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    October 31, 1996
                                   ------------------------

     [ ]  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 November 30, 1996 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 Six Months Ended October 31, 1996 and 1995     3


         Consolidated Balance Sheets -
          October 31, 1996 and April 30, 1996                             4


         Consolidated Statements of Cash Flows -
          Six Months Ended October 31, 1996 and 1995                      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 4.  Submission of Matters to a Vote of Security Holders        15


      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                     SIX MONTHS ENDED
                                                OCTOBER 31,                          OCTOBER 31,
                                       -----------------------------        ------------------------------
                                           1996             1995                1996              1995
                                       ------------     ------------        ------------      ------------
<S>                                    <C>              <C>                 <C>               <C>        
NET SALES                              $    79,206      $    64,161         $   146,179       $   102,959

COST OF SALES                               69,752           61,057             129,063            99,258
                                       ------------     ------------        ------------      ------------

GROSS PROFIT                                 9,454            3,104              17,116             3,701

SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES                 3,404            2,711               6,487             5,149
                                       ------------     ------------        ------------      ------------

OPERATING INCOME (LOSS)                      6,050              393              10,629            (1,448)

OTHER INCOME (EXPENSE)
     Interest Expense                       (1,281)          (1,350)             (2,578)           (2,714)
     Miscellaneous                              72               94                 167               202
                                       ------------     ------------        ------------      ------------

                                            (1,209)          (1,256)             (2,411)           (2,512)
                                       ------------     ------------        ------------      ------------


INCOME (LOSS) BEFORE INCOME TAXES            4,841             (863)              8,218            (3,960)

PROVISION  FOR INCOME TAXES (BENEFIT)        1,840             (328)              3,123            (1,505)
                                       ------------     ------------        ------------      ------------

NET INCOME (LOSS)                            3,001             (535)              5,095            (2,455)

PREFERRED DIVIDENDS                            557              595               1,114             1,203
                                       ------------     ------------        ------------      ------------

NET INCOME (LOSS) APPLICABLE
  TO COMMON SHAREHOLDERS               $     2,444      $    (1,130)        $     3,981       $    (3,658)   
                                       ============     ============        ============      ============


NET INCOME (LOSS) PER COMMON SHARE
     PRIMARY                                 $0.21           ($0.10)              $0.35            ($0.33)
                                             -----           -------              -----            -------

     FULLY DILUTED                           $0.21           ($0.10)              $0.35            ($0.33)
                                             -----           -------              -----            -------









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


                                       3
<PAGE>
<TABLE>
<CAPTION>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                                 (In Thousands)

                                                          OCTOBER 31,              APRIL 30,
                                                             1996                    1996
                                                         --------------          --------------
<S>                                                      <C>                     <C>
CURRENT ASSETS                                            (Unaudited)
   Cash and cash equivalents                             $       3,502           $       4,576
   Accounts receivable, net                                     14,180                  10,190
   Inventories                                                  23,686                  13,891
   Prepaid expenses                                              1,753                   1,568
   Income tax refund receivable                                  1,230                   2,135
   Deferred tax asset                                            1,105                   1,112
   Assets held for sale                                            736                     737
   Timber, timberlands and timber-related assets                 4,371                   6,243
                                                         --------------          --------------

      Total current assets                                      50,563                  40,452


NOTES AND ACCOUNTS RECEIVABLE                                      136                     164

TIMBER AND TIMBERLANDS                                             629                     679

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                          2,943                   2,943
   Buildings and improvements                                   11,189                  11,085
   Machinery and equipment                                      69,065                  68,313
                                                         --------------          --------------

                                                                83,197                  82,341

     Less accumulated depreciation                              54,288                  51,391
                                                         --------------          --------------

                                                                28,909                  30,950

   Construction in progress                                        560                     339
                                                         --------------          --------------

                                                                29,469                  31,289

DEFERRED TAX ASSET                                                 506                   3,388

OTHER ASSETS                                                     1,331                   1,424
                                                         --------------          --------------


                                                         $      82,634           $      77,396
                                                         ==============          ==============












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


                                       4
<PAGE>
<TABLE>
<CAPTION>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES

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



                                                          OCTOBER 31,              APRIL 30,
                                                             1996                    1996
                                                         --------------          --------------
<S>                                                      <C>                     <C>
CURRENT LIABILITIES                                       (Unaudited)
   Accounts payable                                      $       9,593           $       5,791
   Accrued expenses                                              7,039                   6,198
   Timber contracts payable                                         54                   2,252
   Current maturities of long-term debt                          2,112                   1,159
                                                         --------------          --------------

      Total current liabilities                                 18,798                  15,400

LONG-TERM DEBT, less current maturities                         48,169                  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                                            (34,010)                (37,991)
                                                         --------------          --------------

                                                                15,667                  11,686
                                                         --------------          --------------


                                                         $      82,634           $      77,396
                                                         ==============          ==============
















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


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


                                                                 SIX MONTHS ENDED OCTOBER 31,
                                                             ------------------------------------
                                                                  1996                  1995
                                                             --------------        --------------

<S>                                                          <C>                   <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
  Net income (loss)                                          $       5,095         $      (2,455)
  Adjustments to reconcile net income (loss) to
     cash provided by operating activities:
    Depreciation, depletion and amortization                         3,315                 2,823
    Deferred income tax                                              2,889                (1,477)
    Accounts receivable                                             (3,990)                  146
    Inventories                                                     (9,795)                 (939)
    Prepaid expenses                                                  (185)                1,871
    Timber, timberlands and timber-related assets - current          1,788                 1,137
    Payables and accruals                                            2,498                   664
    Income taxes                                                       905                   503
                                                             --------------        --------------

     Cash provided by operating activities                           2,520                 2,273
                                                             --------------        --------------

CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
  Net reductions of timber and timberlands                              50                     7
  Acquisition of property, plant and equipment                      (1,313)               (2,089)
  Other investing activities                                            57                    51
                                                             --------------        --------------

     Cash used for investing activities                             (1,206)               (2,031)
                                                             --------------        --------------

CASH USED FOR FINANCING ACTIVITIES:
  Principal payments on long-term debt                              (1,240)                 (878)
  Other assets                                                         (34)                   (1)
  Dividends paid on preferred stock                                 (1,114)               (1,198)
                                                             --------------        --------------

     Cash used for financing activities                             (2,388)               (2,077)
                                                             --------------        --------------

DECREASE IN CASH AND CASH EQUIVALENTS                               (1,074)               (1,835)
CASH BALANCE AT BEGINNING OF PERIOD                                  4,576                 6,023
                                                             --------------        --------------

CASH BALANCE AT END OF PERIOD                                $       3,502         $       4,188
                                                             ==============        ==============

CASH PAID (REFUNDED) DURING THE PERIOD FOR:
  Interest                                                          $2,523                  $523
  Income taxes                                                       ($706)                ($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  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  October  31,  1996 and April 30,  1996 are as  follows  (in
thousands):

                              October 31,             April 30,
                                 1996                   1996
                              -----------            -----------
       Logs                   $   14,696             $    5,899
       Lumber                      7,664                  6,786
       Supplies                    1,326                  1,206
                              -----------            -----------

                              $   23,686             $   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 October 31, 1996 the  Company's  tangible  net worth was $15.3  million,
compared  to $9  million  required  by the  covenant.  At that  same  date,  the
Company's working capital was $31.8 million,  compared to $22.5 million required
by the covenant.  Also, at October 31, 1996, the Company's  adjusted  cumulative
operating  income was $33.9  million,  compared to $22.5 million  required.  The
collateral  coverage  ratio at October  31,  1996 was 80.8%,  compared  to a 60%
minimum required level. The total liabilities ratio was 81% at October 31, 1996,
compared to a maximum  allowed of 87%. 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 $25 million at January 1, 1997,  $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 increases to 89% at
November 1, 1996,  drops to 87% at July 1, 1997 and drops to 85% at May 1, 1998.
During the quarter ended October 31, 1996,  the  Company's  adjusted  cumulative
operating  income increased by $7.1 million while showing income before taxes of
$4.8 million.

     In  addition,   this  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 has agreed to an additional  prepayment
computed  at 30% of  quarterly  net  income.  The  next  prepayment  under  this
provision will be approximately $902,000 due in December 1996.


NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING

     Stockholder's equity at October 31, 1996 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 October 31, 1996 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
six-month  periods  ended  October  31, 1996 and 1995 are  summarized  below (in
thousands, except per-share data):
<TABLE>
<CAPTION>

                                            Three Months Ended        Six Months Ended
                                               October 31,                October 31,
                                       ----------------------------------------------------
                                          1996          1995          1996          1995
                                       ----------    ----------    ----------    ----------

<S>                                    <C>           <C>           <C>           <C>
NET INCOME (LOSS) APPLICABLE TO
   COMMON SHAREHOLDERS                 $   2,444     $  (1,130)    $   3,981     $  (3,658)
                                       ==========    ==========    ==========    ==========


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

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

  Exercise of stock options                  103            --            20            --  
                                       ----------    ----------    ----------    ----------

AVERAGE NUMBER OF SHARES AND
  EQUIVALENTS OUTSTANDING
   - PRIMARY BASIS                        11,393        11,077        11,310        11,077

ADDITIONAL SHARES ASSUMED FROM
  EXERCISE OF STOCK OPTIONS                   38            --           108            --
                                       ----------    ----------    ----------    ----------
AVERAGE NUMBER OF SHARES AND
  EQUIVALENTS OUTSTANDING
   - FULLY DILUTED                         11,431       11,077        11,418        11,077
                                       ==========    ==========    ==========    ==========

NET INCOME (LOSS) PER COMMON SHARE
   - PRIMARY BASIS                         $0.21        ($0.10)        $0.35        ($0.33)
                                           ======       =======        ======       =======

   - FULLY DILUTED                         $0.21        ($0.10)        $0.35        ($0.33)
                                           ======       =======        ======       =======
</TABLE>


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           Six months ended
                                              October 31,                October 31,
                                       ------------------------    ------------------------
                                          1996          1995          1996          1995
                                       ----------    ----------    ----------    ----------

   <S>                                 <C>           <C>           <C>           <C>       
   Income (loss) before income taxes   $   4,841     $    (863)    $   8,218     $  (3,960)
                                       ==========    ==========    ==========    ==========

   Income tax provision (benefit):
     Federal                           $   1,646     $    (293)    $   2,794     $  (1,347)
     State                                   194           (35)          329          (158)
                                       ----------    ----------    ----------    ----------

                                       $   1,840     $    (328)    $   3,123     $  (1,505)
                                       ==========    ==========    ==========    ========== 

     Current                           $    139      $     115     $     234     $     (28)
     Deferred                             1,701           (443)        2,889        (1,477)
                                       ----------    ----------    ----------    ----------

                                       $   1,840     $    (328)    $   3,123    $   (1,505)
                                       ==========    ==========    ==========    ==========
</TABLE>


     Deferred  tax assets  reduced  during the quarter  ended  October 31, 1996,
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 necessary.  No change to this reserve was considered necessary during
the quarter ended October 31, 1996.


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.

     Low lumber prices, combined with relatively high log prices, created losses
for the  Company  during each  quarter of fiscal  year 1996.  In response to the
generally weak market conditions,  the Company curtailed  production at selected
mills and reduced the level of  operations  at various times during the year. By
the end of the fiscal year, lumber prices had increased and operating conditions
had improved enough to allow the Company to run  substantially  all of its mills
on a full  one-shift  operation in March and April,  1996, and through the first
quarter ended July 31, 1996.  Operating  conditions  continued to improve during
the quarter ended October 31, 1996.  Although chip and other  by-product  prices
continued to be weak,  lumber demand continued strong and lumber prices improved
during  much of the  quarter.  Log  prices  were  relatively  stable  during the
quarter, allowing the Company to enjoy favorable margin conditions.  The Company
worked additional hours at many of its mills. There can be no assurance that the
margins recently experienced by the Company will continue.

                                       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 Six Months
                       Three Months Ended    Six Months Ended        Ended      Ended
                           October 31,         October 31,         10/31/96   10/31/96
                                                                      to         to
                         1996      1995        1996      1995      10/31/95   10/31/95
                       --------  --------    --------  --------    --------   --------
<S>                    <C>       <C>         <C>       <C>         <C>        <C>   
Net sales               100.0%    100.0%      100.0%    100.0%        23.4%      42.0% 
Cost of sales            88.1      95.2        88.3      96.4         14.2       30.0
                       --------  --------    --------  --------                       
Gross profit             11.9       4.8        11.7       3.6        204.6      362.5

Selling, general and
 administrative expense   4.3       4.2         4.4       5.0         25.6       26.0
                       --------  --------    --------  --------
Operating income (loss)   7.6       0.6         7.3      (1.4)         NM         NM


Interest expense         (1.6)     (2.1)       (1.8)     (2.6)        (5.1)      (5.0)
Miscellaneous             0.1       0.1         0.1       0.2        (23.4)     (17.3)
                       --------  --------    --------  --------
Income (loss)
   before income taxes    6.1      (1.3)        5.6      (3.8)         NM         NM

Provision (benefit)
   for income taxes       2.3      (0.5)        2.1      (1.5)         NM         NM
                       --------  --------    --------  --------
Net income (loss)         3.8%     (0.8)%       3.5%     (2.4)%        NM         NM
                       ========  ========    ========  ========



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


Comparison of Three Months Ended October 31, 1996 and 1995
----------------------------------------------------------

     Net sales for the three months ended October 31, 1996 increased $15 million
(23.4%)  from the three  months ended  October 31,  1995.  This was  principally
caused by a 21% increase in lumber shipments,  a 19% increase in chip deliveries
and a 15% increase in lumber prices,  partially offset by a 65% decrease in chip
prices.  The increased  lumber shipments and chip deliveries  reflect  increased
production  resulting  from a strong lumber market in the current  quarter and a
weak market in the second quarter of fiscal 1996.

     Gross profit for the quarter ended October 31, 1996 was 11.9% of net sales,
compared to 4.8% of net sales for the quarter  ended  October 31,  1995.  Lumber
prices  increased  by 15% from the quarter  ended  October 31,  1995,  while the
Company's log costs declined by 10%. The Company increased production during the
second quarter of fiscal 1997 in response to stronger  lumber prices and demand.
Unit  manufacturing  costs  increased by 7% from the quarter  ended  October 31,
1995, in part as a result of adding shifts at some mills and overtime  operating
hours at most mills during the quarter.

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

     Selling, general and administrative (S, G & A) expenses in the three months
ended October 31, 1996  increased by $0.7 million  (25.6%) from the three months
ended  October 31, 1995.  This increase  reflects  higher  profit-sharing  bonus
payments stemming from higher pretax profits.

     In the quarter ended October 31, 1996, the Company's tax provision  equaled
38% of its pretax  profit.  In the quarter ended October 31, 1995, the Company's
tax benefit equaled 38% of its pretax loss. See Note 6 to Consolidated Financial
Statements.

Comparison of Six Months Ended October 31, 1996 and 1995
--------------------------------------------------------

     Net sales for the six months ended October 31, 1996 increased $43.2 million
(42%) from the six months ended October 31, 1995. This was principally caused by
a 39% increase in lumber shipments, a 38% increase in chip deliveries, and a 17%
increase in lumber  prices,  partially  offset by a 65% decrease in chip prices.
The increased lumber shipments and chip deliveries reflect increased  production
resulting from a strong lumber market in the first half of fiscal 1997.

     Gross  profit for the six months  ended  October  31, 1996 was 11.7% of net
sales,  compared to 3.6% of net sales for the six months ended October 31, 1995.
Lumber prices increased by 17% from the six months ended October 31, 1995, while
the Company's log costs declined by 8%. The Company increased  production during
the first half of fiscal  1997 in  response to the  stronger  lumber  prices and
demand. Unit manufacturing costs were essentially  unchanged from the first half
of fiscal 1996.

     Selling,  general and  administrative (S, G & A) expenses in the six months
ended October 31, 1996 increased by $1.3 million (26%) from the six months ended
October 31, 1995. This increase  reflects higher  profit-sharing  bonus payments
stemming from higher pre-tax profits.

     In the six months  ended  October  31,  1996,  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 six months ended  October 31, 1995.  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 six months ended October 31, 1996,  the Company's  cash and cash
equivalents  decreased  by $1.1  million,  to $3.5  million at  October  31. The
decrease was  principally  caused by increases in log and lumber  inventory  and
accounts  receivable,   capital  spending,  principal  repayments  and  dividend
payments  on the  Company's  Series  A  preferred  stock,  partially  offset  by
operating profits and income tax refunds.

                                       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 six months of
fiscal 1997,  to $31.8  million at October 31, 1996.  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 six months of fiscal 1997 was $1.3  million.
Capital spending for the balance of the fiscal year is currently  forecast to be
approximately $3.2 million.  The Company had no material commitments for capital
spending at October 31, 1996.

     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 contain  "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 4.  Submission of Matters to a Vote of Security Holders

         On  October  21,  1996,   the  Company  held  its  Annual   Meeting  of
         Shareholders.  Directors  Richard  W.  Detweiler,  Bruce L.  Engel,  K.
         Stanley Martin and Robert J. Riecke were  re-elected to one-year terms.
         The number of votes cast for each nominated Director was as follows:

                                           Against or
                                For        Withheld
                             ---------     ---------
                Detweiler    9,911,810       110,169
                Engel        9,929,334        92,645
                Martin       9,937,600        84,379
                Riecke       9,922,400        99,579

           Scott Christie and William H. Wright continued as Directors after the
           meeting. The firm of Moss Adams LLP was re-appointed as the Company's
           auditors. The vote for re-appointment of Moss Adams LLP was 9,865,397
           for, 96,559 against or withheld, and 60,023 abstentions.

         The shareholders also approved the 1996 Stock Option Plan at the Annual
         Meeting.  The vote was 9,254,879 for, 398,347 against or withheld,  and
         368,753 abstentions.

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  quarter  ended
               October 31, 1996.




                                       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




December 12, 1996








                                       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)

19   Other reports  furnished to securities  holders with respect            18
     to the quarter ended October 31, 1996: President's letter
     excerpted from Interim Report to Shareholders for the second
     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
of Form 10-K for the year ended April 30, 1996.



                                       17
<PAGE>
                                                                     Exhibit 19

Report from The President

Dear WTD Shareholders:

       We are happy to report that for our second  quarter of fiscal  1997,  WTD
Industries  generated net income of  $3,001,000  or $.21 per share.  This is our
best quarterly operating  performance since the third quarter of fiscal 1994 and
a  turnaround  from the net loss of  $535,000  or $.10 per share for the  second
quarter last year.

       Second quarter net sales were $79.2 million, up 23 percent from the $64.2
million in the comparable period last year.

       For the six months ended October 31, 1996, we have produced net income of
$5,095,000  or $.35 per share,  compared to a net loss of $2,455,000 or $.33 per
share for the same period last year,  an  improvement  in excess of  $7,500,000.
This is our best first half-year performance since fiscal 1990.

       Sales were $146.2 million for the six months  compared to $103 million in
the prior year, up 42 percent.

       We improved  profits in our second  quarter  despite an erosion in lumber
prices in October as we benefited from favorable log cost and  availability.  We
expect that wood chip  demand and prices will  continue to be weak and may see a
further decline in wood chip prices.

       It appears that the Pacific Northwest region is once again competitive in
the  forest  products  marketplace,  as a result of basic  shifts in log  export
markets,  Canadian share of the U.S.  lumber market and sufficient  reduction of
lumber production in the Northwest over recent years.

       Since the end of our second quarter, lumber prices have been volatile due
to speculation  that the recently  issued Canadian export quotas will reduce the
volume of  Canadian-produced  lumber available for sale in the United States and
due to a seasonal slow-down in lumber demand.

       In my last  President's  letter  I  reported  that we were  expecting  to
complete the sale of our Vermont  facility during the second quarter.  We failed
to  reach  agreement  on  the  final  details  of  the  transfer,  and we do not
anticipate  a  future  sale.  Our mill in  Vermont  is a good  facility  and has
potential  for  even  better  performance.  We are  about to  launch  a  capital
improvement project designed to make that mill more efficient and competitive.

       We  continue  to  improve  the  balance  sheet by  generating  profit and
reducing  indebtedness.  Our senior secured debt was reduced by $856,000  during
the second quarter with further  senior debt reduction in the amount  $1,127,000
scheduled to take place in the third quarter.

       We held our Annual  Meeting of  Shareholders  on October  21,  1996.  The
election of directors,  ratification of auditor  selection,  and approval of the
1996 Stock  Option Plan were all  accomplished.  We  appreciate  your  continued
confidence.



                                               Bruce L. Engel
                                               President


                                       18
<PAGE>