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                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


(Mark One)

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

                For the Quarterly Period Ended October 4, 1997

                                       OR

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

                          Commission File Number 1-9843

                              MORGAN PRODUCTS LTD.
             (Exact name of registrant as specified in its charter)



                DELAWARE                               06-1095650
     (State or other jurisdiction of      (I.R.S. Employer Identification No.)
            incorporation or
              organization)

                469 McLaws Circle, Williamsburg, Virginia  23185  
          (Address of principal executive offices, including zip code)

                                (757) 564-1700
             (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 registrant's  Common Stock,  par value $.10
per  share,  at  November  3,  1997 was  10,357,396;  2,386  shares  are held in
treasury.


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<PAGE>



                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
                              MORGAN PRODUCTS LTD.
                           Consolidated Balance Sheets
                        ($000 Except Shares Outstanding)


                                          October 4,  September 28, December 31,
                                             1997         1996         1996
                                          (Unaudited) (Unaudited)
                                          ----------- ------------  ------------
                 ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                 $    419   $   1,717    $  1,467
  Accounts receivable, net                    44,560      39,122      32,559
  Inventories                                 66,678      67,540      73,683
  Other current assets                         1,486       1,198         632
                                           ----------  ----------   ----------
    Total current assets                     113,143     109,577     108,341
                                           ----------  ----------   ----------

OTHER ASSETS                                  11,763       7,039      10,638
PROPERTY, PLANT & EQUIPMENT, net              23,637      23,171      23,137

  TOTAL  ASSETS                             $148,543    $139,787     $142,116
                                           ----------  ----------   ----------

  LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-term debt                           $     99    $     88     $     0
  Current maturities of long-term debt         2,010       1,028       1,136
  Accounts payable                            16,781      18,884      19,449
  Accrued compensation and employee 
     benefits                                  4,815       7,258       6,219
  Other current liabilities                    3,926       3,547       4,449
                                           ----------  ----------   ----------
    Total current liabilities                 27,631      30,805      31,253
                                           ----------  ----------   ----------

LONG-TERM DEBT                                62,533      55,023      48,880

STOCKHOLDERS' EQUITY:

  Common Stock, $.10 par value, 
    10,357,099, 8,649,308, and 10,149,816      1,036         865       1,015
    shares outstanding, respectively
  Paid-in capital                             43,408      33,782      42,237
  Retained earnings                           13,983      19,567      18,927
                                           ----------  ----------   ----------
                                              58,427      54,214      62,179

  Treasury stock, 2,386 shares, at cost          (48)        (48)         (48)
  Unamortized value of restricted stock            0        (207)        (148)
                                           ----------  ----------   ----------

  TOTAL  STOCKHOLDERS'  EQUITY                58,379      53,959       61,983
                                           ----------  ----------   ----------
    TOTAL LIABILITIES & STOCKHOLDERS'        
     EQUITY                                 $148,543    $139,787     $142,116
                                           ==========  ==========   ==========

    The accompanying notes are an integral part of the financial statements.


                                       -2-
<PAGE>



                              MORGAN PRODUCTS LTD.
                         Consolidated Income Statements
                    ($000, except earnings per share amounts
                    and weighted average shares outstanding)



<TABLE>
<CAPTION>
                                              For the Three Months Ended            For the Nine Months Ended
                                          ----------------------------------   ----------------------------------
                                            October 4,       September 28,       October 4,       September 28,
                                               1997               1996              1997              1996
                                          ----------------   ---------------   ---------------    ---------------
                                            (Unaudited)       (Unaudited)       (Unaudited)        (Unaudited)

<S>                                       <C>                <C>               <C>                <C>           
Net sales                                  $  111,656        $    97,377        $   314,262        $   267,121

Cost of goods sold                             97,904             82,775            268,044            227,642
                                          ----------------   ---------------   ---------------    ---------------
    Gross profit                               13,752             14,602             46,218             39,479
                                          ----------------   ---------------   ---------------    ---------------
Operating expenses:
     Sales & marketing                         10,456              8,712             31,455             25,353
     General & administrative                   3,108              2,707             10,067              8,778
     Restructuring                                  0              1,956              4,713              2,837
     Reorganization                                 0                  0              1,117                  0
                                          ----------------   ---------------   ---------------    ---------------
         Total                                 13,564             13,375             47,352             36,968
                                          ----------------   ---------------   ---------------    ---------------
Operating income (loss)                           188              1,227             (1,134)             2,511
                                          ----------------   ---------------   ---------------    ---------------
Other income (expense):
     Interest                                  (1,341)              (778)            (3,912)            (2,147)
     Other                                        100                 80                192                217
                                          ----------------   ---------------   ---------------    ---------------
         Total                                 (1,241)              (698)            (3,720)            (1,930)
                                          ----------------   ---------------   ---------------    ---------------
Income (loss) before income taxes              (1,053)               529             (4,854)               581

Provision for income taxes                         30               (406)                90               (357)
                                          ----------------   ---------------   ---------------    ---------------
Net income (loss)                          $   (1,083)       $       935        $    (4,944)        $      938
                                          ================   ===============   ===============    ===============

Income (loss) per share                    $    (0.10)       $      0.11        $     (0.48)        $     0.11
                                          ================   ===============   ===============    ===============
Weighted average, common and
   common equivalent shares outstanding     10,353,933         8,808,636         10,255,932          8,724,938
                                          ================   ===============   ===============    ===============
</TABLE>



    The accompanying notes are an integral part of the financial statements.




                                       -3-
<PAGE>



                              MORGAN PRODUCTS LTD.
                      Consolidated Statements of Cash Flows
                                  ( $ 000 ' s )


                                                     For the Nine Months Ended
                                                   -----------------------------
                                                    October 4,    September  28,
                                                       1997            1996
                                                   ------------   --------------
                                                    (Unaudited)     (Unaudited)
CASH GENERATED (USED) BY OPERATING ACTIVITIES:
  Net  income (loss)                                 $  (4,944)       $     938
  Add  noncash items included in income:
    Depreciation and amortization                         3,174           2,800
    Provision for doubtful accounts                         230             143
    (Gain) Loss on sale of property, plant &       
       equipment                                           (39)               5
    Provision for restructuring                               0             881
     Other                                                  148             175
  Cash (used) generated by changes in components
      of working capital, net of effects of 
      acquisition of businesses:
    Accounts receivable                                (10,598)         (11,633)
    Inventories                                          8,933           (6,274)
    Accounts payable                                      (764)           5,503
    Other working capital                               (3,117)             724
                                                     ----------       ----------
NET CASH GENERATED (USED) BY OPERATING ACTIVITIES       (6,977)          (6,738)

CASH GENERATED (USED) BY INVESTING ACTIVITIES:
  Acquisition of property, plant, & equipment           (2,769)          (3,864)
  Acquisition of Tennessee  Building  Products          (2,182)         (15,610)
  Acquisition of Wahlfeld Manufacturing Company         (4,757)               0
  Proceeds from disposal of property, plant, &               
       equipment                                           152            4,118
  Proceeds  from  surrender of life insurance
       policies                                              0              925
  Acquisition of other assets, net                        (333)          (1,118)
                                                     ----------       ----------
NET CASH GENERATED (USED) BY INVESTING ACTIVITIES       (9,889)         (15,549)
                                                     ----------       ----------
CASH GENERATED (USED) BY FINANCING ACTIVITIES:
  Net change in short-term debt                             99               88
  Proceeds from long-term  debt                         15,553           20,055
  Repayments of long-term  debt                         (1,026)          (1,285)
  Common stock issued for cash                           1,192               11
                                                     ----------       ----------
NET CASH GENERATED  BY FINANCING ACTIVITIES             15,818           18,869
                                                     ----------       ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS               (1,048)          (3,418)

CASH AND CASH EQUIVALENTS:
  Beginning of period                                    1,467            5,135
                                                     ----------       ----------
  End of period                                      $     419        $   1,717
                                                     ==========       ==========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the year for:
    Interest                                         $   4,224        $   2,465
    Income taxes                                           121               60



    The accompanying notes are an integral part of the financial statements.


                                       -4-
<PAGE>



                              MORGAN PRODUCTS LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      FOR THE PERIOD ENDED OCTOBER 4, 1997


NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS - Morgan Products Ltd. (the "Company")  manufactures and
distributes  products  (virtually  all of which are  considered  to be millwork)
which  are sold to the  residential  and  light  commercial  building  materials
industry and are used for both new  construction and  improvements,  maintenance
and  repairs.  In  view  of the  nature  of  its  products  and  the  method  of
distribution,  management  believes  that the Company's  business  constitutes a
single industry segment.

DISCLOSURES  ABOUT  SEGMENTS  OF AN  ENTERPRISE  AND RELATED  INFORMATION  - The
Financial  Accounting  Standards  Board ("FASB")  issued  Statement of Financial
Accounting  Standards  ("SFAS")  No.  131,  "Disclosures  about  Segments  of an
Enterprise  and  Related  Information,"  which  establishes  new  standards  for
reporting  information about operating  segments in annual financial  statements
and  interim  financial  reports.  It also  establishes  standards  for  related
disclosures  about products and services,  geographic areas and major customers.
SFAS 131 is effective  for fiscal years  beginning  after  December 15, 1997 and
requires  presentation of prior period  financial  statements for  comparability
purposes.  The Company is currently  evaluating its required  disclosures  under
SFAS No. 131 and expects to adopt this standard  during the year ended  December
31, 1998.

CONSOLIDATION - The consolidated  financial  statements  include the accounts of
all  business  units of Morgan  Products  Ltd.  All  intercompany  transactions,
profits and balances are eliminated.

BASIS  OF  PRESENTATION  - The  financial  statements  at  October  4,  1997 and
September 28, 1996, and for the three and nine months then ended, are unaudited;
however,  in the opinion of  management,  all  adjustments  (consisting  only of
normal recurring  accruals)  necessary for a fair  presentation of the financial
position at these dates and the results of  operations  and cash flows for these
periods  have been  included.  The results  for the three and nine months  ended
October  4,  1997 are not  necessarily  indicative  of the  results  that may be
expected for the full year or any other interim period.

EARNINGS PER SHARE - The FASB has issued SFAS No.128, "Earnings per Share." SFAS
128 replaces  primary EPS with basic EPS, which  excludes  dilution and requires
presentation of both basic and diluted EPS on the face of the income  statement.
Diluted EPS is computed  similarly to the current fully diluted EPS. SFAS 128 is
effective for financial  statements issued for periods ending after December 15,
1997,  and requires  restatement of all  prior-period  EPS data  presented.  The
adoption of this statement is not expected to materially affect either future or
prior-period EPS.

REPORTING  COMPREHENSIVE  INCOME - The FASB  issued  SFAS  No.  130,  "Reporting
Comprehensive  Income," which will require the Company to disclose, in financial
statement  format,  all  non-owner  changes  in  equity.  Such  changes  include
cumulative foreign currency translation  adjustments and certain minimum pension
liabilities. SFAS 130 is effective for fiscal years beginning after December 15,
1997  and  requires  presentation  of  prior  period  financial  statements  for
comparability  purposes.  The Company is currently  evaluating  its  disclosures
under SFAS No. 131 and  expects  to adopt  this  standard  during the year ended
December 31, 1998.



                                      -5-
<PAGE>



NOTE 2 - INVENTORIES

Inventories consisted of the following at (in thousands of dollars):


                       October 4, 1997  September 28, 1996     December 31, 1996
                       (unaudited)       (unaudited)



Raw material                   $10,937          $ 12,461                 $14,139

Work-in-process                  8,671             7,801                   9,899

Finished goods                  47,070            47,278                  49,645
                               -------           -------                 -------
                               $66,678           $67,540                 $73,683
                               -------           -------                 -------

Inventories are valued at the lower of cost or market. Cost is determined on the
first-in, first-out (FIFO) method.


NOTE 3 - PROVISION FOR RESTRUCTURING AND REORGANIZATION

In  conjunction  with the  closing of two  plants and to provide  for other cost
reductions and consolidations  within the Company an $11.3 million restructuring
charge was recorded in 1994. At such time, a multi-year plan involving necessary
management  structure changes, a new management  information  system, and future
facility requirements was developed.

In the second quarter of 1996,  the Company sold its  Lexington,  North Carolina
door  manufacturing  facility and  consolidated  it with the Company's  Oshkosh,
Wisconsin  door  manufacturing  facility.  The Company  recorded  an  additional
restructuring  charge  in the  second  quarter  of 1996 of  $881,000,  of  which
$356,000, related to the sale of the Lexington facility and the consolidation of
door  manufacturing  operations  into the Oshkosh  facility,  and the balance of
which was used to cover incremental costs related to the Springfield, Oregon and
Weed,  California  plant  closings  and  the  reorganization  of the  management
structure at Morgan Manufacturing.  Additional aggregate  restructuring expenses
of $3.8 million were  recorded in the third and fourth  quarters of 1996.  These
restructuring expenses, which included Lexington operating costs after cessation
of production and incremental hiring,  training, and relocation costs associated
with the transfer of Lexington production to Oshkosh, were expensed as incurred.

In  the  first  nine  months  of  1997,  the  Company   recorded  an  additional
restructuring  charge  of  $4.7  million  for  excessive  costs  incurred  as  a
consequence of the consolidation of manufacturing  operations and a delay in the
start-up of the new  high-speed  door  assembly  line.  The  equipment  has been
installed  and  management  believes  that the line should be  functioning  at a
normal capacity by January 1998. At October 4, 1997, the  restructuring  reserve
balance was $.6 million as compared to $1.1 million at December 31, 1996.

Additionally,  the Company has recorded a $1.1 million  reorganization charge in
the  first  nine  months  of 1997 in  connection  with  the  termination  of the
employment  of the Chief  Financial  Officer  and  Senior  Vice  President-Human
Resources  and   Administration  of  the  Company.   At  October  4,  1997,  the
reorganization reserve balance was $.2 million.

NOTE 4 - CREDIT AGREEMENT


On July 25,  1997,  the Company and the bank group  entered into an amendment to
its  revolving  credit  facility,   which  altered  the  restrictive  covenants,
increased  the credit line to the current  $75  million  and  extended  the line
through July 14, 2000.  The covenants  have terms  similar to or more  favorable
than  those  previously  in  effect.  The  amendment  also  puts  into  place an
incremental acquisition line of up to


                                      -6-
<PAGE>



$15  million  through  July 14,  2000,  consisting  of a term  loan of up to $10
million and a  revolving  credit  facility  of up to $5 million.  On November 5,
1997, the Company and the bank group entered into an amendment, which eliminated
the $5 million revolving credit facility for  acquisitions.  At October 4, 1997,
the Company had borrowings of $55.6 million under the revolving credit facility,
which includes $4.9 million under the  acquisition  line.  The credit  agreement
requires the Company,  among other things, to maintain minimum interest coverage
and fixed charge  coverage  ratios,  minimum  levels of tangible net worth and a
maximum leverage ratio.

NOTE 5 - ACQUISITION OF WAHLFELD MANUFACTURING COMPANY

On July 25, 1997, the Company acquired certain assets of Wahlfeld  Manufacturing
Company  ('Wahlfeld").  Wahlfeld,  which had annual sales of approximately $22.7
million for the year ended  December  31,  1996,  is a  distributor  of windows,
doors, and other millwork products to residential  builders and other customers.
The purchase price of $4.8 million,  including $.2 million in acquisition costs,
subject  to  certain  purchase  price  adjustments,  was  financed  through  the
borrowings on the company's revolving credit facility.  The acquisition has been
recorded using the purchase  method of  accounting.  The excess of the aggregate
purchase price over the fair market value of net assets  acquired was recognized
as goodwill  and is being  amortized  over 25 years.  The  operating  results of
Wahlfeld have been included in the Company's  consolidated  financial statements
since the date of acquisition.




                                      -7-
<PAGE>



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


Forward Looking Statements

Various  statements  made within this  Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations  and elsewhere in this  Quarterly
Report on Form 10-Q constitute  "forward looking statements" for purposes of the
Securities and Exchange  Commission's "safe harbor" provisions under the Private
Securities  Litigation  Reform  Act of 1995 and Rule 3b-6  under the  Securities
Exchange  Act  of  1934,  as  amended.   Investors   are   cautioned   that  all
forward-looking  statements  involve risks and  uncertainties,  including  those
detailed in the Company's  filings with the Securities and Exchange  Commission.
There can be no assurance that actual results will not differ from the Company's
expectations.  Factors which could cause materially  different  results include,
among others, the success of consolidation of manufacturing operations;  changes
in relationships with important  suppliers and key customers;  the existence and
pace  of  acquisitions;   fluctuations  in  the  price  of  raw  materials;  and
competitive and general economic conditions, such as housing starts.

Results of Operations

Three Months Ended October 4, 1997 vs.
Three Months Ended September 28, 1996

The  Company's  net  sales  for the  third  quarter  of 1997 of  $111.7  million
represent a $14.3 million or 14.7%  increase over the same period in 1996.  This
increase  is  primarily  attributable  to the August  30,  1996  acquisition  of
Tennessee Building Products,  ("TBP") which generated  incremental sales of $9.6
million and a $5.1 million  improvement  in the sales of  distributed  products,
which  management  believes  is due to  increased  marketing  efforts  with  key
suppliers and the acquisition of Wahlfeld  Manufacturing Company ("Wahlfeld") on
July 25, 1997. External sales of manufactured  products for the third quarter of
1997 dropped $.5 million from the same period in 1996. Sales continue to decline
from prior year periods due to the disruption caused by the consolidation of the
Lexington,  North  Carolina  facility  and the delay in the  start-up of the new
high-speed door assembly line.

For  the  third  quarter  of  1997,  the  Company  reported  a net  loss  before
restructuring  and  reorganization  charges  of $1.1  million or $0.10 per share
compared to net income before  restructuring and reorganization  charges of $2.8
million  or $0.33  per  share  for the same  period  in 1996 on  average  shares
outstanding  of  10,353,933  and  8,808,636,   respectively.  The  decrease  was
primarily  due to lower  volumes of  manufactured  products and higher  interest
costs.

The gross profit  decline for the third  quarter of 1997 of $.9 million from the
third  quarter  of 1996 is due  primarily  to a shift  to  lower  margin  direct
business  and market  price  pressure  at  Distribution,  and higher cost of raw
materials  and  unfavorable  variances at  Manufacturing.  These  declines  were
partially offset by increases at TBP due to the additional volume.

Operating  expenses for the third quarter of 1997,  excluding the  restructuring
and reorganization  charges,  were $13.6 million, or 12.1% of net sales compared
to operating  expenses in the third quarter of 1996 of $11.4 million,  or 11.7%.
of net sales. The increase in operating expenses is almost  exclusively  related
to the TBP acquisition.

Interest  expense for the third  quarter of 1997  increased $.6 million over the
same period in 1996. The increase was due to a $23.6 million increase in average
long-term debt in the 1997 third quarter from the same period in 1996.

The provision  for income taxes in both third  quarters 1997 and 1996 relates to
the  recording of state  taxes.  No federal tax benefit was  recognized  in 1997
given the Company's net operating loss position. The provision for federal taxes
in 1996 was are offset by the Company's net operating loss position.


                                      -8-
<PAGE>



Nine Months Ended October 4, 1997 vs.
Nine Months Ended September 28, 1996

The Company's net sales for the 1997 nine-month  period  increased $47.1 million
or 17.6% over the same period in 1996. The increase is primarily attributable to
the  acquisition  of TBP, and an 8.8%  year-to-date  improvement in the sales of
distributed  products,  which management  believes is due to increased marketing
efforts with key suppliers and the  acquisition  of Wahlfeld.  External sales of
manufactured  products for the 1997 nine-month  period dropped $6.4 million from
the same period in 1996.  Sales  continue to decline from prior year periods due
to the disruption caused by the  consolidation of the Lexington,  North Carolina
facility and the delay in the start-up of the new high-speed door assembly line.

The  Company  reported   year-to-date  net  income  before   restructuring   and
reorganization  charges of $.9 million or $0.09 per share compared to net income
before  restructuring  and  reorganization  charges of $3.7 million or $0.43 per
share for the same period in 1996, on average  shares  outstanding of 10,255,932
and 8,724,938,  respectively.  The lower income,  exclusive of the restructuring
and reorganization  charges,  was primarily due to lower volumes of manufactured
products and higher interest costs.  Including  restructuring and reorganization
charges of $5.8 million,  the Company  reported a year-to-date  net loss of $4.9
million or $0.48 per share  versus net income of $.9  million or $0.11 per share
for the same period in 1996.

The  gross  profit  increase  of $6.7  million  for the 1997  nine-month  period
compared  corresponding  period  of 1996 was  primarily  the  result  of the TBP
acquisition,  sales volume  gains and a supplier  incentive  somewhat  offset by
Manufacturing results.

Operating   expenses  for  the  first   nine-months   of  1997,   excluding  the
restructuring  and  reorganization  charges,  were $41.5 million or 13.2% of net
sales,  compared  to the same  period in 1996 with  operating  expenses of $34.1
million or 12.8% of net sales.  The  increase  in  operating  expenses is almost
exclusively related to the TBP acquisition.

Year-to-date  interest  expense was $1.8 million  higher than the same period in
1996.  This  increase is due to average  debt  rising from $36.8  million in the
first nine months of 1996 to $61.8  million in the same period in 1997 which was
needed to maintain higher working capital levels due to operating inefficiencies
in Manufacturing, the TBP and Wahlfeld acquisitions.

The  provision  for income taxes in both years relates to the recording of state
taxes.  No federal tax benefit was  recognized  in 1997 given the  Company's net
operating loss  position.  The provision for federal taxes in 1996 was offset by
the Company's net operating loss position.


Significant Business Trends/Uncertainties

Management  believes  that housing  starts have a  significant  influence on the
Company's level of business activity.  The Wall Street Journal recently reported
that the Commerce  Department  said housing starts jumped 7.9% in September to a
seasonally  adjusted  rate of 1.5 million  homes.  No  assurances  can be given,
however,  that for 1997 there will be any continued  improvement in the level of
housing  starts,  or that  single-family  housing starts will not decline in the
future.

Management also believes that the Company's ability to continue to penetrate the
residential  repair and remodeling  markets  through sales to home center chains
may have a significant  influence on the Company's  level of business  activity.
Management  believes  this market will  continue  to grow in  importance  to the
Company. Management further believes that in certain areas of the United States,
sales by  distributors  directly to the end-user may over time  replace,  as the
primary  channel  of  distribution,  the  distribution  method of selling to the
retail dealer,  who then sells to the end user.  The Company  intends to respond
aggressively  to  such  changes  in  distribution  methods,   including,   where
opportunities  permit,  through the acquisition of distribution  businesses that
sell directly to the end-user.




                                      -9-
<PAGE>



In the past, raw material prices have fluctuated  substantially for pine and fir
lumber.  Fir prices  reached a high in the first  quarter  of 1995 and  remained
within 5% of that  level  until the fourth  quarter of 1996.  For the first nine
months of 1997,  average  pine  prices,  the highest  volume  specie used by the
Company,  have increased 19% over the same period in 1996. Since June 1997, pine
prices  have  steadily  fallen to a one-year  low.  For the first nine months of
1997,  average fir and oak prices were at their  highest  levels in a year. As a
result,  the  Company  continues  its efforts to expand the  utilization,  where
appropriate,  of engineered  materials in wood door  components and to switch to
alternate wood species.  In addition,  the Company has  established new offshore
sources of raw material.  Management believes that these actions,  together with
aggressive  price  increases  where  competitive  factors allow,  will partially
offset the impact of the high cost of raw material.

In order to expand its capacity,  meet anticipated demand and reduce its cost of
production, the Company has installed a new high-speed door assembly line at its
Oshkosh facility. Delivery and installation of the new line was completed during
the first quarter of 1997. The new high-speed door assembly line is operational;
however,  the new  line is not yet  operating  at  normal  capacity.  Management
currently  believes that the line should be functioning at a normal  capacity by
January 1998. A performance  shortfall could have a detrimental  impact, both on
the  short-term  profitability  of the Company and on its  long-term  ability to
service  and  retain  key  customers.  Management  believes  that the  efficient
operation  of the new  high-speed  door  assembly  line is  critical to reducing
lead-times to acceptable levels and satisfying customers.

An important part of the Company's  strategic plan is to expand its distribution
capabilities,  particularly  in the  Southeast and  Southwest,  as well as other
areas, if attractive  opportunities  are presented.  In August 1996, the Company
acquired  substantially  all of the business  and assets of  Tennessee  Building
Products,  a regional millwork and specialty  building products  distributor and
light  manufacturer   headquartered  in  Nashville,   Tennessee.  With  the  TBP
acquisition,  the Company  expanded  its  operations  to include  Nashville  and
Chattanooga,  Tennessee;  Charlotte, North Carolina; Greenville, South Carolina;
and Huntsville,  Alabama.  In July 1997, the Company  acquired certain assets of
Wahlfeld, a distributor of windows, doors and other millwork products in Peoria,
Illinois.  The Company has  consolidated  Wahlfeld's  operations into two of its
existing facilities.

Recently,  Andersen  Corporation  ("Andersen") decided to market and to sell its
Fibrex(TM)  replacement window systems through retail stores, which are aimed at
the  replacement   window  buyer.   These  retail  stores,   called  Renewal  by
Andersen(TM)  stores,  will be devoted  exclusively to the promotion and sale of
Fibrex(TM) window systems, with the stores being established in various areas of
the country and  principally  owned and  operated by  independent  distributors.
Andersen has entered into an agreement with the Company to open one of the first
such stores in Overland  Park,  Kansas.  This store is owned and operated by the
Company. Fibrex(TM) is a proprietary material developed by Andersen that is made
of a  composite  of wood  fibers and vinyl and is  considered  to be superior in
certain characteristics to pure vinyl core window systems. In the event that the
Kansas   location  is   successful,   the  Company  and  Andersen  may  consider
establishing additional stores.

As the  final  major  element  of its  strategic  initiatives,  the  Company  is
committed to improving its management  information  systems.  A new Company-wide
integrated management information system has been selected and is in the process
of implementation.  The Company has approved a total capital expenditure of $3.4
million  for  the new  management  information  system  project,  which  will be
financed  through a  combination  of  capital  leases and  borrowings  under the
Company's revolving line of credit. Upon completion of this project, the Company
will  have  achieved  significant  progress  in  meeting  its goal of being  the
industry leader in customer-friendly order processing and fulfillment systems.

Liquidity and Capital Resources

The  Company's  working  capital  requirements  are related to its sales  level,
which, because of its dependency on housing starts and the repair and remodeling
market,  are seasonal  and, to a degree,  weather  dependent.  This  seasonality
affects the need for working capital inasmuch as it is necessary to carry larger
inventories and receivables during certain months of the year.



                                      -10-
<PAGE>



Working  capital  increased $8.4 million from $77.1 million at December 31, 1996
to $85.5 million at October 4, 1997.  The increase in working  capital  reflects
seasonality,  with account receivables  increasing $10.6 million and an increase
of $4.8  million  as a result  of the  Wahlfeld  acquisition.  The  increase  in
receivables  is primarily  due to a $7.6 million  increase in sales in September
1997 as compared to December 1996, with  Distribution  sales accounting for $6.0
million, Manufacturing sales accounting for $.7 million and TBP sales accounting
for $.9  million of such  increase,  respectively.  Accounts  payable  and other
working capital  decreased in the first nine months of 1997 by an aggregate $3.9
million,  primarily  as a  consequence  of the  payment of accrued  bonuses  and
commissions and a large decrease in the amount of checks issued and outstanding.
Increases  in  working  capital  were  offset  by a  $8.9  million  decrease  in
inventories.  This decline of inventory is a continuance  of the Company's  cost
cutting plan to reduce working capital and interest on long-term debt.

Long-term debt, net of cash, increased to $62.1 million at October 4, 1997, from
$47.4 million at December 31, 1996. The Company's  ratio of long-term  debt, net
of cash, to total  capitalization  increased  from 43.3% at December 31, 1996 to
51.5% at October 4, 1997. The $14.7 million  increase is primarily  attributable
to the  aforementioned  $3.6 million change in working capital (exclusive of the
Wahlfeld working capital), the $4.8 million in borrowings to acquire Wahlfeld, a
final  payment of $2.2  million  related  to the  acquisition  of TBP,  and $2.8
million of capital spending.

Cash used by operating activities totaled $7.0 million for the nine months ended
October 4, 1997, as compared to $6.7 million cash used for the nine months ended
September 28, 1996. The  difference  between  periods is due to lower  operating
results and higher working capital as discussed above.  Investing  activities in
the first nine months of 1997 used $10.0 million,  compared to the corresponding
period in 1996, when investing activities used $15.5 million. Activities in 1997
included  $2.8 million to acquire new  equipment,  the final payment to purchase
TBP of  $2.2  million  and  payments  to  purchase  Wahlfeld  of  $4.8  million.
Activities in 1996 activities included $5.0 million used for asset acquisitions,
cash  used  purchase  TBP of $15.6  million,  $4.1  million  generated  on asset
disposals and $.9 million provided by the surrender of life insurance  policies.
Financing activities generated $15.8 million through October 4, 1997, with $15.5
million  provided  by net  increases  in the  revolving  line  of  credit,  $1.2
generated by stock  options  being  exercised by former  employees,  $.1 million
generated by short term financing and $1.0 used by principal payments of capital
leases and the  Walfeld  term loan.  During the same  period in 1996,  financing
activities generated $18.9 million, with $20.1 million provided by net increases
in the  revolving  line of  credit  offset by $1.3  million  in cash used to pay
principal  payments on capital leases.  The $3.1 million difference in financing
requirements for the nine months ended October 4, 1997 and the comparable period
in 1996 is primarily due to the TBP acquisition in 1996.

On July 25,  1997,  the Company and the bank group  entered into an amendment to
its  revolving  credit  facility,   which  altered  the  restrictive  covenants,
increased  the credit line to the current  $75  million  and  extended  the line
through July 14, 2000.  The covenants  have terms  similar to or more  favorable
than  those  previously  in  effect.  The  amendment  also  puts  into  place an
incremental  acquisition  line  of up to $15  million  through  July  14,  2000,
consisting of a term loan of up to $ 10 million and a revolving  credit facility
of up to $5 million. On November 5, 1997, the Company and the bank group entered
into an amendment, which eliminated the $5 million revolving credit facility for
acquisitions.  At October 4, 1997,  the Company had  borrowings of $55.6 million
under the  revolving  credit  facility,  which  includes  $4.9 million under the
acquisition line. The credit agreement requires the Company, among other things,
to maintain minimum interest coverage and fixed charge coverage ratios,  minimum
levels of tangible  net worth and a maximum  leverage  ratio.  The Company is in
compliance with the financial covenants under the credit agreement.

The  Company  believes  that  it may  require  additional  financing  to  pursue
attractive acquisition candidates, depending upon the size of the acquisitions.

Restructuring of Operations

Since 1994 the  Company has adopted a  comprehensive  strategic  plan to restore
profitability and regain industry leadership by providing customers with quality
products and optimum service at the best price/value  relationship.  The Company
has taken a series of major initiatives to implement this plan and


                                      -11
<PAGE>



respond to continuing challenges in the industry.  At Morgan Manufacturing,  the
Company  has  consolidated  all of its door  manufacturing  operations  into its
Oshkosh   facility  and  has  invested   approximately  $6  million  in  capital
expenditures for a new high-speed door assembly line. In addition, management is
committed to controlling  manufacturing  costs,  achieving a substantial savings
through  innovative raw material  purchasing and  manufacturing  practices,  and
developing a more customer-focused  business approach. The Company believes that
its  relationship  with  Andersen  has  improved  in  recent  years.  At  Morgan
Distribution,  the Company has  strengthened its business through a broad series
of operating initiatives and plans to achieve additional growth both through its
existing operations and by acquisition, as opportunities permit.

Primarily as the result of the implementation of its strategic plan, the Company
has incurred  substantial  restructuring  charges.  In 1994 the Company incurred
$11.3  million  in  restructuring  charges  to cover  the costs of  closing  the
Company's  Springfield,  Oregon door and Weed,  California  veneer  plants,  the
downsizing of Morgan  Manufacturing,  Company-wide  management structure changes
(including   terminations  and  the  elimination  of  certain  positions),   the
restructuring  of the Morgan  Distribution  operations,  the  relocation  of the
Company's  corporate  headquarters,  and other cost reduction and  consolidation
actions.

In the second quarter of 1996,  the Company sold its  Lexington,  North Carolina
door manufacturing facility. The entire line of doors previously manufactured in
Lexington was shifted to the Company's Oshkosh door manufacturing  facility. The
Company  recorded  restructuring  charges  in 1996 of  $4.7  million,  primarily
related to the sale of the  Lexington  facility  and the  consolidation  of door
manufacturing operations into the Oshkosh facility.

Management  believes  that  with  the  installation  and  start-up  of  the  new
high-speed  door assembly line at the Oshkosh  facility,  which  occurred in the
first  quarter  of  1997,  lead  time  increases  experienced  due to  increased
production  requirements  and  related  inefficiencies  encountered  during  the
consolidation  process may be reversed and, in fact, may be reduced by up to two
weeks.  The new  high-speed  door  assembly  line is not yet operating at normal
capacity;  however, management believes that the line should be functioning at a
normal  capacity by January 1998.  When the new high-speed door assembly line is
fully  operational,  management  believes  that  the  Oshkosh  facility  will be
operating  at  approximately  80% of  capacity,  based upon  current  production
levels.  It is  believed  that  the  consolidation  of  all  door  manufacturing
facilities at a single facility will offer the Company  significant cost savings
as well as provide  customers with the advantage of purchasing the full range of
solid wood door products and wood species from a single manufacturing facility.

In  the  first  nine  months  of  1997,  the  Company   recorded  an  additional
restructuring  charge  of  $4.7  million  for  excessive  costs  incurred  as  a
consequence of the  consolidation  of  manufacturing  operations and the delayed
start-up  of the new  high-speed  door  assembly  line.  The  Company  does  not
currently expect to incur any additional restructuring charges for the remainder
of 1997. Additionally, the Company recorded a $1.1 million reorganization charge
in the first  nine  months of 1997 in  connection  with the  termination  of the
employment  of the Chief  Financial  Officer  and  Senior  Vice  President-Human
Resources  and  Administration  of  the  Company.  Such  provision  is to  cover
severance and related payments to such officers.





                                      -12-
<PAGE>



                           PART II. OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     27.  Financial Data Schedule

(b)  Two reports on Form 8-K were filed during the quarter.

1.   Current  Report on Form 8-K was filed by the  Company  on August 9, 1997 
     with respect to the acquisition by the Company of substantially  all of the
     assets of Wahlfeld Manufacturing Company (Commission File No. 1-9843).

2.   Amendment on Form 8-K/A to Current Report on Form 8-K filed on August 9, 
     1997, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
     1934, was filed  with the  Commission  on  October  4,  1997 to  include
     the  Wahlfeld Manufacturing  Company  financial  statements  and the  
     unaudited  pro  forma combined financial statements (Commission File No.
     1-9843).




                                      -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.


                                               MORGAN PRODUCTS LTD.





Date:                                          By: /s/ Mitchell J. Lahr



                                                   -------------------------
                                                   Mitchell J. Lahr
                                                   Vice President, Secretary
                                                   and Chief Financial Officer
                                                   (For the Registrant and as
                                                   Principal Financial Officer)







                                       -14-