Company to incur at least $34.8 million in additional costs up to
the date of the settlement with the Government.  Pursuant to the
terms of the settlement agreement, the Company received $25.0
million in cash from the U.S. Government in October of 1996.  (See
also Part I, Item 2 "Management's Discussion and Analysis - KC-135
Contract").

Also in October of 1996, the Company and its primary lender
negotiated the terms and conditions of amendments to the credit and
warrant agreements.  These amendments, which are anticipated to be
formalized in November of 1996, include a payment of principal of
$15.0 million from the proceeds of the settlement with the
Government, with $2.8 million to be applied to the Senior
Subordinated loan, $4.2 million to the Term Credit facility and
$8.0 million to fully repay the Revolving Credit facility.  The
agreement also provides for the forgiveness of approximately $1.3
million of accrued but unpaid interest for the period of May
through September of 1996.  Interest payment terms and rates
subsequent to September of 1996 will remain substantially
unchanged.  Repayment of the remaining $5.0 million Term Credit
facility will be made via three quarterly payments of $1.7 million,
to be paid on January 31, April 30 and July 31, 1997.  The
repayment of the remaining $7.2 million Senior Subordinated loan
will be paid in sixteen quarterly payments of $450,000, beginning
on September 30, 1997.  The agreement provided for no prepayment
penalty for either the Term Credit facility or Senior Subordinated
Credit facility.  The agreement also provides that all existing
breaches of loan covenants are waived or amended.

The amendments to the warrant agreement require mandatory
redemption of the primary lender's common stock purchase warrant in
eight equal quarterly installments beginning on December 31, 1996. 
The redemption is payable in cash or common stock, which will be
freely tradable by the primary lender with no restriction.  The
choice as to the form of redemption payment is at the Company's
sole discretion.  The redemption price of one-half of the warrant
(2,107,877 shares) is based on the average trading price during the
fifteen days before and the fifteen days after the public release
by the Company of its financial results for the third quarter of
1996.  The redemption price of the remaining half of the warrant
(2,107,876 shares) will be established at each quarterly redemption
date in a corresponding manner.

The Company remitted $15.0 million to its primary lender in October
of 1996 in accordance with the provisions of the agreement.  The
Company expects to recognize an extraordinary gain of $1.3 million
in the fourth quarter of 1996 because of the aforementioned
forgiveness of unpaid interest.  (See also, Part I, Item 1
"Footnote 4" and Part II, Item 3 "Defaults Upon Senior
Securities.")

However, until funds were received under the aforementioned
settlement with the Government, the Company's cash resources
continued to be strained primarily from excessive costs on its KC-
135 program, the delayed redelivery of KC-135 aircraft and losses
incurred under various commercial aircraft maintenance contracts
performed at the Company's Dothan and Copenhagen, Denmark
facilities.  As a consequence, the Company was unable to meet its
interest obligations for interest accrued in May through September
of 1996.  Additionally, the Company was in violation of the
financial ratio requirements of its loan agreements with its
primary lender beginning in June of 1996.  As noted above, the
agreement with the Company's primary lender has forgiven the
accrued, but unpaid, interest and waived or amended all breaches of
its loan covenants.

The following is a discussion of the significant items in the
Company's Consolidated Statement of Cash Flows for the years ending
September 30, 1996 and 1995.

The Company's pension expense as determined by its actuary for the
year 1996 is $1.0 million as compared to $2.3 million in 1995.  The
Company intends to fund its pension $1.3 million in 1996, which is
the same as was funded in 1995.  The Company funded $0.3 million in
the first quarter of 1996 and 1995 but due to its strained cash
resources, was unable to contribute funds in the second and third
quarters of either 1996 or 1995.  The Company contributed $0.6
million to its pension in October of 1996.

The Company reduced its deferred tax assets by $2.1 million in 1996
and $1.9 million in 1995.  The change in deferred tax assets in
1996 resulted primarily from the utilization of federal net
operating loss carryforwards and the liquidation of inventory which
had been reserved.  The Company also increased it's valuation
allowance in 1996 for certain state net operating loss
carryforwards which have been disallowed based on the findings of
an Alabama state tax audit.  The state tax audit involves tax years
prior to the Company's acquisition of Hayes International
Corporation (now Pemco Aeroplex, Inc.) and thus, while the Company
intends to vigorously defend its position with the state, the
valuation allowance has been increased due to the uncertainty of a
successful resolution.  The change in deferred tax assets in 1995
resulted primarily from a reduction of percentage of completion-
based profits on work in process and the usage of net operating
loss carryforwards.

The Company's accounts receivable decreased in the first nine
months of 1996 approximately $5.8 million, primarily due to fewer
redeliveries under the Company's KC-135 program in September of
1996 as compared to December of 1995, and the timing of such
redeliveries.

Net inventories decreased in the first nine months of 1996
primarily due to an increase of $10.1 million in progress payment
balances, offset by an increase of $4.2 million of work in process,
an increase of $0.9 million of raw materials and a decrease of $1.3
million of estimated losses on contracts in progress.  The increase
to work in process as well as $3.7 million of the increase in
progress payment balances is attributed to the Company's Dothan
facility.  The remaining increase of approximately $6.4 million in
progress payment balances is related to the Company's KC-135
program.

The Company increased its Request for Equitable Adjustment (REA)
receivable $20.4 million in the first nine months of 1996 related
to the $25.0 million settlement which was received from the
Government in October of 1996 (see "KC-135 Contract", under Results
of Operations, above).  The Company had recorded $4.1 million of
the settlement in 1995 and will record $0.4 million in the fourth
quarter of 1996.  Additionally, the Company received $8.1 million
in the first quarter of 1996 for the settlement of its $10.3
million REA, which was fully accrued at December 31, 1995.

The Company's accounts payable and accrued expenses were $24.7
million at September 30, 1996 versus $28.2 million at December 31,
1995.  Approximately $2.2 million of this reduction results from
the capitalization of interest accrued and unpaid to the Company's
primary lender, as of April 1, 1996.  The interest was capitalized
and added to the Term Credit facility.  The remaining reduction in
accounts payable and accrued expenses is primarily related to a
reduction in vendors payable.

The Company funded $1.1 million for capital improvements and $0.4
million for payments on various capital leases in the first nine
months of 1996 as compared to $1.9 million for capital
improvements, $0.5 million for payments on various capital leases
and a $4.0 million payment on its Term Credit facility in the first
nine months of 1995.

BACKLOG
<TABLE>
The following table presents the Company's backlog (in thousands of
dollars) at September 30, 1996 and 1995:

                                    1996          1995
          <S>                      <C>           <C>
          U.S. Government          $111,483      $143,923
          Commercial                 16,873        33,114      
             Sub-total             $128,356      $177,037
          Unfunded Option Years
             U.S. Government        167,000       205,000
          Total                    $295,356      $382,037   
</TABLE>
As of September 30, 1996, 87% of the Company's backlog, excluding
backlog related to unfunded option years, was with the U.S.
Government versus 81% for the period ending September 30, 1995. 
The Company's U.S. Government backlog decreased $20.3 million under
the Company's KC-135 contract, primarily due to a reduction in
anticipated work under the second option year of the contract which
began on October 1, 1996, as compared to work under the first
option year of the contract which began on October 1, 1995.  The
U.S. Government delivered thirty-four aircraft under the first
option year of the contract, compared to twenty aircraft currently
scheduled to be delivered for PDM work under the second option year
of the contract.  The Company's U.S. Government backlog also
decreased $5.8 million under the Company's C-130 program, $4.1
million under its Targets program, and $2.3 million under its Space
Vector program.

The Company's commercial backlog at September 30, 1996 changed from
prior year primarily due to a reduction of $18.4 million under the
Company's B-737 cargo conversion program, resulting from the
elimination of assumed option ships under contracts that have
expired.  The Company's commercial backlog also decreased $2.6
million at its aircraft facility in Copenhagen, Denmark and backlog
at the Company's Pemco Air Support Service division decreased $1.9
million.  Partially offsetting these reductions to commercial
backlog was a $6.4 million increase for various commercial
maintenance contracts and a $1.7 million increase in B-727 cargo
conversion contracts, all of which are to be performed at the
Company's Dothan facility.

Additionally, as of September, 1996, the Company has approximately
$167 million of backlog associated with the four follow-on option
years of its KC-135 contract.

CONTINGENCIES

The Company's contract with the United Auto Workers (UAW) at its
Pemco Aeroplex, Inc. division in Birmingham, Alabama and its Hayes
Targets division in Leeds, Alabama expired in July, 1996. 
Following contract expiration, the Company's approximately 900 UAW
employees voted to stop work at these facilities.  The primary
disagreement between the Company and its UAW employees centered on
the Company's proposal to modify job classifications and
descriptions which the Company deems critical to its ability to
increase efficiency and remain competitive.  Production and
shipments at the Pemco Aeroplex division in Birmingham have
continued by using management and supervisory personnel. 
Additionally, the Company employed approximately 470 temporary
replacement workers and 41 permanent replacement workers at the end
of September.  As of the beginning of November, 1996, the Company
employed approximately 480 temporary replacement workers and 210
permanent replacement workers.  Production and shipments at the
Targets division have continued through the utilization of the
Company's management employees.

Although production was slowed initially, average monthly
production has equaled the rate that was achieved for the six month
period immediately preceding the strike.  Normal production rates
should continue through the fourth quarter and into 1997. 
Replacement of the striking work force has necessarily generated a
substantial training requirement for the replacement workers;
however, efficiencies gained by using the methods of production
which the Company has proposed to the Union has largely offset the
impact of the additional training.  As the permanent replacement
work force continues to increase, this impact will decline and
further production efficiencies are anticipated.  Since the strike
began, the Company has realized substantial savings in man-hours
and reductions in flow time on aircraft entering production,
although the Company has incurred additional costs for the
procurement, housing and transportation of its replacement workers. 
Quality has remained high and there have been no customer reported
deficiencies on aircraft delivered since the strike began.

The Company, as a U.S. Government contractor, is routinely subject
to audits, reviews and investigations by the government related to
its negotiation and performance of government contracts and its
accounting for such contracts.  Under certain circumstances, a
contractor can be suspended or debarred from eligibility for
government contract awards.  The government may, in certain cases,
also terminate existing contracts, recover damages and impose other
sanctions and penalties.  The Company believes, based on all
available information, that the outcome of the U.S. Government's
audits, reviews and investigations will not have a materially
adverse effect on the Company's consolidated results of operation,
financial position or cash flows.

FORWARD LOOKING STATEMENTS

Statements herein concerning anticipated results of operations and
the Company's intent to take certain actions in the future are
forward looking statements, the accuracy of which cannot be
guaranteed by the Company.  These forward looking statements are
subject to a variety of business risks and other uncertainties,
including but not limited to the effect of economic conditions, the
impact of competitive products and pricing, new product
development, the actual performance of work under contract,
customer contract awards and actions with respect to utilization
and renewal of their contracts and the results of financing
efforts.


                     PRECISION STANDARD,INC.

                        OTHER INFORMATION


PART II.

Item 1    Legal Proceedings

          None

Item 2    Changes in Securities

          None

Item 3    Defaults Upon Senior Securities

          The Company was unable to meet its interest obligations
          for interest accrued in May through September of 1996. 
          Additionally, the Company was in violation of the
          financial ratio requirements of its loan agreements with
          its primary lender as of June of 1996.  As a result of
          these delinquencies and violations, the Company may be
          deemed to be in default of its loan agreements with its
          primary lender and those of its other obligations which
          contain cross-default provisions to the Company's
          principal loan agreements as of September 30, 1996. 
          However, in October of 1996, the Company and its primary
          lender entered into a letter agreement outlining the
          general terms and conditions of amendments to the credit
          and warrant agreements to be formalize in November 1996. 
          The components of the agreement include a debt principal
          reduction of $15.0 million, the forgiveness of
          approximately $1.3 million of accrued but unpaid interest
          for the period of May through September of 1996, a
          restructuring of the remaining debt principal and the
          amendment or waiver of all existing breaches of loan
          covenants.  The agreement also specifies redemption of
          the primary lender's warrant in eight equal quarterly
          installments beginning on December 31, 1996.  The Company
          remitted $15.0 million to its primary lender in October
          of 1996 in accordance with the provisions of the
          agreement.  (See also, Part I, Item I "Note 4 to
          Financial Statements" and Part I, Item 2 "Management's
          Discussion and Analysis - Liquidity and Capital
          Resources".)
          
Item 4    Submission of Matters to a Vote of Security Holders

          None
          


Item 5    Other Information

          None

Item 6    Exhibits and Reports on Form 8-K

          a)   Exhibits

          27 Financial Data Schedule

          b)   Reports on Form 8-K

          None 





                         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.




                                   PRECISION STANDARD, INC.



Date:      11/13/96                By:  /s/ Matthew L. Gold     
                                         Matthew L. Gold
                                         Chairman, President and
                                         Chief Executive Officer




Date:      11/15/96                By:  /s/ Walter M. Moede     
                                         Walter M. Moede
                                         Executive Vice President
                                         & Chief Financial Officer