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      July 31, 1998
                              -------------------------

[ ]  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
                                             ---  ---

     The number of shares  outstanding  of  Registrant's  Common  Stock,  no par
value, at August 31, 1998 was 11,162,874.


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

                                      INDEX

                                                                      Page
                                                                      Number

PART I.       Financial Information (Unaudited)


         Item 1.    Financial Statements

              Consolidated Statements of Operations -
                Three Months Ended July 31, 1998 and 1997               3


              Consolidated Balance Sheets -
                 July 31, 1998 and April 30, 1998                       4


              Consolidated Statements of Cash Flows -
                 Three Months Ended July 31, 1998 and 1997              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 1.    Legal Proceedings                                   15

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







                                       2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                      WTD INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per-Share Amounts)
                                   (Unaudited)



                                                                     THREE MONTHS ENDED JULY 31,
                                                     =============================================================
                                                           1998                                        1997
                                                     =================                           =================
<S>                                                <C>                                         <C>               
NET SALES                                          $           47,661                          $           68,881

COST OF SALES                                                  44,175                                      61,841
                                                     -----------------                           -----------------

GROSS PROFIT                                                    3,486                                       7,040

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                    2,764                                       3,230
                                                     -----------------                           -----------------

OPERATING INCOME                                                  722                                       3,810

OTHER INCOME (EXPENSE)
     Interest Expense                                          (1,160)                                     (1,211)
     Miscellaneous                                               (181)                                        101
                                                     -----------------                           -----------------

                                                               (1,341)                                     (1,110)
                                                     -----------------                           -----------------


INCOME (LOSS) BEFORE INCOME TAXES                                (619)                                      2,700

PROVISION  FOR INCOME TAXES                                        --                                         756
                                                     -----------------                           -----------------

NET INCOME (LOSS)                                                (619)                                      1,944

PREFERRED DIVIDENDS                                               574                                         569
                                                     -----------------                           -----------------

NET INCOME (LOSS) APPLICABLE
  TO COMMON STOCKHOLDERS                           $           (1,193)                         $            1,375
                                                     =================                           =================


NET INCOME (LOSS) PER COMMON SHARE
     BASIC                                                     ($0.11)                                      $0.12
                                                               =======                                      =====

     DILUTED                                                   ($0.11)                                      $0.12
                                                               =======                                      =====









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



                                       3
<PAGE>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                                 (In Thousands)

                                                         JULY 31,                    APRIL 30,
                                                           1998                        1998
                                                       ==============              ==============
<S>                                                  <C>                         <C>
CURRENT ASSETS                                          (Unaudited)
   Cash and cash equivalents                         $         5,337             $         2,157
   Accounts receivable, net                                    8,203                      10,464
   Inventories                                                12,445                      14,005
   Prepaid expenses                                            1,660                       1,195
   Deferred tax asset                                            750                         750
   Assets held for sale                                        6,267                       6,685
   Timber, timberlands and timber-related assets               2,256                       4,252
                                                       --------------              --------------

      Total current assets                                    36,918                      39,508


NOTES AND ACCOUNTS RECEIVABLE                                     48                         103

PROPERTY, PLANT AND EQUIPMENT, at cost
   Land                                                        2,848                       2,849
   Buildings and improvements                                 11,133                      11,123
   Machinery and equipment                                    62,352                      62,623
                                                       --------------              --------------

                                                              76,333                      76,595

     Less accumulated depreciation                            52,957                      52,378
                                                       --------------              --------------

                                                              23,376                      24,217

   Construction in progress                                      321                         225
                                                       --------------              --------------

                                                              23,697                      24,442

OTHER ASSETS                                                   1,250                       1,258
                                                       --------------              --------------


                                                     $        61,913             $        65,311
                                                       ==============              ==============














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



                                       4
<PAGE>
                      WTD INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
                           CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                    (In Thousands, Except Share Information)



                                                         JULY 31,                    APRIL 30,
                                                           1998                        1998
                                                       ==============              ==============
<S>                                                  <C>                         <C>
CURRENT LIABILITIES                                     (Unaudited)
   Accounts payable                                  $         7,503             $         8,992
   Accrued expenses                                            6,255                       6,568
   Income taxes payable                                           74                          --
   Timber contracts payable                                      301                         323
   Current maturities of long-term debt                        9,076                       8,467
                                                       --------------              --------------

      Total current liabilities                               23,209                      24,350

LONG-TERM DEBT, less current maturities                       35,795                      36,868

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, 11,162,874 issued and outstanding
     (11,154,374 at April 30, 1998)                           28,761                      28,752
   Additional paid-in capital                                     15                          15
   Retained deficit                                          (46,888)                    (45,695)
                                                       --------------              --------------

                                                               2,909                       4,093
                                                       --------------              --------------


                                                     $        61,913             $        65,311
                                                       ==============              ==============


















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



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


                                                                        THREE MONTHS ENDED JULY 31,
                                                                 ==========================================
                                                                     1998                        1997
                                                                 ==============              ==============
<S>                                                            <C>                         <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
  Net income (loss)                                            $          (619)            $         1,944
  Adjustments to reconcile net income (loss) to
     cash provided by operating activities:
    Depreciation, depletion and amortization                             1,132                       1,427
    Deferred income tax                                                     --                         693
    Accounts receivable                                                  2,261                       3,725
    Inventories                                                          1,560                      (5,040)
    Prepaid expenses                                                      (465)                       (833)
    Timber, timberlands and timber-related assets - current              1,996                         667
    Payables and accruals                                               (1,809)                     (1,670)
    Income taxes                                                            74                          --
                                                                 --------------              --------------

     Cash provided by operating activities                               4,130                         913
                                                                 --------------              --------------

CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
  Notes and other receivables                                               55                           6
  Acquisition of property, plant and equipment                            (313)                     (1,703)
  Net book value of retirements                                            195                           1
  Net book value of disposed idle assets                                   177                          --
  Other investing activities                                                --                          (2)
                                                                 --------------              --------------

     Cash provided by (used for) investing activities                      114                      (1,698)
                                                                 --------------              --------------

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
  Principal payments on long-term debt                                    (479)                     (1,461)
  Other assets                                                             (20)                        (19)
  Dividends paid on preferred stock                                       (574)                       (574)
  Issuance of common stock                                                   9                          --
                                                                 --------------              --------------

     Cash used for financing activities                                 (1,064)                     (2,054)
                                                                 --------------              --------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         3,180                      (2,839)
CASH BALANCE AT BEGINNING OF PERIOD                                      2,157                       8,209
                                                                 --------------              --------------

CASH BALANCE AT END OF PERIOD                                  $         5,337             $         5,370
                                                                 ==============              ==============

CASH PAID (REFUNDED) DURING THE PERIOD FOR:
  Interest                                                              $1,327                      $1,215
  Income taxes                                                            ($74)                        $62








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,  1998,  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 July  31,  1998  and  April  30,  1998  are as  follows  (in
thousands):

                                        July 31,            April 30,
                                          1998                1998
                                      -----------         -----------
       Logs                           $     5,364         $     3,791
       Lumber                               5,563               8,635
       Supplies and other                   1,518               1,579
                                      -----------         -----------

                                      $    12,445         $    14,005
                                      ===========         ===========


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
April 1,  1998,  with  respect  to  certain  affirmative  financial  performance
covenants.





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

     At July  31,  1998 the  Company's  tangible  net  worth  was $2.7  million,
compared to a minimum of negative $1.0 million required by the covenant. At that
same date, the Company's  working  capital was $13.7  million,  compared to $9.0
million required by the covenant. Also, at July 31, 1998, the Company's adjusted
cumulative  operating  income  was  $35.7  million,  compared  to $27.5  million
required.  The collateral coverage ratio at July 31, 1998 was 63.4%, compared to
a 50% minimum required level. The total  liabilities ratio was 95.3% at July 31,
1998,  compared to a maximum  allowed of 105%. The minimum level of tangible net
worth increases to $0 at January 1, 1999, $2.0 million at July 1, 1999, and $4.0
million at July 1, 2000. The minimum level of working capital increases to $11.5
million at July 1, 1999, $14.0 million at July 1, 2000 and $16.5 million at July
1, 2002. The minimum level of adjusted cumulative  operating income increases to
$30.0  million  at August 1, 1998,  $34.0  million at  November  1, 1998,  $37.5
million at July 1, 1999,  $42.5  million at July 1, 2000,  and $47.5  million at
July 1, 2001. The minimum required collateral coverage ratio increases to 63% at
July 1, 1999.  The  maximum  allowed  total  liabilities  ratio drops to 100% at
August 1, 1998, 95% at July 1, 1999, and 85% at July 1, 2000. During the quarter
ended  July  31,  1998,  the  Company's  adjusted  cumulative  operating  income
increased by $1.6 million while showing a loss before taxes of $0.6 million. The
Company  continues  to be in  compliance  with all  covenants  contained in this
agreement.

     The  debt  agreement  requires  prepayments  if  the  Company's  cumulative
operating  income exceeds  certain  specified  amounts.  No such  prepayment was
required for the year ended April 30, 1998. In  connection  with the May 1, 1996
amendment,  the  Company  agreed to  additional  prepayments  computed at 30% of
quarterly net income.  No such prepayment is required for the quarter ended July
31, 1998.


NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING

     Stockholder's equity at July 31, 1998 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)

         Series  C  junior   participating   preferred  stock,  $100  per  share
         liquidation preference;  400,000 shares authorized; no shares issued or
         outstanding;  each share has 100 votes,  voting  together  with  Common
         Stock;  dividends payable only if paid on the Company's Common Stock at
         100 times the Common Stock dividend rate. This class of preferred stock
         was authorized in connection with the  shareholder  rights plan adopted
         by the Company on March 4, 1998.

         Common stock, no par value;  40,000,000 shares  authorized;  11,162,874
         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  11,375,567  shares if  remaining  Series B
         preferred  stock  outstanding  at July 31, 1998 is  converted to common
         stock.

NOTE 5 - NET INCOME (LOSS) PER SHARE

    The calculations of net income (loss) per share for the three-month  periods
ended  July 31,  1998  and  1997 are  summarized  below  (in  thousands,  except
per-share data):

                                                          Three Months Ended
                                                                July 31,
                                                        -----------------------
                                                           1998          1997
                                                        ---------     ---------
Net income (loss) applicable to common shareholders     $ (1,193)     $  1,375
                                                        =========     =========

Weighted average shares outstanding
             - Basic                                      11,155        11,083

Additional shares assumed from:
             - Conversion of Series B preferred stock        - -           213
             - Exercise of stock options                     - -           431
                                                        ---------     ---------

Average number of shares and equivalents outstanding
             - Diluted                                    11,155        11,727
                                                        =========     =========

Net income (loss) per common share
             - Basic                                      ($0.11)        $0.12
                                                          =======       =======
             - Diluted                                    ($0.11)        $0.12
                                                          =======       =======


    Earnings  (loss) per share have been recomputed and restated for the effects
of implementing Statement of Financial Accounting Standard Number 128, "Earnings
per Share," as of December 31, 1997.




                                       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
                                                             July 31,
                                                     ------------------------
                                                        1998           1997
                                                     ---------      ---------
               Income (loss) before income taxes     $   (619)      $  2,700
                                                     =========      =========
 
               Income tax provision:
                  Federal                            $    - -       $    648
                  State                                   - -            108
                                                     ---------      ---------

                                                     $    - -       $    756
                                                     =========      =========

                  Current                            $    - -       $     63
                  Deferred                                - -            693
                                                     ---------      ---------

                                                     $    - -       $    756
                                                     =========      =========

     The Company has substantial NOL  carryforwards  available to reduce the tax
paid on future income.  Because of the difficult  operating  environment and the
likely delayed or decreased use of the Company's NOL carryforwards,  the Company
has  provided  for a valuation  reserve  against any  benefits  created from the
current period operating loss. Management periodically reviews the above factors
and may change  the amount of  valuation  allowance  as facts and  circumstances
dictate.

      In the  quarter  ended July 31,  1998,  the Company did not record any tax
provision or benefit.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

     The  Company is  involved in various  litigation  primarily  arising in the
normal course of its business. Additionally, the Company has received notices in
connection with potential environmental litigation. See "Legal Proceedings."

     The  Company is subject to  various  federal,  state and local  regulations
regarding waste disposal and pollution control.  Various  regulations  regarding
air and water emissions,  log yard  management,  and disposal or landfill of log
yard debris may require material expenditures in the future. Management believes
that the  Company  will be able to comply  with any such  regulations  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  that the  Company's  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  market  conditions  started  off weak  during the first  quarter of
fiscal year 1999.  By  mid-June,  lumber  prices  started to recover and by July
lumber prices had recovered enough to allow profitable  operations at the end of
the quarter.  The Company has taken advantage of the improved market  conditions
by adding hours of production at its most profitable locations.  There can be no
assurance that the margins recently  experienced by the Company will continue or
improve.  During much of fiscal  year 1998 and into the first  quarter of fiscal
year 1999, there was an oversupply of lumber in the U.S. market. This oversupply
was principally the result of traditional export producers manufacturing for the
U.S. lumber market as exports weakened.  Chip prices are up substantially from a
year ago, while lumber prices and log costs have declined.




                                       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 items bear to net sales, and the  period-to-period  percentage  change in
each item:
<TABLE>
<CAPTION>
                                                                       Percentage
                                                                   Increase (Decrease)
                                   Income and Expense Items as        Three Months
                                    a Percentage of Net Sales            Ended
                                   Three Months ended July 31,          7/31/98
                                   ---------------------------            to
                                    1998                 1997           7/31/97
                                   ------               ------          -------
<S>                                <C>                  <C>             <C>    
Net Sales                          100.0%               100.0%          (30.8)%
Cost of sales                       92.7                 89.8           (28.6)
                                   ------               ------
Gross profit                         7.3                 10.2           (50.5)

Selling, general and
   administrative expenses           5.8                  4.7           (14.4)
                                   ------               ------

Operating income                     1.5                  5.5           (81.0)

Interest expense                    (2.4)                (1.8)           (4.2)
Miscellaneous                       (0.4)                 0.1             NM
                                   ------               ------

Income (loss) before income taxes   (1.3)                 3.9             NM

Provision for income taxes           - -                  1.1             NM
                                   ------               ------

Net income (loss)                   (1.3)%                2.8%            NM
                                   ======               ======


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

Comparison of Three Months Ended July 31, 1998 and 1997
-------------------------------------------------------

         Net sales for the three  months  ended July 31,  1998  decreased  $21.2
million  (31%) from the three months ended July 31, 1997.  This was  principally
caused by a 17% decrease in lumber shipments, a 24% decrease in chip deliveries,
and a 21% decrease in lumber prices;  partially offset by a 49% increase in chip
prices. The reduced lumber shipments reflect reduced production resulting from a
weak market in the current quarter compared to a relatively strong market in the
first  quarter of fiscal  1998.  The reduced  chip  deliveries  reflect not only
reduced lumber  production but also improved lumber recovery  resulting in fewer
chips per thousand board feet of lumber produced.

         Gross profit for the quarter ended July 31, 1998 was 7.3% of net sales,
compared to 10.2% of sales for the quarter  ended July 31, 1997.  Lumber  prices
declined by 21% from the first  quarter of fiscal 1998,  while the Company's log
costs declined by 18%. Unit manufacturing costs increased by 4% from the quarter
ended July 31, 1997, principally due to production curtailments in the July 1998
quarter, in response to poor lumber prices.


                                       12
<PAGE>
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS (Continued)
 
         Selling,  general and administrative expenses in the three months ended
July 31, 1998  decreased by $0.5 million  (14%) from the three months ended July
31, 1997. This decrease reflects reduced  profit-sharing bonus payments stemming
from lower pre-tax  profits and the operation of fewer  facilities in the recent
quarter.

         Miscellaneous expenses were up for the first quarter of fiscal 1999, as
compared to the first quarter of fiscal 1998,  reflecting payments made to Bruce
L. Engel in connection  with his retirement on July 1, 1998. The Company had net
miscellaneous income in the first quarter of fiscal 1998.

         In the quarter  ended July 31,  1998,  the Company did not record a tax
provision or benefit. In the quarter ended July 31, 1997, the Company recorded a
tax provision  equal to 28% of its pre-tax  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 July 31,  1998,  the Company had net working  capital of $13.7  million,
$1.5  million  less than at April 30,  1998.  The working  capital  decrease was
primarily  the result of  operating  losses  and  capital  spending,  along with
principal  payments  on debt  and  dividends  paid  on the  Company's  Series  A
preferred stock.

     Cash and cash  equivalents  increased  by $3.2  million  during  the  first
quarter of fiscal 1999, to $5.3 million at July 31.  Approximately  $4.1 million
of cash was provided by operations. About $0.5 million was used to repay various
debt  obligations  and $0.3  million  for  acquisition  of  property,  plant and
equipment.  The Company  also paid $0.6  million in  dividends to holders of its
Series A preferred stock.

     During the three months ended July 31, 1998, the Company spent $0.3 million
for capital improvements to its facilities.  Capital spending for the balance of
the  fiscal  year  is  currently  forecast  to be  approximately  $2.2  million,
including a project to improve the boiler at the Company's  South Bend facility.
See "Legal  Proceedings."  The Company had no material  commitments  for capital
spending at July 31, 1998.

     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 April 1, 1998,
with respect to certain affirmative financial performance covenants.  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,  inadequate cash
reserves,   changes  in   environmental   and  other   regulations,   additional
expenditures being necessary to

                                       13
<PAGE>
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS (Continued)
 
comply with environmental regulations (see "Legal Proceedings"),  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, 1998
(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 1.  Legal Proceedings

         The   Company's   South  Bend   facility   has  received  a  Notice  of
Noncompliance  with  effluent  permit terms from the  Washington  Department  of
Ecology.  The  Company  has  received  a Notice of Intent to sue under the Clean
Water Act from a citizen's group based on the Notice of Noncompliance.

         The Company is making  modifications  to the plant's  boiler  system to
address the alleged noncompliance and is entering into settlement discussions.

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 
July 31, 1998.

























                                       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/ Robert J. Riecke
                                                  ------------------------------
                                                  Robert J. Riecke
                                                  Vice President-Administration


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







         September 14, 1998







                                       16
<PAGE>
                              WTD INDUSTRIES, INC.


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                    Sequential
                                                                                       Number
                                                                                       System
                                                                                         Page
                                                                                       Number

<S>                                                                                    <C>   
3.1        Fourth  Restated   Articles  of  Incorporation  of  Registrant
           adopted  effective  November 27, 1992,  as amended on March 4,
           1998(1)

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

10.10      Settlement Agreement dated May 15, 1998, between                               18
           Bruce L. Engel and Registrant

19         Other reports furnished to securities holders with respect to the              25
           quarter ended July 31, 1998:  Management's letter excerpted from
           Interim Report to Shareholders for the first quarter of fiscal 1999

27         Financial Data Schedule(3)


</TABLE>
--------------------------------------------------------------------------------

       (1)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,  1998,
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, 1998.








                                       17