<PAGE>

================================================================================

                                      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 September 28, 1996

                                          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                      (I.R.S. Employer
       of incorporation or                            Identification No.)
           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 October 22, 1996 was 8,649,517; 2,386 shares are held in treasury.
================================================================================

<PAGE>

                            PART I.  FINANCIAL INFORMATION
                            ITEM 1.  FINANCIAL STATEMENTS
                                 MORGAN PRODUCTS LTD.
                             Consolidated Balance Sheets
                           ($000 except shares outstanding)

 
<TABLE>
<CAPTION>

                                                     September 28,   September 30,  December 31,
                                                         1996            1995           1995
                                                     ------------    ------------   ------------
                                                      (Unaudited)    (Unaudited)
                ASSETS

<S>                                                  <C>             <C>            <C>
CURRENTS ASSETS:
  Cash and cash equivalents                           $    1,717     $    1,420     $    5,135
  Accounts receivable, net                                39,122         31,701         20,801
   Inventories                                            67,540         55,881         53,422
   Income tax receivable                                     306              0              0
  Other current assets                                       892            858            422
                                                      ----------     ----------     ----------
        Total current assets                             109,577         89,860         79,780
                                                      ----------     ----------     ----------

OTHER ASSETS                                               7,039          6,246          6,235

PROPERTY, PLANT & EQUIPMENT, net                          23,171         22,886         23,500
                                                      ----------     ----------     ----------

         TOTAL ASSETS                                 $  139,787     $  118,992     $  109,515
                                                      ----------     ----------     ----------
                                                      ----------     ----------     ----------

LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-term debt                                     $       88     $        0     $        0
  Current maturities of long-term debt                     1,028            942            954
  Accounts payable                                        18,884         14,481         11,121
  Accrued compensation and employee benefits               7,258          6,626          5,625
  Income tax payable                                           0             83            111
  Other current liabilities                                3,547          3,091          3,295
                                                      ----------     ----------     ----------
        Total current liabilities                         30,805         25,223         21,106
                                                      ----------     ----------     ----------

LONG-TERM DEBT                                            55,023         39,496         35,574

STOCKHOLDERS' EQUITY:
  Common stock, $.10 par value, 8,649,308, 8,646,783
    and 8,647,483 shares outstanding, respectively           865            865            865
  Paid-in capital                                         33,782         33,768         33,771
  Retained earnings                                       19,567         20,128         18,629
                                                      ----------     ----------     ----------
                                                          54,214         54,761         53,265

  Treasury stock, 2,386 shares, at cost                      (48)           (48)           (48)
  Unamortized value of restricted stock                     (207)          (440)          (382)
                                                      ----------     ----------     ----------
  TOTAL STOCKHOLDERS' EQUITY                              53,959         54,273         52,835
                                                      ----------     ----------     ----------

     TOTAL LIABILITIES & STOCKHOLDERS' EQUITY         $  139,787     $  118,992     $  109,515
                                                      ----------     ----------     ----------
                                                      ----------     ----------     ----------

</TABLE>

 

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

<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
                                            --------------------------    -------------------------
                                            September 28,  September 30,  September 28,  September 30,
                                                1996           1995           1996           1995
                                            ------------   ------------   ------------   ------------
                                            (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)

<S>                                         <C>            <C>            <C>            <C>
Net sales                                   $   97,377     $   90,723     $  267,121     $  255,649

Cost of goods sold                              82,775         78,278        227,642        219,683
                                            ----------     ----------     ----------     ----------

    Gross profit                                14,602         12,445         39,479         35,966
                                            ----------     ----------     ----------     ----------

Operating expenses:
    Sales & marketing                            8,712          8,766         25,353         26,693
    General & administrative                     2,707          2,726          8,778          7,885
    Provision for restructuring                  1,956              0          2,837              9
                                            ----------     ----------     ----------     ----------
         Total                                  13,375         11,492         36,968         34,587
                                            ----------     ----------     ----------     ----------

Operating income (loss)                          1,227            953          2,511          1,379
                                            ----------     ----------     ----------     ----------

Other income (expense):
    Interest                                      (778)        (1,006)        (2,147)        (2,872)
    Other                                           80            116            217            376
                                            ----------     ----------     ----------     ----------
         Total                                    (698)          (890)        (1,930)        (2,496)
                                            ----------     ----------     ----------     ----------

Income (loss) before income taxes                  529             63            581         (1,117)

Provision for income taxes                        (406)           (48)          (357)            12
                                            ----------     ----------     ----------     ----------

Net income (loss)                           $      935     $      111     $      938     $   (1,129)
                                            ----------     ----------     ----------     ----------
                                            ----------     ----------     ----------     ----------

Income (loss) per share                     $     0.11     $     0.01     $     0.11     $    (0.13)
                                            ----------     ----------     ----------     ----------
                                            ----------     ----------     ----------     ----------

Weighted average number of
  common shares outstanding                  8,808,636      8,644,423      8,724,938      8,642,362
                                            ----------     ----------     ----------     ----------
                                            ----------     ----------     ----------     ----------

</TABLE>

 

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

<PAGE>

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

 
<TABLE>
<CAPTION>

                                                                  For the Nine Months Ended
                                                                ----------------------------
                                                                September 28,  September 30,
                                                                    1996           1995
                                                                (Unaudited)    (Unaudited)
                                                                ------------   -----------
<S>                                                             <C>            <C>
CASH GENERATED (USED) BY OPERATING ACTIVITIES:
  Net income (loss)                                              $     938      $  (1,129)
  Add (deduct) noncash items included in income:
    Depreciation and amortization                                    2,800          2,892
    Provision for doubtful accounts                                    143            (32)
    (Gain) loss on sale of property, plant, & equipment                  5            (11)
    Provision for restructuring                                        881              0
    Other                                                              175           (104)
  Cash generated (used) by changes in components of
    working capital:
      Accounts receivable                                          (11,633)        (7,308)
      Inventories                                                   (6,274)          (924)
      Accounts payable                                               5,503          2,971
      Other working capital                                            724         (2,936)
                                                                 ---------      ---------

NET CASH GENERATED (USED) BY OPERATING ACTIVITIES                   (6,738)        (6,581)
                                                                 ---------      ---------

CASH GENERATED (USED) BY INVESTING ACTIVITIES:
  Acquisition of property, plant, & equipment                       (3,864)        (3,786)
  Acquisition of Tennessee Building Products                       (15,610)             0
  Proceeds from disposal of property, plant, & equipment             4,118             49
  Proceeds from surrender of life insurance policies                   925              0
  Acquisition of other assets, net                                  (1,118)          (481)
                                                                 ---------      ---------

NET CASH GENERATED (USED) BY INVESTING ACTIVITIES                  (15,549)        (4,218)
                                                                 ---------      ---------

CASH GENERATED (USED) BY FINANCING ACTIVITIES:
  Increase (decrease) in short-term debt                                88              0
  Proceeds from issuance of long-term debt                          20,055          6,739
  Payments on long-term debt                                        (1,285)          (751)
  Common stock issued for cash                                          11             36
                                                                 ---------      ---------

NET CASH GENERATED (USED) BY FINANCING ACTIVITIES                   18,869          6,024
                                                                 ---------      ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                (3,418)        (4,775)

CASH AND CASH EQUIVALENTS:
  Beginning of period                                                5,135          6,195
                                                                 ---------      ---------

  End of period                                                  $   1,717      $   1,420
                                                                 ---------      ---------
                                                                 ---------      ---------

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the year for:
  Interest                                                       $   2,465      $   2,848
  Income taxes                                                          60            132



</TABLE>

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

<PAGE>

                                MORGAN PRODUCTS LTD.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE PERIOD ENDED SEPTEMBER 28, 1996




NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS - Morgan Products Ltd. (the "Company") manufactures and
purchases 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.

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

BASIS OF PRESENTATION - The financial statements at September 28, 1996 and
September 30, 1995, 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
September 28, 1996 are not necessarily indicative of the results that may be
expected for the full year or any other interim period.


NOTE 2 - INVENTORIES

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

                        September 28,  September 30,  December 31,
                           1996            1995           1995
                        -----------    -----------    -----------
                        (unaudited)    (unaudited)

  Raw material          $  12,461      $   9,870      $   9,120
  Work-in-process           7,801          7,098          6,536
  Finished goods           47,278         38,913         37,766
                        ---------      ---------      ---------
                        $  67,540      $  55,881      $  53,422
                        ---------      ---------      ---------
                        ---------      ---------      ---------

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

<PAGE>

NOTE 3 - PROVISION FOR RESTRUCTURING

An $11.3 million restructuring charge was incurred in the second quarter of
1994.  The original restructuring charge covered the cost of closing the
Springfield, Oregon plant, the Weed, California veneer operation and other cost
reductions and consolidations within the Company.  During the third and
fourth quarters of 1994, the Company reviewed the charges reserved for in the
restructuring and determined that certain estimated costs would not be as high
as originally anticipated.  At that time, certain other cost reduction and
restructuring actions were approved and provided for, which offset the lower
expenses.  The additional expenses related to the restructuring of the Morgan
Distribution operations and costs associated with the relocation of the
Corporate headquarters.  At the end of 1994, $4.9 million of the original $11.3
million had been used and the closing of the two plants was substantially
complete.  The remaining reserve at the end of 1994 related primarily to other
cost reductions and consolidation to be taken within the Company, and the
Corporate headquarters relocation.

During the first quarter of 1995, management again evaluated its restructuring
reserves and determined that certain estimated costs would not be as high as had
been expected and adjusted the reserve appropriately.  In addition, incremental
restructuring activities for Morgan Distribution (as described below) were
approved during the first quarter of 1995.

Since his arrival in September 1994, the Company's new Chief Executive 
Officer and other members of senior management have been evaluating what 
actions are necessary to improve Morgan Distribution's profitability.  A 
multi-year plan involving necessary management structure changes, a new 
management information system and future facility requirements was developed. 
The first phase of this restructuring plan was implemented during the first 
quarter of 1995.  A new organizational structure was announced that 
eliminated several management positions.  The costs of severance and certain 
other cost reductions were provided for during the first quarter which more 
than offset the lower than originally anticipated expenses of the 1994 
restructuring. No charges were made for changes in physical facilities since 
no actions were implemented in 1995 with respect to these facilities.

The Company completed the relocation of the Corporate headquarters from
Lincolnshire, Illinois to Williamsburg, Virginia during the third quarter of
1995.  Most, but not all, of the expenses relating to the relocation were
charged against the restructuring reserve in that period.

During the fourth quarter of 1995, no significant activity occurred in the
reserve.  At December 31, 1995, a $3.8 million reserve balance remained.


<PAGE>

NOTE 3 - PROVISION FOR RESTRUCTURING -- CONTINUED

During the first quarter of 1996, restructuring expenses charged against the
restructuring reserve totaled $279,000, substantially all of which were employee
benefits resulting from severances.

In the second quarter of 1996, the Company sold its Lexington, North Carolina
door manufacturing facility for $4.1 million.  The entire product line of doors
previously manufactured in Lexington will be shifted to the Company's Oshkosh,
Wisconsin door manufacturing facility during the  third and fourth quarters of
1996.  The Company recorded an additional restructuring charge in the second
quarter of $356,000, primarily related to the loss on the sale of the Lexington
facility.  

Also in the second quarter, a $470,000 reserve was recorded for incremental
costs related to the 1994 plant closings in Springfield, Oregon and Weed,
California and the 1995 reorganization of the Manufacturing Division office in
Oshkosh, Wisconsin (primarily due to changes in cost estimates in the
incremental workers compensation claims incurred prior to the commitment date). 
At June 29, 1996, the reserve balance was $3.8 million.  

In the third quarter of 1996, restructuring costs charged against income 
related to the Lexington plant shutdown and consolidation of operations in 
Oshkosh totaled $1,956,000.  Additionally, $522,000 of restructuring expenses 
were charged against the 1996 reserve balance during the quarter.  The 
September 28, 1996 reserve balance was $3.2 million.  It is expected that the 
Company will incur additional aggregate restructuring expenses of 
approximately $1.0 million in the fourth quarter related to the consolidation 
of the Lexington operations into Oshkosh, as previously announced.  These 
restructuring expenses include Lexington operating costs after cessation of 
production and incremental hiring, training, and relocation costs associated 
with the transfer of Lexington production to Oshkosh.  These costs will be 
expensed as incurred.

<PAGE>

NOTE 4 - CREDIT AGREEMENT

The Company maintains a credit agreement with its bank group which provides 
for a revolving credit facility of up to $65 million through July 13, 1998, 
and includes a letter of credit facility of up to $9 million through July 13, 
1998. During the second quarter, the Company and its bank group signed an 
amendment extending the existing agreement.  The amendment became effective 
June 30, 1996 and has terms similar to, or more favorable to, the Company 
than those previously in effect.  During the third quarter and early fourth 
quarter, the parties executed two additional amendments which altered the 
financial covenants to give effect to the TBP acquisition.  At September 28, 
1996 the Company had borrowings of $47.5 million under the revolving credit 
facility.  The credit agreement requires the Company, among other things, to 
maintain minimum tangible net worth, leverage and interest coverage ratios.

<PAGE>


NOTE 5 - ACQUISITION OF TENNESSEE BUILDING PRODUCTS

On August 30, 1996, the Company acquired certain assets and assumed certain
liabilities of Tennessee Building Products, Inc. and subsidiary ("TBP").  TBP,
which had annual sales of approximately $46.8 million for the year ended
December 31, 1995, is a distributor of windows, doors, kitchen cabinets, and
other millwork and glass products, to residential builders and other customers. 
The purchase price of $15.6 million, including $.3 million in acquisition costs,
subject to certain purchase price adjustments, was financed through 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 TBP
have been included in the Company's consolidated financial statements since the
date of acquisition.

The following unaudited pro forma results of operations assume the acquisition
occurred as of January 1, 1995 (in thousands except per share amounts):

                                                 Nine Months Ended
                                                 -----------------
                                      September 28, 1996     September 30, 1995
                                      -------------------    -------------------

Net sales                                $ 301,121               $ 290,003
Net income (loss)                        $   1,756               $  (1,370)
Earnings (loss)
 per common share                        $     .20               $    (.16)


The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the TBP acquisition been
consummated as of January 1, 1995, nor is it necessarily indicative of future
operating results.

<PAGE>

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

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 28, 1996 VS
THREE MONTHS ENDED SEPTEMBER 30, 1995

The Company's net sales for the third quarter of 1996 were $97.4 million, 
representing a 7.3% increase over the same period in 1995, when sales were 
$90.7 million. The increase in sales reflects a 6.5%  increase in sales of 
distributed products, a 12.1% decrease in sales of manufactured products, and 
the purchase of TBP in August 1996.  The decrease in sales of manufactured 
goods related to operating difficulties due to the sale of the Lexington, 
North Carolina facility and consolidation of operations into the Oshkosh, 
Wisconsin plant, rather than a decrease in customer orders. Based upon F.W. 
Dodge statistics for July and August 1996, single family housing starts were 
at a seasonally adjusted annual rate of slightly below 1.1 million units.  
This increase of 7.0% over the same period in 1995 reflected an increase in 
construction activity.  However, the Northeast region, where the Company 
derives a significant portion of its business, experienced only a 6% increase.

For the third quarter of 1996, the Company reported net income of $.9 million or
$0.11 per share compared to a net income of $.1 million or $0.01 per share for
the same period in 1995, on average shares outstanding of 8,808,636 and
8,644,423, respectively.  As discussed in Note 3, included in the third quarter
1996 results is a restructuring charge of $1.9 million to cover the costs of
closing the Company's Lexington, North Carolina manufacturing plant.  Excluding
the $1.9 million restructuring charge for 1996, the Company reported net income
of $2.8 million or $.33 per share.  The increase in net income, exclusive of the
restructuring charge, was primarily caused by higher sales volume, improved
profit margins, reductions to operating expenses, and the acquisition of
Tennessee Building Products.

The gross profit increase of $2.2 million from the third quarter of 1995 to the
corresponding period of 1996 was primarily the result of the aforementioned
sales volume increase, cost reductions, material cost improvements, and the
TBP acquisition.

Operating expenses for the third quarter of 1996 were $11.4 million, 
excluding the restructuring charge, or 11.7% of net sales, compared to 1995 
third quarter operating expenses of $11.5 million, or 12.7% of net sales.  
Operating expenses as a percent of net sales have decreased primarily due to 
the closing of the Lexington manufacturing facility and the resulting 
elimination of significant duplicate operating expenses.

<PAGE>



Third quarter 1996 interest expense was $.2 million lower than for the similar
period of 1995.  Of this, $.1 million was due to the capitalization of interest
incurred in connection with the door manufacturing expansion.  The remainder was
a result of lower bank debt levels and lower interest rates in 1996.

The provision for income taxes in both years relates to the recording of state
taxes.  The provision for federal taxes is offset by the Company's net operating
loss position.  Additionally, 1996's third quarter reflects a tax benefit
related to the amendment of prior year tax returns.

<PAGE>

NINE MONTHS ENDED SEPTEMBER 28, 1996 VS
NINE MONTHS ENDED SEPTEMBER 30, 1995


The Company's net sales for the 1996 nine-month period were $267.1 million, 
representing a 4.5% increase from the 1995 nine-month period, when net sales 
were $255.6 million. The increase in net sales was primarily the result of a 
3.3% increase in the sales of distributed products, a 1.2% increase in the 
sales of manufactured products, and the acquisition of TBP. The increase in 
the sale of manufactured products would have been materially higher but for the
operating difficulties related to the sale of the Lexington, North Carolina 
manufacturing facility and the consolidation of operations into the Oshkosh, 
Wisconsin plant.

The Company reported year-to-date 1996 net income of $.9 million or $.11 per 
share, compared to a net loss of $1.1 million or $0.13 per share for 1995 on 
average shares outstanding of 8,724,938 and 8,642,362 respectively.  
Excluding the $2.8 million restructuring charges in 1996, the Company 
reported earnings of $3.7 million or $0.43 per share.  The increase in net 
income, exclusive of the restructuring charges, was primarily caused by the 
impact of a higher sales volume, material and other operating cost 
reductions, the purchase of TBP, and the 1995 inventory losses at the 
Virginia distribution center on gross profit, as well as reduced operating 
expenses and lower interest expense.  These favorable items were somewhat 
offset by less favorable pricing and mix and higher overhead costs.

The gross profit increase of $3.5 million from the first nine months of 1995 
to the corresponding period of 1996 was primarily the result of the effect of 
the aforementioned increase in sales at both the manufacturing and 
distribution divisions and the addition of TBP, in addition to the impact of 
the 1995 inventory losses at the Company's Virginia distribution center.  The 
gross profit percentage improved from 14.1% in the first nine months of 1995 
to 14.8% in 1996.

Excluding the restructuring charges, year-to-date operating expenses 
decreased $.5 million from 1995 to 1996.  Operating expenses for 1996 were 
$34.1 million or 12.8% of net sales, compared to 1995 expenses of $34.6 
million or 13.5% of net sales, excluding the restructuring charges. The 
decline in operating expenses as a percentage of net sales primarily due to 
the closing of the Lexington manufacturing facility and the resulting 
elimination of significant duplicate operating expenses, tighter cost 
controls on non-personnel costs and lower salaries.  These were partially 
offset by higher 1996 accruals for incentive bonuses and profit sharing.  Due 
to the losses in 1995, these accruals were not appropriate in the prior year.

<PAGE>

Year-to-date 1996 interest expense was $.7 million lower than for the similar
period of 1995.  Of this, $.4 million was due to the capitalization of interest
incurred in connection with the door manufacturing expansion.  The remainder was
a result of lower bank debt levels and lower interest rates in 1996.

The provision for income taxes in both years relates to the recording of state
taxes.  The provision for federal taxes is offset by the Company's net operating
loss position.  Additionally, 1996 reflects  a tax benefit related to the
amendment of prior year tax returns.

<PAGE>

SIGNIFICANT BUSINESS TRENDS/UNCERTAINTIES

Management believes that housing starts have a significant influence on the
Company's level of business activity.  For the first eight months of 1996, F.W.
Dodge indicates that single family housing starts are 14% greater than for the
similar period of 1995.  Lower interest rates and pent up demand are credited
with causing the increase.  The expectation is that industry growth will
moderate in the fourth quarter, but that the full year 1996 will show a
significantly higher construction rate than 1995 for single family dwellings.

Management also believes that the Company's ability to continue to penetrate the
residential repair and remodeling markets through sales to home center
improvement 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.

In the past, raw material prices have fluctuated substantially for pine and fir
lumber.  Fir prices at 1995 year-end remained at record high levels, while pine
lumber prices declined by 18.5% during 1995.  Due to intense competitive
pricing, this resulted in reduced selling prices rather than increased profit
margins.  For the first nine months of 1996, fir prices remained unchanged at
the record level, while pine prices escalated approximately 17.6% from the 1995
year-end price.  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 reliable offshore material resources.  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.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital requirements are related to its sales, 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. 

Working capital at September 28, 1996 was $78.8 million, with a current ratio 
of 3.6 to 1.0, while at December 31, 1995 working capital was $58.7 million 
with a current ratio of 3.8 to 1.0.  The increase in working capital was 
primarily the result of an $11.6 million increase in receivables, as well as 
an $11.5 million increase as a result of the TBP acquisition.  This increase 
was partially offset by a $.7 million decrease in other working capital.  As 
a consequence of the operational problems the Oshkosh, Wisconsin 
manufacturing operation is experiencing in consolidating the Lexington 
production, exclusive of TBP inventories were $6.3 million higher, with a 
partially compensating $5.5 million increase in accounts payable.

Long-term debt, net of cash, increased to $53.3 million at September 28, 
1996, from $30.4 million at December 31, 1995.  The Company's ratio of 
long-term debt, net of cash, to total capitalization increased from  36.6% at 
December 31, 1995 to 49.7% at September 28, 1996.  The increase in long-term 
debt was a result of the need to finance the $8.6 million increase in working 
capital (exclusive of the TBP working capital), the $16.8 million paid to 
acquire TBP and pay off its debt, and $3.9 million of capital spending 
partially offset by the sale of the Lexington facility for $4.1 million and 
the redemption of certain life insurance policies for $.9 million.

Cash used by operating activities amounted to $6.7 million for the nine 
months ended September 28, 1996, primarily to support the higher level of 
receivables. By comparison, the nine months ended September 30, 1995, 
reflected cash used by operating activities of $6.6 million.  Investing 
activities in the first nine months of 1996 used $15.5 million, compared to 
the corresponding period in 1995, when investing activities used $4.2 
million.  The 1996 investing activities included $.9 million in cash provided 
by the surrender of life insurance policies on former executives, $3.9 
million expended on capital projects, $15.6 million, including acquisition 
costs, for the purchase of TBP and $4.1 million generated by asset disposals. 
Financing activities generated $18.8 million through September 28, 1996, 
almost exclusively by the increase in the outstanding revolving bank debt.  
During the same period in 1995, financing activities provided $6.0 million in 
cash.  The $12.8 million difference in financing requirements between the 
first nine months of 1995 and of 1996 primarily reflects the need to finance 
the TBP acquisition discussed previously.

<PAGE>


The Company executed an amended credit agreement with its Bank Group effective
June 30, 1996.  The terms are similar to or more favorable to the Company than
the terms previously in effect.  The amendment extends the revised credit
agreement through July 13, 1998.  The Company executed amendments dated August
30, 1996 and October 21, 1996 which altered the specific financial covenants to
give effect to the TBP acquisition.

The Company was in compliance with the specific financial covenants in its
amended credit agreement with its Bank Group at September 28, 1996. 

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

              EXHIBIT

              10.1 Amendment #7, dated October 22, 1996, to the Loan and
                   Security Agreement among the Company, certain banks and
                   Barclay's Business Credit, Inc. (succeeded by Fleet
                   Capital), dated July 14, 1994.

              10.2 Form of Indemnification Agreement, dated September 17, 1996,
                   between the Company and David A. Braun.

              27   Financial Data Schedule

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

              1.    Current Report on Form 8-K, pursuant to Section 13 or 15(d)
                   of the Securities Exchange Act of 1934, was voluntarily
                   filed with the Commission on September 13, 1996 for the
                   acquisition of Tennessee Building Products (Commission File
                   No. 1-9843).

              2.   Current Report on Form 8-K, pursuant to Section 13 or 15(d)
                   of the Securities Exchange Act of 1934, was filed with the
                   Commission on September 26, 1996 for the acquisition of
                   Tennessee Building Products, with twelve exhibits/material
                   contracts added (Commission File No. 1-9843).

              3.   Amendment on Form 8-K/A to Current Report on Form 8-K filed
                   on September 13, 1996, pursuant to Section 13 or 15(d) of
                   the Securities Exchange Act of 1934, was filed with the
                   Commission on September 27, 1996 to include the audited
                   Tennessee Building Products financial statements and the
                   unaudited pro forma combined financial statements
                   (Commission File No. 1-9843).

<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: November 7, 1996               By /S/ DOUGLAS H. MACMILLAN    
                                        ------------------------
                                        Douglas H. MacMillan 
                                        Vice President, 
                                        Chief Financial Officer and Secretary
                                        (For the Registrant and as
                                        Principal Finance Officer)
 


<PAGE>

                                    EXHIBIT INDEX
                                           

              Exhibit No.                                              Page No.

              10.1 Amendment #7, dated October 22, 1996, to the Loan and
                   Security Agreement among the Company, certain banks and
                   Barclay's Business Credit, Inc. (succeeded by Fleet
                   Capital), dated July 14, 1994.

              10.2 Form of Indemnification Agreement, dated September 17, 1996,
                   between the Company and David A. Braun.

              27   Financial Data Schedule