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, 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 November 30, 1997 was 11,154,374.


<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, 1997 and 1996     3


          Consolidated Balance Sheets -
             October 31, 1997 and April 30, 1997                            4


          Consolidated Statements of Cash Flows -
             Six Months Ended October 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 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,
                                      -----------------------     -----------------------
                                         1997         1996           1997         1996
                                      ----------   ----------     ----------   ----------
<S>                                   <C>          <C>            <C>          <C>      
NET SALES                             $  67,387    $  79,206      $ 136,268    $ 146,179

COST OF SALES                            63,854       69,752        125,695      129,063
                                      ----------   ----------     ----------   ----------
GROSS PROFIT                              3,533        9,454         10,573       17,116

SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES              2,903        3,404          6,133        6,487
                                      ----------   ----------     ----------   ----------
OPERATING INCOME                            630        6,050          4,440       10,629

OTHER INCOME (EXPENSE)
     Interest Expense                    (1,182)      (1,281)        (2,393)      (2,578)
     Miscellaneous                           35           72            136          167
                                      ----------   ----------     ----------   ----------

                                         (1,147)      (1,209)        (2,257)      (2,411)
                                      ----------   ----------     ----------   ----------

INCOME (LOSS) BEFORE INCOME TAXES          (517)       4,841          2,183        8,218

PROVISION  FOR INCOME TAXES (BENEFIT)      (319)       1,840            437        3,123
                                      ----------   ----------     ----------   ----------
NET INCOME (LOSS)                          (198)       3,001          1,746        5,095

PREFERRED DIVIDENDS                         573          557          1,142        1,114
                                      ----------   ----------     ----------   ----------
NET INCOME (LOSS) APPLICABLE
  TO COMMON STOCKHOLDERS              $    (771)   $   2,444      $     604    $   3,981
                                      ==========   ==========     ==========   ==========


NET INCOME (LOSS) PER COMMON SHARE
     PRIMARY                             ($0.07)       $0.21           $0.05        $0.35
                                         =======       =====           =====        =====

     FULLY DILUTED                       ($0.07)       $0.21           $0.05        $0.35
                                         =======       =====           =====        =====















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)

                                                    OCTOBER 31,       APRIL 30,
                                                        1997            1997
                                                    -----------     -----------
CURRENT ASSETS                                      (Unaudited)
   Cash and cash equivalents                        $    2,710      $    8,209
   Accounts receivable, net                             12,394          16,830
   Inventories                                          20,226          17,760
   Prepaid expenses                                      2,279           1,817
   Income tax refund receivable                          1,145           1,145
   Deferred tax asset                                    1,471           1,383
   Assets held for sale                                    361             361
   Timber, timberlands and timber-related assets         4,462           3,936
                                                    -----------     -----------

      Total current assets                              45,048          51,441


NOTES AND ACCOUNTS RECEIVABLE                              113             124

TIMBER AND TIMBERLANDS                                     631             629

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                  3,343           3,343
   Buildings and improvements                           12,677          11,194
   Machinery and equipment                              76,193          70,391
                                                    -----------     -----------

                                                        92,213          84,928

     Less accumulated depreciation                      59,214          56,557
                                                    -----------     -----------

                                                        32,999          28,371

   Construction in progress                              3,059           4,365
                                                    -----------     -----------

                                                        36,058          32,736

DEFERRED TAX ASSET                                          --             280

OTHER ASSETS                                             1,270           1,276
                                                    -----------     -----------


                                                    $   83,120      $   86,486
                                                    ===========     ===========









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)



                                                    OCTOBER 31,      APRIL 30,
                                                        1997            1997
                                                    -----------     -----------
CURRENT LIABILITIES                                 (Unaudited)
   Accounts payable                                  $   9,645      $    9,709
   Accrued expenses                                      7,333           9,644
   Timber contracts payable                                738             246
   Current maturities of long-term debt                  1,723           2,367
                                                       --------       ---------

      Total current liabilities                         19,439          21,966

LONG-TERM DEBT, less current maturities                 44,544          46,086

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, 11,154,374 issued and outstanding
     (11,083,474 at April 30, 1997)                     28,752          28,647
   Additional paid-in capital                               15              15
   Retained deficit                                    (30,651)        (31,249)
                                                    -----------     -----------

                                                        19,137          18,434
                                                    -----------     -----------


                                                    $   83,120      $   86,486
                                                    ===========     ===========



















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)


                                                                SIX MONTHS ENDED OCTOBER 31,
                                                             ---------------------------------
                                                                  1997                1996
                                                             -------------       -------------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
<S>                                                          <C>                 <C>         
  Net income                                                 $      1,746        $      5,095
  Adjustments to reconcile net income to
     cash provided by operating activities:
    Depreciation, depletion and amortization                        2,968               3,315
    Deferred income tax                                               192               2,889
    Accounts receivable                                             4,436              (3,990)
    Inventories                                                    (2,466)             (9,795)
    Prepaid expenses                                                 (462)               (185)
    Timber, timberlands and timber-related assets - current          (611)              1,788
    Payables and accruals                                          (1,840)              2,498
    Income taxes                                                       --                 905
                                                             -------------       -------------

     Cash provided by operating activities                          3,963               2,520
                                                             -------------       -------------

CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
  Net reductions of (additions to) timber and timberlands              (2)                 50
  Acquisition of property, plant and equipment                     (6,152)             (1,313)
  Other investing activities                                           12                  57
                                                             -------------       -------------

     Cash used for investing activities                            (6,142)             (1,206)
                                                             -------------       -------------

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
  Principal payments on long-term debt                             (2,228)             (1,240)
  Other assets                                                        (49)                (34)
  Dividends paid on preferred stock                                (1,148)             (1,114)
  Issuance of common stock                                            105                  --
                                                             -------------       -------------

     Cash used for financing activities                            (3,320)             (2,388)
                                                             -------------       -------------

DECREASE IN CASH AND CASH EQUIVALENTS                              (5,499)             (1,074)
CASH BALANCE AT BEGINNING OF PERIOD                                 8,209               4,576
                                                             -------------       -------------

CASH BALANCE AT END OF PERIOD                                $      2,710        $      3,502
                                                             =============       =============

CASH PAID (REFUNDED) DURING THE PERIOD FOR:
  Interest                                                         $2,351              $2,523
  Income taxes                                                       $244               ($706)










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,  1997,  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,  1997 and April 30,  1997 are as  follows  (in
thousands):

                                        October 31,          April 30,
                                            1997                1997
                                        -----------         -----------    
       Logs                             $     9,410         $     9,054
       Lumber                                 9,304               7,379
       Supplies and other                     1,512               1,327
                                        -----------         -----------    

                                        $    20,226         $    17,760
                                        ===========         ===========    


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
October 1,  1997,  with  respect to  reducing  until July 1, 1998,  the  minimum
working capital required to be maintained.



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

     At October 31, 1997 the  Company's  tangible  net worth was $18.9  million,
compared  to $10  million  required  by the  covenant.  At that same  date,  the
Company's working capital was $25.6 million,  compared to $21.5 million required
by the covenant.  Also, at October 31, 1997, the Company's  adjusted  cumulative
operating  income was $38  million,  compared  to $27.5  million  required.  The
collateral coverage ratio at October 31, 1997 was 73%, compared to a 60% minimum
required  level.  The total  liabilities  ratio  was 77% at  October  31,  1997,
compared to a maximum  allowed of 87%. The required  level of tangible net worth
increases  to $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, 1998. The
required level of adjusted cumulative  operating income increases to $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 85% at May 1, 1998. During
the quarter ended October 31, 1997, the Company's adjusted cumulative  operating
income  decreased  by $2.3  million  while  showing a loss before  taxes of $0.5
million.  The Company continues to be in compliance with all covenants contained
in this agreement.

     In addition,  this 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, 1997. In  connection  with
the May 1,  1996  amendment,  the  Company  agreed to an  additional  prepayment
computed at 30% of quarterly net income.  No such prepayment is required for the
quarter ended October 31, 1997.


NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING

     Stockholders' equity at October 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. The
         Company has not missed any dividend  payments on the Series A preferred
         stock.

         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;  11,154,374
         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  11,367,067  shares if  remaining  Series B
         preferred stock  outstanding at October 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
six-month  periods  ended  October  31, 1997 and 1996 are  summarized  below (in
thousands, except per-share data):

                                      Three Months Ended       Six Months Ended
                                          October 31,             October 31,
                                      ------------------      ------------------
                                        1997      1996          1997      1996
                                      --------  --------      --------  --------

NET INCOME (LOSS) APPLICABLE TO
   COMMON SHAREHOLDERS                $  (771)  $ 2,444       $   604   $ 3,981
                                      ========  ========      ========  ========


WEIGHTED AVERAGE SHARES OUTSTANDING    11,143    11,077        11,128    11,077

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

  Exercise of stock options               --        103          450         20
                                      --------  --------      --------  --------

AVERAGE NUMBER OF SHARES AND
  EQUIVALENTS OUTSTANDING
   - PRIMARY BASIS                     11,143    11,393        11,791    11,310

ADDITIONAL SHARES ASSUMED FROM
  EXERCISE OF STOCK OPTIONS                --        38          100        108
                                      --------  --------      --------  --------
AVERAGE NUMBER OF SHARES AND
  EQUIVALENTS OUTSTANDING
   - FULLY DILUTED                     11,143    11,431        11,891    11,418
                                      ========  ========      ========  ========

NET INCOME (LOSS) PER COMMON SHARE
   - PRIMARY BASIS                     ($0.07)    $0.21         $0.05     $0.35
                                       =======   =======       =======   =======

   - FULLY DILUTED                     ($0.07)    $0.21         $0.05     $0.35
                                       =======   =======       =======   =======





                                       9
<PAGE>
NOTE 6 - INCOME TAXES

     The income tax  provision is based on the  estimated  effective  annual tax
rate for each fiscal year.  The provision  includes  anticipated  current income
taxes payable,  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.

     The federal and state income tax  provision  consists of the  following (in
thousands):

                                      Three Months Ended       Six Months Ended
                                          October 31,             October 31,
                                      ------------------      ------------------
                                        1997      1996          1997      1996
                                      --------  --------      --------  --------

Income (loss) before income taxes     $  (517)  $ 4,841       $ 2,183   $ 8,218
                                      ========  ========      ========  ========

Income tax provision (benefit):
  Federal                             $  (298)  $ 1,646       $   350   $ 2,794
  State                                   (21)      194            87       329
                                      --------  --------      --------  --------
                                      $  (319)  $ 1,840       $   437   $ 3,123
                                      ========  ========      ========  ========

  Current                             $   182   $   139       $   245   $   234
  Deferred                               (501)    1,701           192     2,899
                                      --------  --------      --------  --------
                                      $  (319)  $ 1,840       $   437   $ 3,123
                                      ========  ========      ========  ========

     Deferred tax assets  increased  during the quarter  ended October 31, 1997,
principally the result of additional net operating loss  carryforwards  stemming
from pretax losses and a reduction of the valuation reserve against the deferred
tax asset.

     Management  anticipates some reductions in its valuation  reserve in fiscal
1998.  These reductions  should result in a lowering of the Company's  effective
tax rate to approximately 20% in fiscal 1998.

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.

     Lumber  prices were  substantially  weaker during the quarter ended October
31,  1997.  Lumber  usage and demand  continue  to be strong and the Company has
responded  to certain  lumber  price  adjustments  by  altering  product mix and
reducing log costs where possible. There is currently an oversupply of lumber in
the U.S.  market,  caused  in part by  weakness  in the  export  lumber  market,
particularly  exports to Japan, and some export producers  manufacturing for the
domestic lumber market. Log costs were relatively stable during the first half.

     Quarterly  results were  negatively  impacted by the inability of the Union
Pacific  Railroad  to  provide  adequate  service to the  Company  and its other
customers.  Although  the  Company  has been able to make  alternative  shipping
arrangements in many  instances,  there have not been enough railcars to satisfy
demand.


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

     There can be no  assurance  that the margins  recently  experienced  by the
Company will continue or improve.

     A  labor  strike  at  the   Company's   hardwood   mill  located  in  South
Bend/Raymond,  Washington,  commenced  on October  29,  1997.  The  Company  has
continued to operate the facility,  although at a lower rate of production, with
employees that are not  participating in the strike,  replacement  workers,  and
salaried  personnel.  In June of 1997 the  Company  had  reached  an  impasse in
negotiations with the local  Woodworkers  Union. In October the Company withdrew
recognition  of the  Union as the  bargaining  agent of the  employees  based on
notification  by a  majority  of the  employees  at the mill that they no longer
wanted to be represented by the Union. No other WTD employees are represented by
this Union. No meetings with the Union have been scheduled.

     The following table sets forth the percentages  which certain  expenses and
income 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,      10/31/97     10/31/97  
                                      1997      1996      1997      1996        to           to
                                     ------    ------    ------    ------    10/31/96     10/31/96
                                                                             --------     --------
<S>                                   <C>       <C>       <C>       <C>        <C>          <C>   
Net sales                             100.0 %   100.0 %   100.0 %   100.0 %    (14.9)%      (6.8)%
Cost of sales                          94.8      88.1      92.2      88.3       (8.5)       (2.6)
                                     ------    ------    ------    ------
Gross profit                            5.2      11.9       7.8      11.7      (62.6)      (38.2)
                                                                                
Selling, general and
   administrative expense               4.3       4.3       4.5       4.4      (14.7)       (5.5)
                                     ------    ------    ------    ------  
                                                                                

Operating income                        0.9       7.6       3.3       7.3      (89.6)      (58.2)
                                                                               

Interest expense                       (1.8)     (1.6)     (1.8)     (1.8)      (7.7)       (7.2)
Miscellaneous                           0.1       0.1       0.1       0.1      (51.4)      (18.6)
                                     ------    ------    ------    ------  

Income (loss) before income taxes      (0.8)      6.1       1.6       5.6         NM       (73.4)

Provision for income taxes (benefit)   (0.5)      2.3       0.3       2.1         NM       (86.0)
                                     ------    ------    ------    ------  
Net income (loss)                      (0.3) %    3.8 %     1.3 %     3.5 %       NM       (65.7)%
                                     ======    ======    ======    ======             
</TABLE>

Note:  Percentages may not add precisely due to rounding.
NM:    Not Meaningful

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

     Net sales for the three  months  ended  October  31, 1997  decreased  $11.8
million (15%) from the three months ended October 31, 1996. This was principally
caused by a 10% decrease in lumber shipments, a 16% decrease in chip deliveries,
a 7% decrease in lumber prices, a 4% decrease in chip prices, and a 37% decrease
in other  by-product  prices.  The  reduced  lumber  shipments  reflect  reduced
production  resulting  from a weak market in the current  quarter  compared to a
strong market in the

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

second  quarter of fiscal 1997.  The reduced  lumber  shipments  also reflect an
inadequate  supply of  railcars to ship  lumber.  The  reduced  chip  deliveries
reflect not only reduced  lumber  production but also improved  lumber  recovery
resulting in fewer chips per thousand board feet (mbf).

     Gross profit for the quarter  ended October 31, 1997 was 5.2% of net sales,
compared to 11.9% of net sales for the quarter  ended  October 31, 1996.  Lumber
prices  declined  by 7% from the  second  quarter  of  fiscal  1997,  while  the
Company's log costs declined by only 3%. Production  declined compared to levels
in the prior year, when production  levels reflected the favorable  market,  and
some  production  curtailment  occurred in the present  year in response to poor
lumber prices and inadequate rail service. Unit manufacturing costs increased by
7% from the quarter  ended  October 31,  1996,  partially  due to a general wage
increase in September 1996.

     Selling,  general and  administrative  expenses in the three  months  ended
October 31, 1997  decreased  by $0.5  million  (15%) from the three months ended
October 31, 1996. This decrease reflects reduced  profit-sharing  bonus payments
stemming from lower pretax  profits,  partially  offset by expenses  associated
with the start-up of two WTD subsidiaries in the first quarter of fiscal 1998.

     In the quarter ended October 31, 1997,  the Company  recorded a tax benefit
equal to 62% of its pretax loss.  In the quarter  ended  October 31,  1996,  the
Company  recorded a tax provision equal to 38% of its pretax profit.  See Note 6
to Consolidated Financial Statements.

Comparison of Six Months Ended October 31, 1997 and 1996
--------------------------------------------------------

     Net sales for the six months ended October 31, 1997  decreased $9.9 million
(7%) from the six months ended October 31, 1996. This was principally  caused by
a 5% decrease in lumber  shipments, an 11%  decrease  in chip  deliveries,  a 2%
decrease in lumber prices, a 10% decrease in chip prices,  and a 37% decrease in
other by-product prices. The reduced lumber shipments reflect reduced production
resulting from a weak market in the second  quarter  compared to a strong market
in the first half of fiscal 1997. The reduced  lumber  shipments also reflect an
inadequate supply of railcars to ship lumber in the second quarter.  The reduced
chip  deliveries  reflect not only reduced  lumber  production but also improved
lumber recovery resulting in fewer chips per mbf.

     Gross  profit for the six months  ended  October  31,  1997 was 7.8% of net
sales, compared to 11.7% of net sales for the six months ended October 31, 1996.
Lumber prices  declined by 2% from the six months ended October 31, 1996,  while
the Company's log costs  declined by only 1%.  Production  declined  compared to
levels in the prior year, when production levels reflected the favorable market,
and some production curtailment occurred in the present year in response to poor
lumber  prices  and  inadequate  rail  service  in  the  second  quarter.   Unit
manufacturing  costs increased by 6% from the six months ended October 31, 1996,
partially due to a general wage increase in September 1996.

     Selling,  general  and  administrative  expenses  in the six  months  ended
October 31,  1997  decreased  by $0.35  million  (5%) from the six months  ended
October 31, 1996. This decrease reflects reduced  profit-sharing  bonus payments
stemming from lower pretax  profits,  partially  offset by expenses  associated
with the start-up of two WTD subsidiaries in the first quarter of fiscal 1998.


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

     In the six months  ended  October  31,  1997,  the  Company  recorded a tax
provision equal to 20% of its pretax profit. In the six months ended October 31,
1996,  the Company  recorded a tax provision  equal to 38% of its pretax profit.
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.

     At October 31, 1997, the Company had net working  capital of $25.6 million,
$3.9  million  less than at April 30,  1997.  The working  capital  decrease was
primarily the result of capital spending,  along with principal payments on debt
and dividends paid on the Company's Series A preferred stock.

     During the six months ended October 31, 1997,  the Company's  cash and cash
equivalents   decreased   by  $5.5  million  to  $2.7  million  at  October  31.
Approximately  $4.0  million  of cash was  provided  by  operations.  About $2.2
million  was  used to repay  various  debt  obligations  and  $6.2  million  for
acquisition of property, plant and equipment. The Company also paid $1.1 million
in dividends to holders of its Series A preferred stock.

     Capital  spending in the first six months of fiscal 1998 was $6.2  million.
Capital spending for the balance of the fiscal year is currently  forecast to be
approximately  $1.7 million.  The Company had commitments of approximately  $0.7
million for capital spending at October 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 October 1, 1997,
with  respect to  reducing  until  July 1, 1998,  the  minimum  working  capital
required to be maintained. See Note 3 to Consolidated Financial Statements.

Forward-Looking Information
---------------------------

     Certain statements in this Form 10-Q 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,  availability of
adequate  transportation  to get product to market,  inadequate  cash  reserves,
labor strikes,  changes in environmental and other  regulations,  the ability to
get  necessary  approvals  for  marketing  the  GREENWELD(R)  process in Canada,
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,  1997 (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  7,  1997,   the  Company   held  its  Annual   Meeting  of
         Shareholders. Directors Richard W. Detweiler and William H. Wright were
         elected  to  one-year  terms.  Larry G. Black and Scott  Christie  were
         elected to two-year terms. Bruce L. Engel, K. Stanley Martin and Robert
         J. Riecke were elected to  three-year  terms.  The number of votes cast
         for each nominated Director was as follows:

                                                        Against or
                                      For                Withheld
                                  -----------          -----------
                  Black            9,661,769               72,570
                  Christie         9,675,209               59,130
                  Detweiler        9,670,409               63,930
                  Engel            9,665,655               68,684
                  Martin           9,665,009               69,330
                  Riecke           9,659,109               75,230
                  Wright           9,668,809               65,530


         The firm of Moss Adams LLP was re-appointed as the Company's  auditors.
         The vote for re-appointment of Moss Adams LLP was 9,656,765 for, 46,436
         against or withheld, and 31,138 abstentions.

         The shareholders  also approved the restoration of control share voting
         rights under the Oregon  Control  Share Act,  for Quinault  Corporation
         (Quinault).  Mr. Black,  by virtue of being president and sole director
         of  Quinault,  may be deemed to  beneficially  own the shares  owned by
         Quinault.  The vote was 6,763,736 for, 261,488 against or withheld, and
         53,250 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, 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





December 12, 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)

4.2.7        Amendment  dated as of  October  1,  1997 to  Credit  and        18
             Security 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        20
             respect  to  the  quarter   ended   October   31,   1997:
             President's  letter  excerpted  from  Interim  Report  to
             Shareholders for the second quarter of fiscal 1998

27           Financial Data Schedule(3)



--------

      (1)Incorporated  by  reference  to  the  exhibit  of  like  number  to the
Registrant's  report on 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, 1997.


                                       17