SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period ended      January 31, 1997

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

For the transition from                      to
                       ----------------------  ----------------------

                         Commission file number 0-16158

                              WTD Industries, Inc.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                  Oregon                                         93-0832150
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                               Identification No.)

          10260 S.W. Greenburg Road, Suite 900, Portland, Oregon 97223
--------------------------------------------------------------------------------
               (Address of principal executive offices)               (Zip Code)

(Registrant's telephone number, including area code)  (503) 246-3440
                                                   --------------------  

     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
                                             ---  ---

     Indicate by check mark whether the  Registrant  has filed all documents and
reports  required to be filed by Sections 12, 13 or 15(d) of the  Securities and
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes X No
                         ---  ---

     The number of shares  outstanding  of  Registrant's  Common  Stock,  no par
value, at February 28, 1997 was 11,077,074.


<PAGE>
                              WTD INDUSTRIES, INC.
                              --------------------
                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------

PART I.       Financial Information (Unaudited)


     Item 1.    Financial Statements

          Consolidated Statements of Operations -
            Three Months and Nine Months Ended January 31, 1997 and 1996    3


          Consolidated Balance Sheets -
            January 31, 1997 and April 30, 1996                             4


          Consolidated Statements of Cash Flows -
            Nine Months Ended January 31, 1997 and 1996                     6


          Notes to Consolidated Financial Statements                        7

     Item 2.  Management's Discussion and Analysis
              of Financial Condition and Results of
              Operations                                                   11


PART II. Other Information

     Item 6.    Exhibits and Reports on Form 8-K                           15




                                       2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                     WTD INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per-Share Amounts)
                                   (Unaudited)


                                           THREE MONTHS ENDED             NINE MONTHS ENDED
                                               JANUARY 31,                   JANUARY 31,
                                         ------------------------      ------------------------
<S>                                     <C>            <C>            <C>            <C> 
                                           1997           1996           1997           1996
                                         ---------      ---------      ---------      ---------

NET SALES                               $  64,469      $  37,852      $ 210,648      $ 140,811

COST OF SALES                              59,982         38,662        189,045        137,920
                                         ---------      ---------      ---------      ---------

GROSS PROFIT (LOSS)                         4,487           (810)        21,603          2,891

SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                2,767          2,296          9,254          7,445
REORGANIZATION CREDITS                          0           (409)             0           (409)
                                         ---------      ---------      ---------      ---------

OPERATING INCOME (LOSS)                     1,720         (2,697)        12,349         (4,145)

OTHER INCOME (EXPENSE)
     Interest Expense                      (1,250)        (1,327)        (3,828)        (4,041)
     Miscellaneous                            248            255            415            457
                                         ---------      ---------      ---------      ---------

                                           (1,002)        (1,072)        (3,413)        (3,584)
                                         ---------      ---------      ---------      ---------


INCOME (LOSS) BEFORE INCOME TAXES             718         (3,769)         8,936         (7,729)

PROVISION  FOR INCOME TAXES (BENEFIT)         269         (1,432)         3,392         (2,937)
                                         ---------      ---------      ---------      ---------

NET INCOME (LOSS)                             449         (2,337)         5,544         (4,792)

PREFERRED DIVIDENDS                           557            592          1,671          1,795
                                         ---------      ---------      ---------      ---------


NET INCOME (LOSS) APPLICABLE
  TO COMMON SHAREHOLDERS                $    (108)     $  (2,929)      $  3,873      $  (6,587)
                                         =========      =========      =========      =========



NET INCOME (LOSS) PER COMMON SHARE
     PRIMARY                               ($0.01)        ($0.26)         $0.34         ($0.59)
                                         ---------      ---------      ---------      ---------

     FULLY DILUTED                         ($0.01)        ($0.26)         $0.34         ($0.59)
                                         ---------      ---------      ---------      ---------















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


                                       3
<PAGE>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                                 (In Thousands)

                                                  JANUARY 31,    APRIL 30,
                                                      1997         1996
                                                  -----------  -----------
CURRENT ASSETS                                    (Unaudited)
   Cash and cash equivalents                      $    9,230   $    4,576
   Accounts receivable, net                           12,871       10,190
   Inventories                                        19,477       13,891
   Prepaid expenses                                    1,514        1,568
   Income tax refund receivable                        1,145        2,135
   Deferred tax asset                                  1,105        1,112
   Assets held for sale                                  736          737
   Timber, timberlands and timber-related assets       4,092        6,243
                                                  -----------  -----------

      Total current assets                            50,170       40,452


NOTES AND ACCOUNTS RECEIVABLE                            130          164

TIMBER AND TIMBERLANDS                                   629          679

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                2,943        2,943
   Buildings and improvements                         11,228       11,085
   Machinery and equipment                            69,389       68,313
                                                  -----------  -----------

                                                      83,560       82,341

     Less accumulated depreciation                    55,505       51,391
                                                  -----------  -----------

                                                      28,055       30,950

   Construction in progress                              958          339
                                                  -----------  -----------

                                                      29,013       31,289

DEFERRED TAX ASSET                                       246        3,388

OTHER ASSETS                                           1,286        1,424
                                                  -----------  -----------


                                                  $   81,474   $   77,396
                                                  ===========  ===========












The accompanying notes are an integral part of these consolidated financial 
statements.



                                       4
<PAGE>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                    (In Thousands, Except Share Information)



                                                  JANUARY 31,    APRIL 30,
                                                      1997         1996
                                                  -----------  -----------
CURRENT LIABILITIES                               (Unaudited)
   Accounts payable                               $   10,217   $    5,791
   Accrued expenses                                    6,879        6,198
   Timber contracts payable                               --        2,252
   Current maturities of long-term debt                1,280        1,159
                                                  -----------  -----------

      Total current liabilities                       18,376       15,400

LONG-TERM DEBT, less current maturities               47,539       50,310

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Preferred stock, 10,000,000 shares authorized
     Series A, 270,079 shares outstanding             20,688       20,688
     Series B, 6,111 shares outstanding                  333          333
   Common stock, no par value, 40,000,000 shares
     authorized, 11,077,074 issued and outstanding    28,641       28,641
   Additional paid-in capital                             15           15
   Retained deficit                                  (34,118)     (37,991)
                                                  -----------  -----------

                                                      15,559       11,686
                                                  -----------  -----------


                                                  $   81,474   $   77,396
                                                  ===========  ===========























The accompanying notes are an integral part of these consolidated financial 
statements.

                                       5
<PAGE>
<TABLE>
<CAPTION>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (Unaudited)


                                                            NINE MONTHS ENDED JANUARY 31,
                                                            -----------------------------
<S>                                                         <C>              <C> 
                                                                1997             1996
                                                            -----------       -----------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
  Net income (loss)                                         $    5,544        $   (4,792)
  Adjustments to reconcile net income (loss) to
     cash provided by operating activities:
    Depreciation, depletion and amortization                     4,896             3,746
    Deferred income tax                                          3,149            (2,910)
    Reorganization credits                                          --              (409)
    Accounts receivable                                         (2,681)            3,715
    Inventories                                                 (5,586)            2,185
    Prepaid expenses                                                54             1,762
    Timber, timberlands and timber-related assets - current      1,912             1,516
    Payables and accruals                                        2,926            (1,522)
    Income taxes                                                   990               503
                                                            -----------       -----------

     Cash provided by operating activities                      11,204             3,794
                                                            -----------       -----------

CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
  Net reductions of timber and timberlands                          50                 7
  Acquisition of property, plant and equipment                  (2,282)           (3,630)
  Other investing activities                                       126               159
                                                            -----------       -----------

     Cash used for investing activities                         (2,106)           (3,464)
                                                            -----------       -----------

CASH USED FOR FINANCING ACTIVITIES:
  Principal payments on long-term debt                          (2,721)           (1,948)
  Other assets                                                     (52)               --
  Dividends paid on preferred stock                             (1,671)           (1,789)
                                                            -----------       -----------

     Cash used for financing activities                         (4,444)           (3,737)
                                                            -----------       -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 4,654            (3,407)
CASH BALANCE AT BEGINNING OF PERIOD                              4,576             6,023
                                                            -----------       -----------

CASH BALANCE AT END OF PERIOD                               $    9,230        $    2,616
                                                            ===========       ===========

CASH PAID (REFUNDED) DURING THE PERIOD FOR:
  Interest                                                      $3,781            $1,870
  Income taxes                                                   ($751)            ($530)












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

                                       6
<PAGE>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PRESENTATION

     In the opinion of management,  the consolidated financial statements of WTD
Industries,  Inc. and  subsidiaries  ("WTD" or "the Company")  presented  herein
include  all  adjustments,  which  are  solely  of a  normal  recurring  nature,
necessary  for a  fair  presentation  of  the  financial  position,  results  of
operations  and  cash  flows  for  the  interim   periods   presented.   Certain
reclassifications may have been made to the prior period results and balances to
conform to the current period  classifications.  The financial statements should
be read with  reference to  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations" contained in this report, and the "Notes to
Consolidated  Financial  Statements" set forth in the Company's Annual Report on
Form 10-K for the year  ended  April 30,  1996,  filed with the  Securities  and
Exchange  Commission.  The results of operations for the current interim periods
are not  necessarily  indicative  of the results to be expected  for the current
year.


NOTE 2 - INVENTORIES

     Inventories are valued at the lower of cost or market. The amounts included
in  inventories  at  January  31,  1997 and April 30,  1996 are as  follows  (in
thousands):

                                       January 31,         April 30,
                                          1997              1996
                                       -----------       -----------
       Logs                            $    10,625       $     5,899
       Lumber                                7,569             6,786
       Supplies                              1,283             1,206
                                       -----------       -----------
                                       $    19,477       $    13,891
                                       ===========       ===========

NOTE 3 - LONG-TERM DEBT

     The Company's primary debt agreement includes certain covenants,  including
the maintenance of specified levels of adjusted cumulative  operating income (as
defined),  tangible net worth, working capital, collateral coverage (as defined)
and total  liabilities  ratio (as defined).  This agreement also imposes certain
restrictions  and  limitations on capital  expenditures,  investments,  dividend
payments,   new  indebtedness,   and  transactions  with  officers,   directors,
shareholders and affiliates. This debt agreement was most recently amended as of
May 1, 1996, with respect to certain affirmative financial performance covenants
and payment terms.



                                       7
<PAGE>
NOTE 3 - LONG-TERM DEBT (Continued)

     At January 31, 1997 the  Company's  tangible  net worth was $15.2  million,
compared to $9 million  required  by the  corresponding  covenant.  At that same
date, the Company's working capital was $31.8 million, compared to $22.5 million
required by the corresponding covenant. Also, at January 31, 1997, the Company's
adjusted cumulative operating income was $36.3 million,  compared to $25 million
required.  The collateral coverage ratio at January 31, 1997 was 81.3%, compared
to a 60%  minimum  required  level.  The  total  liabilities  ratio was 80.9% at
January 31, 1997,  compared to a maximum  allowed of 89%. The required  level of
tangible net worth  increases to $10 million at July 1, 1997, $12 million at May
1, 1998 and $14.5 million at May 1, 1999. The required level of working  capital
increases  to $25  million  on July 1,  1997.  The  required  level of  adjusted
cumulative  operating  income  increases to $27.5  million at July 1, 1997,  $40
million at May 1, 1998, $52.5 million at May 1, 1999 and $67.5 million at May 1,
2000. The minimum required  collateral coverage ratio increases to 65% at May 1,
1998. The maximum allowed total  liabilities  ratio drops to 87% at July 1, 1997
and drops  further to 85% at May 1, 1998.  During the quarter  ended January 31,
1997,  the Company's  adjusted  cumulative  operating  income  increased by $2.4
million while showing income before taxes of $0.7 million.

     In addition,  the debt  agreement  requires  prepayments  if the  Company's
cumulative   operating  income  exceeds  certain  specified  amounts.   No  such
prepayment  was required for the year ended April 30, 1996. In  connection  with
the May 1,  1996  amendment,  the  Company  agreed to an  additional  prepayment
computed  at 30% of  quarterly  net  income.  The  next  prepayment  under  this
provision will be approximately $136,000 due April 1, 1997.


NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING

     Stockholder's equity at January 31, 1997 consists of the following:

         Series A  preferred  stock,  $100  per  share  liquidation  preference;
         500,000  shares  authorized;  270,079  shares  issued and  outstanding;
         limited  voting  rights;  cumulative  dividends  payable  quarterly  in
         advance at the prime rate, with a minimum rate of 6% and a maximum rate
         of 9%; convertible into common stock at $7.50 per share after April 30,
         1999;  redeemable at original issue price plus accrued dividends at the
         option of the Board of  Directors,  in the form of cash or in  exchange
         for senior unsecured debt with a 12% coupon.  The holders of the Series
         A preferred stock will be granted voting control of the Company's Board
         of  Directors  in  the  event  the  Company  misses  three  consecutive
         quarterly  dividend  payments,  four quarterly dividend payments within
         twenty-four months or a total of eight quarterly dividend payments.

         Series B  preferred  stock,  $100  per  share  liquidation  preference;
         500,000 shares authorized; 6,111 shares issued and outstanding; limited
         voting  rights;  convertible  into  212,693  shares  of  common  stock;
         dividends   payable  only  if  paid  on  the  Company's  common  stock;
         redeemable at original issue price plus accrued dividends at the option
         of the Board of Directors  after all Series A preferred  stock has been
         redeemed.

                                       8
<PAGE>
NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING
             (Continued)

         Common stock, no par value;  40,000,000 shares  authorized;  11,077,074
         shares issued and outstanding.  Before giving effect to any shares that
         might be  issued  pursuant  to the  exercise  of any stock  options  or
         conversion of any Series A preferred  stock, the total number of common
         shares  would  increase  to  11,289,767  shares if  remaining  Series B
         preferred stock  outstanding at January 31, 1997 is converted to common
         stock.


NOTE 5 - NET INCOME (LOSS) PER SHARE

     The  calculations  of net income (loss) per share for the  three-month  and
nine-month  periods  ended  January 31, 1997 and 1996 are  summarized  below (in
thousands, except per-share data):

                                     Three Months Ended       Nine Months Ended
                                         January 31,              January 31,
                                     ------------------       ------------------
                                        1997      1996           1997      1996
                                     --------  --------       --------  --------
NET INCOME (LOSS) APPLICABLE TO      
   COMMON SHAREHOLDERS               $  (108)  $(2,929)       $ 3,873   $(6,587)
                                     ========  ========       ========  ========

WEIGHTED AVERAGE SHARES OUTSTANDING   11,077    11,077         11,077    11,077

ADDITIONAL SHARES ASSUMED FROM:
  Conversion of Series B
   preferred stock                        --        --            213        --

  Exercise of stock options               --        --             72        --
                                     --------  --------       --------  --------
AVERAGE NUMBER OF SHARES AND
  EQUIVALENTS OUTSTANDING
   - PRIMARY BASIS                    11,077    11,077         11,362    11,077

ADDITIONAL SHARES ASSUMED FROM
  EXERCISE OF STOCK OPTIONS               --        --            180       --
                                     --------  --------       --------  --------
AVERAGE NUMBER OF SHARES AND
  EQUIVALENTS OUTSTANDING
   - FULLY DILUTED                    11,077    11,077         11,542    11,077
                                     ========  ========       ========  ========

NET INCOME (LOSS) PER COMMON SHARE
   - PRIMARY BASIS                    ($0.01)   ($0.26)         $0.34    ($0.59)
                                     ========  ========       ========  ========
   - FULLY DILUTED                    ($0.01)   ($0.26)         $0.34    ($0.59)
                                     ========  ========       ========  ========

NOTE 6 - INCOME TAXES

     The income tax  provision  (benefit)  is based on the  estimated  effective
annual  tax  rate  for  each  fiscal  year.  The  provision  (benefit)  includes
anticipated  current  income  taxes  payable  or  refundable,  the tax effect of
anticipated  differences between the financial reporting and tax basis of assets
and  liabilities,  and the  expected  utilization  of net  operating  loss (NOL)
carryforwards.

                                       9
<PAGE>
NOTE 6 - INCOME TAXES (Continued)

     The  federal  and state  income tax  provision  (benefit)  consists  of the
following (in thousands):
<TABLE>
<CAPTION>
                                              Three months ended       Nine months ended
                                                  January 31,              January 31,
                                              ------------------       ------------------
                                                 1997      1996           1997      1996
                                              --------  --------       --------  --------
<S>                                           <C>       <C>            <C>       <C>     
          Income (loss) before income taxes   $   718   $(3,769)       $ 8,936   $(7,729)
                                              ========  ========       ========  ========
          Income tax provision (benefit):
             Federal                          $   244   $(1,281)       $ 3,038   $(2,628)
             State                                 25      (151)           354      (309)
                                              --------  --------       --------  --------
                                              $   269   $(1,432)       $ 3,392   $(2,937)

             Current                          $     9   $    --        $   243   $   (27)
             Deferred                             260    (1,432)         3,149    (2,910)
                                              --------  --------       --------  --------
                                              $   269   $(1,432)       $ 3,392   $(2,937)
                                              ========  ========       ========  ========
</TABLE>
     Deferred  tax assets  reduced  during the quarter  ended  January 31, 1997,
principally  the result of  recording  utilization  of the tax benefit  from NOL
carryforwards.

     Management has assessed the  likelihood of utilizing the recorded  deferred
tax asset related to its NOL carryforwards, including its operating history, the
cyclical nature of the industry in which the Company operates,  current economic
conditions and the potential outcome of any I.R.S.  audits. Based upon the above
factors,  management  believes that a valuation  allowance of approximately $2.9
million is  appropriate.  No change to this  reserve  was  considered  necessary
during the quarter ended January 31, 1997.


NOTE 7 - COMMITMENTS AND CONTINGENCIES

     The  Company is  involved in various  litigation  primarily  arising in the
normal  course of its  business.  In the opinion of  management,  the  Company's
liability,  if any,  under  such  pending  litigation  would not have a material
adverse impact upon the Company's consolidated financial condition or results of
operations.

     The  Company is subject to  various  federal,  state and local  regulations
regarding waste disposal and pollution control.  Various  governmental  agencies
have enacted, or are considering regulations,  regarding log yard management and
disposal of log yard waste that may require material expenditures in the future.
Management  believes  that the  Company  will be able to  comply  with any final
regulations in this area without a material  adverse impact on its  consolidated
financial condition or results of operations.

                                       10
<PAGE>
Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS

Results of Operations
---------------------

     On a quarter-to-quarter  basis, the Company's financial results have varied
widely,  and will  continue  to vary,  due to seasonal  fluctuations  and market
factors  affecting  the demand for logs,  lumber  and other wood  products.  The
industry is subject to fluctuations in sales and earnings due to such factors as
industry  production  in relation to product  demand and  variations in interest
rates and  housing  starts.  Currency  fluctuations  affect  the  industry  when
exchange  rates spur log exports and drive up  domestic  log prices,  and when a
relatively   strong  U.S.  dollar   encourages  lumber  imports  from  competing
countries.  Trade  policies and  agreements  between the United States and other
countries,  such as Canada, can also significantly  affect log and lumber prices
in the Company's markets.

     The industry is also  affected by weather  conditions  and changing  timber
management  policies.   Fire  danger  and  excessively  dry  or  wet  conditions
temporarily  reduce  logging  activity and may increase  open market log prices.
Timber  management  policies of governmental  agencies change from time to time,
causing actual or feared  shortages in some areas  periodically.  These policies
change because of  environmental  concerns,  public agency budget issues,  and a
variety of other reasons.  Therefore, past results for any given year or quarter
are not necessarily indicative of future results.

     It is generally the Company's  practice to curtail production at facilities
from time to time due to conditions which  temporarily  impair log flow, or when
imbalances  between log costs and product  prices cause the cost of operation to
exceed  the cost of  shutdown.  Management  believes  its  labor  practices  and
compensation  systems,  as well as a relatively  low capital cost in relation to
production  capacity,  give it the flexibility to efficiently curtail operations
and resume production as conditions warrant.

     Raw  materials  comprise the  majority of the cost of products  sold by the
Company.  The Company  depends  principally on open market log purchases for its
raw materials needs. WTD's log inventory policy is to maintain,  where possible,
a supply equal to three to four weeks of production.

     After approximately 12 months of poor lumber market conditions, improvement
began during the first quarter of the  Company's  1997 fiscal year and operating
conditions  continued  to  improve  during the  second  quarter.  There was some
seasonal  adjustment  downward in prices  during the third quarter ended January
31, 1997, as a result of slackened demand through most market areas.  During the
third quarter,  the stud lumber market lagged behind the dimension lumber market
with prices comparable to the previous year,  offsetting  profits from dimension
lumber sales. Log costs were relatively stable throughout the nine-month period.
There can be no  assurance  that the  margins  experienced  during any period of
fiscal 1997 will continue or improve.





                                       11
<PAGE>
Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS (Continued)

     The following table sets forth the percentages  which certain  expenses and
income  (loss)  items bear to net  sales,  and the  period-to-period  percentage
change in each item.
<TABLE>
<CAPTION>

                               Income and Expense Items as                         Percentage
                               a Percentage of Net Sales                        Increase (Decrease)

                                                                         Three Months   Nine Months
                           Three Months Ended     Nine Months Ended         Ended         Ended
                              January 31,            January 31,           1/31/97       1/31/97
                                                                             to            to
                             1997     1996          1997     1996          1/31/96       1/31/96
<S>                         <C>      <C>           <C>      <C>             <C>           <C>
Net sales                    100.0 %  100.0 %       100.0 %  100.0 %         70.3%          49.6%
Cost of sales                 93.0    102.1          89.7     97.9           55.1           37.1
                            ------   ------        ------   ------
Gross profit (loss)            7.0     (2.1)         10.3      2.1            NM           647.3

Selling, general and
   administrative expense      4.3      6.1           4.4      5.3           20.5           24.3
Reorganization credits          --     (1.1)           --     (0.3)           NM             NM
                            ------   ------        ------   ------

Operating income (loss)        2.7     (7.1)          5.9     (2.9)           NM             NM


Interest expense              (1.9)    (3.5)         (1.8)    (2.9)          (5.8)          (5.3)
Miscellaneous                  0.4      0.7           0.2      0.3           (2.7)          (9.2)
                            ------   ------        ------   ------

Income (loss)
   before income taxes        1.1     (10.0)          4.2     (5.5)           NM             NM

Provision (benefit)
   for income taxes           0.4      (3.8)          1.6     (2.1)           NM             NM
                            ------   ------        ------   ------

Net income (loss)             0.7 %    (6.2) %        2.6 %   (3.4) %         NM             NM
                            ======   ======        ======   ======

</TABLE>
Note:  Percentages may not add precisely due to rounding.
NM:    Not Meaningful


Comparison of Three Months Ended January 31, 1997 and 1996
----------------------------------------------------------

     Net sales for the three  months  ended  January  31, 1997  increased  $26.6
million (70%) from the three months ended January 31, 1996. This was principally
caused by a 55% increase in lumber shipments, a 46% increase in chip volume, and
a 20%  increase in lumber  prices,  partially  offset by a 55%  decrease in chip
prices.  The higher  lumber and chip  deliveries  reflect  increased  production
resulting from an improved lumber market.

     For the quarter ended  January 31, 1997,  the Company had a gross profit of
7.0% of net sales,  compared  to gross loss of 2.1% of net sales for the quarter
ended January 31, 1996.  Lumber  prices  increased by 20% from the quarter ended
January 31, 1996,  while the Company's  log costs  decreased by 6% from the same
period. Unit manufacturing costs increased by 10% from the quarter ended January
31, 1996, despite the higher production  levels.  This was in part a result of a
general wage increase in September 1996.

                                       12
<PAGE>
Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS (Continued)

     Selling,  general and  administrative  expenses in the three  months  ended
January 31, 1997  increased by $0.5 million  (20.5%) from the three months ended
January 31, 1996. This increase  reflects higher  profit-sharing  bonus payments
stemming from higher pretax profits.

     In the quarter ended January 31, 1997, the Company's tax provision  equaled
37.5% of its pretax profit. In the quarter ended January 31, 1996, the Company's
tax benefit equaled 38% of its pretax loss. See Note 6 to Consolidated Financial
Statements.

Comparison of Nine Months Ended January 31, 1997 and 1996
---------------------------------------------------------

     Net sales for the nine  months  ended  January  31,  1997  increased  $69.8
million  (49.6%)  from  the  nine  months  ended  January  31,  1996.  This  was
principally caused by a 43% increase in lumber shipments, a 40% increase in chip
deliveries,  and a 17%  increase  in lumber  prices,  partially  offset by a 62%
decrease in chip prices.  The increased  lumber  shipments  and chip  deliveries
reflect increased  production resulting from a strong lumber market in the first
nine months of fiscal 1997.

     Gross  profit for the nine months  ended  January 31, 1997 was 10.3% of net
sales, compared to 2.1% of net sales for the nine months ended January 31, 1996.
Lumber  prices  increased  by 17% from the nine months  ended  January 31, 1996,
while the Company's log costs declined by 7%. The Company  increased  production
during the first nine months of fiscal 1997 in response to the  stronger  lumber
prices and demand. Unit manufacturing costs in the nine months ended January 31,
1997 were 3.5%  higher than in the nine months  ended  January  31,  1996.  This
increase was in part a result of a general wage increase in September 1996.

     Selling,  general and  administrative  expenses  in the nine  months  ended
January 31, 1997  increased  by $1.8  million  (24%) from the nine months  ended
January 31, 1996. This increase primarily reflects higher  profit-sharing  bonus
payments stemming from higher pretax profits.

     In the nine months  ended  January  31,  1997,  the Company  recorded a tax
provision equal to 38% of its pretax profit.  The Company recorded a tax benefit
equal to 38% of its pretax loss for the nine months ended January 31, 1996.  See
Note 6 to Consolidated Financial Statements.

Liquidity and Capital Resources
-------------------------------

     The Company  relies on cash provided by its  operations to fund its working
capital  needs.  There can be no assurance  that such cash will be sufficient to
fund the Company's future operations.  Substantially all of the Company's assets
are pledged as security for its primary debt obligation.

     During the nine months ended January 31, 1997,  the Company's cash and cash
equivalents  increased  by $4.7  million,  to $9.2  million at January  31. This
increase was  principally  caused by  operating  profits and income tax refunds,
partially  offset  by  increases  in log and  lumber  inventories  and  accounts
receivable,  capital spending, principal repayments and dividend payments on the
Company's Series A preferred stock.

                                       13
<PAGE>
Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS (Continued)

     Working  capital  increased by $6.7 million during the first nine months of
fiscal 1997,  to $31.8  million at January 31, 1997.  This was  principally  the
result of profitable operations, partially offset by capital spending, principal
payments on long-term debt and dividend payments.

     Capital  spending in the first nine months of fiscal 1997 was $2.3 million.
Capital spending for the balance of the fiscal year is currently  forecast to be
approximately $4.2 million.  The Company had no material commitments for capital
spending at January 31, 1997.

     The Company's  Credit and Security  Agreement dated as of November 30, 1992
contains certain  covenants,  including the maintenance of prescribed  levels of
collateral coverage (as defined),  tangible net worth, working capital, adjusted
cumulative  operating  income  (as  defined)  and  total  liabilities  ratio (as
defined).  This debt agreement was most recently amended as of May 1, 1996, with
respect to certain  affirmative  financial  performance  covenants  and  payment
terms. See Note 3 to Consolidated Financial Statements.

     "Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains "forward-looking" information (as defined in Section 27A of
the  Securities  Act of 1933, as amended) that involve risks and  uncertainties,
including,  but not  limited  to,  the impact of  general  economic  conditions,
increased  interest  rates,  the impact of  competitive  products  and  pricing,
availability and cost of raw materials, inadequate cash reserves, labor strikes,
changes in environmental and other regulations, changes in the Company's ability
to use its net operating loss carryforward and the risk factors listed from time
to time in the Company's SEC reports,  including, but not limited to, the report
on Form 10-K for the  fiscal  year  ended  April  30,  1996  (Part  II,  Item 7,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations").









                                       14
<PAGE>
                              WTD INDUSTRIES, INC.


                           PART II. OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K

       (a) Exhibits

               The Index to Exhibits is located on page 17.

       (b) Reports on Form 8-K

               No reports on Form 8-K were filed  during the three  months ended
               January 31, 1997.













                                       15
<PAGE>
                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




                                                  WTD INDUSTRIES, INC.
                                                  -----------------------------
                                                  (Registrant)



                                             By:  /s/ Bruce L. Engel
                                                  -----------------------------
                                                  Bruce L. Engel
                                                  President



                                             By:  /s/ K. Stanley Martin
                                                  -----------------------------
                                                  K. Stanley Martin
                                                  Vice President-Finance





March 13, 1997





                                       16
<PAGE>
                              WTD INDUSTRIES, INC.


                                INDEX TO EXHIBITS

                                                                      Sequential
                                                                          Number
                                                                          System
                                                                            Page
                                                                          Number

3.1     Fourth Restated Articles of Incorporation of Registrant adopted
        effective November 27, 1992(1)

3.2     Second Restated Bylaws of the Registrant adopted effective
        November  27,  1992(2)

4.2.4   Amendment dated as of December 17, 1996 to Credit and Security       18
        Agreement dated as of November  30,  1992,  between  Registrant
        and Principal Mutual Life Insurance Company,  Aetna Life Insurance
        Company, The Northwestern  Mutual Life Insurance Company,
        Chemical  Bank,  Seattle-First  National Bank, and Bank of America
        Oregon.

19      Other reports furnished to securities holders with respect to the    22
        quarter ended January 31, 1997: President's letter excerpted from
        Interim Report to Shareholders for the third quarter of fiscal 1997.

27      Financial Data Schedule(3)



--------------------------------------------------------------------------------
        (1)Incorporated  by  reference  to the  exhibit  of  like  number to the
Registrant's  report of Form 8-K dated November 23, 1992,  previously filed with
the Commission.

        (2)Incorporated  by reference  to the  exhibit  of  like  number  to the
Registrant's  annual  report on Form  10-K for the year  ended  April 30,  1993,
previously filed with the Commission.

        (3)This schedule has been submitted in the electronic form prescribed by
EDGAR.



--------------------------------------------------------------------------------
         All other required  Exhibits are listed in the Company's  Annual Report
on Form 10-K for the year ended April 30, 1996.


                                       17
<PAGE>
                                                                 Exhibit 4.2.4
                                   AMENDMENT
                         DATED AS OF DECEMBER 17, 1996
                                       TO
                         CREDIT AND SECURITY AGREEMENT
                         DATED AS OF NOVEMBER 30, 1992



         Reference is hereby made to that certain Credit and Security  Agreement
("Credit  Agreement")  dated as of November 30, 1992 among Principal Mutual Life
Insurance Company,  Aetna Life Insurance Company,  The Northwestern  Mutual Life
Insurance  Company,  Chemical  Bank,  Seattle-First  National  Bank  and Bank of
America Oregon,  and WTD Industries,  Inc. and its Affiliates and the Term Notes
issued by the Borrowers in  connection  with the Credit  Agreement.  Capitalized
terms used herein  shall have the same  meaning  ascribed  thereto in the Credit
Agreement.

         The Term Note  originally  issued to Aetna Life  Insurance  Company was
split into two Notes one of which was sold to Foothill Group, Inc.

         Pursuant to that  certain  Offer to Purchase  dated  November 26, 1996,
Borrowers  purchased  $577,025.41  original  face  amount  ($501,111.11  current
principal  amount)  of  Foothill's  Term  Note.  Borrowers  thereupon  issued to
Foothill a substitute Term Note  reflecting the new principal  amount owed after
the  purchase.  Pursuant  to the  terms of the  Offer to  Purchase,  $577,025.41
aggregate original face amount ($501,111.11  aggregate current principal amount)
of Term Notes was  cancelled.  The purchase and  cancellation  has the effect of
reducing the  proportionate  share of future  scheduled  principal  and interest
payments for Foothill and increasing the proportionate shares of each Lender who
did not participate in the Offer to Purchase.  Accordingly,  certain exhibits to
the Credit Agreement require amendment as follows:

         1. Credit Agreement Exhibits 2.04(a) and 2.05(b) are hereby restated in
the form,  respectively,  of Exhibit  2.04(a)  (Restated  12/17/96)  and Exhibit
2.05(b) (Restated 12/17/96) attached hereto and incorporated herein.

         2. In all other respects, the  Credit  Agreement shall remain unchanged
and in full force and effect.









                                       18
<PAGE>
                                                                   Exhibit 4.2.4
EFFECTIVE DATE:   December 17, 1996.


PRINCIPAL MUTUAL LIFE                       THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY                           INSURANCE COMPANY


By:                                         By:
   ------------------------------              ------------------------------
Its:                                        Its:
   ------------------------------              ------------------------------

By:                                         FOOTHILL GROUP, INC.
   ------------------------------           
Its:
   ------------------------------
                                            By:
                                               ------------------------------
                                            Its:
                                               ------------------------------

OPPENHEIMER & CO., INC.                     BANK OF AMERICA ILLINOIS


By:                                         By:
   ------------------------------              ------------------------------
Its:                                        Its:
   ------------------------------              ------------------------------

FIXED PLUS PARTNERS                         WTD INDUSTRIES, INC.


By:                                         By:
   ------------------------------              ------------------------------
Its:                                        Its:
   ------------------------------              ------------------------------










                                       19
<PAGE>
WTD INDUSTRIES, INC.                         EXHIBIT 2.04(a) (RESTATED 12/17/96)
ALLOCATION OF PRINCIPAL PAYMENTS                to Credit and Security Agreement
FOR SECURED PROMISSORY NOTES                       Dated as of November 30, 1992
(RESTATED AS OF DEC 17, 1996)
<TABLE>
<CAPTION>
                 100.000000%  TOTAL              47.729056% PRINCIPAL         20.450484% NORTHWESTERN
                 ----------------------------    -------------------------    ------------------------    
<S>              <C>            <C>              <C>          <C>             <C>           <C>
                 PAYMENT        BALANCE          PAYMENT      BALANCE         PAYMENT       BALANCE
                 -------------  -------------    ----------   ------------    -----------   ------------   
BALANCE AFTER                                                                                                               
 PRIN PURCH AND
 NOTE TRANSFER
 DEC 17, 1996                   47,275,066.98                 22,563,943.24                 9,667,979.91

SCHEDULED PAYMENTS
 MAR 15, 1997      225,000.00   47,050,066.98    107,390.37   22,456,552.87     46,013.59   9,621,966.32
 JUN 15, 1997      225,000.00   46,825,066.98    107,390.37   22,349,162.50     46,013.59   9,575,952.73
 SEP 15, 1997      225,000.00   46,600,066.98    107,390.37   22,241,772.13     46,013.59   9,529,939.14
 DEC 15, 1997      225,000.00   46,375,066.98    107,390.37   22,134,381.76     46,013.59   9,483,925.55
 MAR 15, 1998      400,000.00   45,975,066.98    190,916.22   21,943,465.54     81,801.94   9,402,123.61
 JUN 15, 1998      400,000.00   45,575,066.98    190,916.22   21,752,549.32     81,801.94   9,320,321.67
 SEP 15, 1998      400,000.00   45,175,066.98    190,916.22   21,561,633.10     81,801.94   9,238,519.73
 DEC 15, 1998      400,000.00   44,775,066.98    190,916.22   21,370,716.88     81,801.94   9,156,717.79
 MAR 15, 1999    1,000,000.00   43,775,066.98    477,290.56   20,893,426.32    204,504.84   8,952,212.95
 JUN 15, 1999    1,000,000.00   42,775,066.98    477,290.56   20,416,135.76    204,504.84   8,747,708.11
 SEP 15, 1999    1,000,000.00   41,775,066.98    477,290.56   19,938,845.20    204,504.84   8,543,203.27
 DEC 15, 1999    1,000,000.00   40,775,066.98    477,290.56   19,461,554.64    204,504.84   8,338,698.43
 MAR 15, 2000    1,000,000.00   39,775,066.98    477,290.56   18,984,264.08    204,504.84   8,134,193.59
 JUN 15, 2000    1,000,000.00   38,775,066.98    477,290.56   18,506,973.52    204,504.84   7,929,688.75
 SEP 15, 2000    1,000,000.00   37,775,066.98    477,290.56   18,029,682.96    204,504.84   7,725,183.91
 DEC 15, 2000    1,000,000.00   36,775,066.98    477,290.56   17,552,392.40    204,504.84   7,520,679.07
 MAR 15, 2001    1,000,000.00   35,775,066.98    477,290.56   17,075,101.84    204,504.84   7,316,174.23
 JUN 15, 2001    1,000,000.00   34,775,066.98    477,290.56   16,597,811.28    204,504.84   7,111,669.39
 SEP 15, 2001    1,000,000.00   33,775,066.98    477,290.56   16,120,520.72    204,504.84   6,907,164.55
 DEC 15, 2001    1,000,000.00   32,775,066.98    477,290.56   15,643,230.16    204,504.84   6,702,659.71
 MAR 15, 2002    1,000,000.00   31,775,066.98    477,290.56   15,165,939.60    204,504.84   6,498,154.87
 JUN 15, 2002    1,000,000.00   30,775,066.98    477,290.56   14,688,649.04    204,504.84   6,293,650.03
 SEP 15, 2002    1,000,000.00   29,775,066.98    477,290.56   14,211,358.48    204,504.84   6,089,145.19
 DEC 15, 2002    1,000,000.00   28,775,066.98    477,290.56   13,734,067.92    204,504.84   5,884,640.35
 MAR 15, 2003    1,000,000.00   27,775,066.98    477,290.56   13,256,777.36    204,504.84   5,680,135.51
 JUN 15, 2003    1,000,000.00   26,775,066.98    477,290.56   12,779,486.80    204,504.84   5,475,630.67
 SEP 15, 2003    1,000,000.00   25,775,066.98    477,290.56   12,302,196.24    204,504.84   5,271,125.83
 DEC 15, 2003    1,000,000.00   24,775,066.98    477,290.56   11,824,905.68    204,504.84   5,066,620.99
 MAR 15, 2004    1,000,000.00   23,775,066.98    477,290.56   11,347,615.12    204,504.84   4,862,116.15
 JUN 15, 2004    1,000,000.00   22,775,066.98    477,290.56   10,870,324.56    204,504.84   4,657,611.31
 SEP 15, 2004    1,000,000.00   21,775,066.98    477,290.56   10,393,034.00    204,504.84   4,453,106.47
 DEC 15, 2004    BALANCE DUE                     BALANCE DUE                   BALANCE DUE
</TABLE>


                                       20a
<PAGE>
WTD INDUSTRIES, INC.                         EXHIBIT 2.04(a) (RESTATED 12/17/96)
ALLOCATION OF PRINCIPAL PAYMENTS             - Continued
FOR SECURED PROMISSORY NOTES                            
(RESTATED AS OF DEC 17, 1996)
<TABLE>
<CAPTION>

                    6.911127%  OPPENHEIMER      16.810776%  FOOTHILL         6.104475% BK OF AMER ILL    1.994082% FIXED PLUS PART
                    ------------------------    -------------------------    ------------------------    -------------------------
<S>                 <C>         <C>             <C>          <C>             <C>         <C>             <C>         <C>
                    PAYMENT     BALANCE         PAYMENT      BALANCE         PAYMENT     BALANCE         PAYMENT     BALANCE
                    ---------   ------------    ----------   ------------    ---------   ------------    ---------   -------------
BALANCE AFTER                                                                                                             
 PRIN PURCH AND
 NOTE TRANSFER
 DEC 17, 1996                   3,267,240.00                 7,947,305.90                2,885,894.47                942,703.46

SCHEDULED PAYMENTS  
 MAR 15, 1997       15,550.04   3,251,689.96     37,824.25   7,909,481.65    13,735.07   2,872,159.40     4,486.68   938,216.78
 JUN 15, 1997       15,550.04   3,236,139.92     37,824.25   7,871,657.40    13,735.07   2,858,424.33     4,486.68   933,730.10
 SEP 15, 1997       15,550.04   3,220,589.88     37,824.25   7,833,833.15    13,735.07   2,844,689.26     4,486.68   929,243.42
 DEC 15, 1997       15,550.04   3,205,039.84     37,824.25   7,796,008.90    13,735.07   2,830,954.19     4,486.68   924,756.74
 MAR 15, 1998       27,644.51   3,177,395.33     67,243.10   7,728,765.80    24,417.90   2,806,536.29     7,976.33   916,780.41
 JUN 15, 1998       27,644.51   3,149,750.82     67,243.10   7,661,522.70    24,417.90   2,782,118.39     7,976.33   908,804.08
 SEP 15, 1998       27,644.51   3,122,106.31     67,243.10   7,594,279.60    24,417.90   2,757,700.49     7,976.33   900,827.75
 DEC 15, 1998       27,644.51   3,094,461.80     67,243.10   7,527,036.50    24,417.90   2,733,282.59     7,976.33   892,851.42
 MAR 15, 1999       69,111.27   3,025,350.53    168,107.76   7,358,928.74    61,044.75   2,672,237.84    19,940.82   872,910.60
 JUN 15, 1999       69,111.27   2,956,239.26    168,107.76   7,190,820.98    61,044.75   2,611,193.09    19,940.82   852,969.78
 SEP 15, 1999       69,111.27   2,887,127.99    168,107.76   7,022,713.22    61,044.75   2,550,148.34    19,940.82   833,028.96
 DEC 15, 1999       69,111.27   2,818,016.72    168,107.76   6,854,605.46    61,044.75   2,489,103.59    19,940.82   813,088.14
 MAR 15, 2000       69,111.27   2,748,905.45    168,107.76   6,686,497.70    61,044.75   2,428,058.84    19,940.82   793,147.32
 JUN 15, 2000       69,111.27   2,679,794.18    168,107.76   6,518,389.94    61,044.75   2,367,014.09    19,940.82   773,206.50
 SEP 15, 2000       69,111.27   2,610,682.91    168,107.76   6,350,282.18    61,044.75   2,305,969.34    19,940.82   753,265.68
 DEC 15, 2000       69,111.27   2,541,571.64    168,107.76   6,182,174.42    61,044.75   2,244,924.59    19,940.82   733,324.86
 MAR 15, 2001       69,111.27   2,472,460.37    168,107.76   6,014,066.66    61,044.75   2,183,879.84    19,940.82   713,384.04
 JUN 15, 2001       69,111.27   2,403,349.10    168,107.76   5,845,958.90    61,044.75   2,122,835.09    19,940.82   693,443.22
 SEP 15, 2001       69,111.27   2,334,237.83    168,107.76   5,677,851.14    61,044.75   2,061,790.34    19,940.82   673,502.40
 DEC 15, 2001       69,111.27   2,265,126.56    168,107.76   5,509,743.38    61,044.75   2,000,745.59    19,940.82   653,561.58
 MAR 15, 2002       69,111.27   2,196,015.29    168,107.76   5,341,635.62    61,044.75   1,939,700.84    19,940.82   633,620.76
 JUN 15, 2002       69,111.27   2,126,904.02    168,107.76   5,173,527.86    61,044.75   1,878,656.09    19,940.82   613,679.94
 SEP 15, 2002       69,111.27   2,057,792.75    168,107.76   5,005,420.10    61,044.75   1,817,611.34    19,940.82   593,739.12
 DEC 15, 2002       69,111.27   1,988,681.48    168,107.76   4,837,312.34    61,044.75   1,756,566.59    19,940.82   573,798.30
 MAR 15, 2003       69,111.27   1,919,570.21    168,107.76   4,669,204.58    61,044.75   1,695,521.84    19,940.82   553,857.48
 JUN 15, 2003       69,111.27   1,850,458.94    168,107.76   4,501,096.82    61,044.75   1,634,477.09    19,940.82   533,916.66
 SEP 15, 2003       69,111.27   1,781,347.67    168,107.76   4,332,989.06    61,044.75   1,573,432.34    19,940.82   513,975.84
 DEC 15, 2003       69,111.27   1,712,236.40    168,107.76   4,164,881.30    61,044.75   1,512,387.59    19,940.82   494,035.02
 MAR 15, 2004       69,111.27   1,643,125.13    168,107.76   3,996,773.54    61,044.75   1,451,342.84    19,940.82   474,094.20
 JUN 15, 2004       69,111.27   1,574,013.86    168,107.76   3,828,665.78    61,044.75   1,390,298.09    19,940.82   454,153.38
 SEP 15, 2004       69,111.27   1,504,902.59    168,107.76   3,660,558.02    61,044.75   1,329,253.34    19,940.82   434,212.56
 DEC 15, 2004       BALANCE DUE                  BALANCE DUE                   BALANCE DUE                  BALANCE DUE
</TABLE>

                                       20b
<PAGE>
                      EXHIBIT 2.05(b) (RESTATED 12/17/96)

                              Lenders' Percentages

                       (Restated as of December 17, 1996)




Principal                                    47.729056%

Northwestern                                 20.450484%

Oppenheimer                                   6.911127%

Foothill1                                     6.810776%

Bank of America Illinois                      6.104475%

Fixed Plus Partners                           1.994082%

















                                       21
<PAGE>
                                                                      Exhibit 19

Report from the President

Dear WTD Shareholders:

     We are pleased to report  that for our third  quarter of fiscal  1997,  WTD
significantly  improved its  operating  results over the third quarter of fiscal
1996. WTD generated net income of $449,000 which, after accounting for dividends
on its Series A preferred stock, is a net loss of $.01 per share for the quarter
ended  January 31, 1997.  This  compares to a net loss of $2,337,000 or $.26 per
share for the same period in 1996.  Third quarter net sales were $64.5  million,
up 70 percent from the $37.9 million in the comparable period last year.

     For the nine  months  ended  January  31,  1997,  WTD  earned net income of
$5,544,000  or $.34 per share,  compared to a net loss of $4,792,000 or $.59 per
share during the same period last year.  Sales were $210.6  million for the nine
months,  compared to $140.8  million in the  comparable  prior year  period,  an
increase of 50 percent.

     The winter  weather had some impact on the market and our  operations.  The
stud lumber market lagged behind the dimension market with prices  comparable to
last year,  offsetting  profits from  dimension  lumber  sales.  The chip market
remains very weak which had a negative impact on profitability.

     Dimension  lumber prices and demand are up  substantially  over a year ago.
Building  activity and interest rate levels  remain  helpful as we move into our
fourth quarter. Our current cash flow and cash reserves are strong.

     Lumber market activity  appears  somewhat slower than it otherwise might be
in  anticipation  of the  beginning  of a new  quota  year on April 1 under  the
U.S.-Canadian  lumber  agreement  and the  potential  for  increased  imports of
Canadian produced lumber into the U.S.

     We  are  excited  about  our  recently  announced  decision  to  install  a
fingerjointing  operation  at our  Midway  Forest  Products  site in  Corvallis,
Oregon.  The new operation,  expected to do business as Midway  Engineered  Wood
Products, is WTD's entry into the engineered lumber business.

     The  fingerjointing  operation  is designed  to further  improve our dollar
return on raw  material  by using wood fiber that  otherwise  would be made into
chips and  converting it into lumber.  Our goal is to commence  operations  this
summer  employing  approximately  40  people,  assuming  necessary  permits  are
obtained.

     Progress  continues  on  additional  lumber  drying  capacity at two of the
Company's dimension sawmills,  Sedro-Woolley  Lumber and Pacific Softwoods.  The
ability to produce an  increased  volume of  kiln-dried  lumber  gives access to
additional markets and increased flexibility in log species utilization.

     We look forward to the opportunities ahead.



                                                                Bruce L. Engel
                                                                President

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