UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q
(Mark One)

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

For the quarterly period ended  September 30, 1997
                                                                  OR

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

For the transition period from                to

Commission file number              1-8712

                              BOWATER INCORPORATED
             (Exact name of registrant as specified in its charter)

          Delaware                             62-0721803
 (State or other jurisdiction of              (I.R.S. Employer
 incorporation or organization)              Identification No.)
                         

           55 East Camperdown Way, P.O. Box 1028, Greenville, SC 29602
               (Address of principal executive offices) (Zip Code)

                                 (864) 271-7733
              (Registrant's telephone number, including area code)

              (Former name, former address and former fiscal year,
                         if changed since last report.)

   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

          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS:

   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
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

   Indicate the number of shares  outstanding of each of the issuer's classes of
common stock, as of November 6, 1997.

                     Class                 Outstanding at November 6, 1997
  
         Common Stock, $1.00 Par Value             40,529,946 Shares

<PAGE>



                              BOWATER INCORPORATED

                                    I N D E X



                                                                           Page
                                                                          Number


  PART I   FINANCIAL INFORMATION

         1.  Financial Statements:

                  Consolidated Balance Sheet at September 30, 1997,
                  and December 31, 1996                                     3

                  Consolidated Statement of Operations for the Three
                  and Nine Months Ended September 30, 1997, and
                       September 30, 1996                                   4

                  Consolidated Statement of Capital Accounts
                  for the Nine Months Ended September 30, 1997              5

                  Consolidated Statement of Cash Flows for the
                  Nine Months Ended September 30, 1997, and
                  September 30, 1996                                        6

                  Notes to Consolidated Financial Statements               7-8

            2.  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations            9-14


  PART II   OTHER INFORMATION

            6.  Exhibits and Reports on Form 8-K                            15

  SIGNATURES                                                                16


  


                                        2


<PAGE>



PART I
                      BOWATER INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                            (Unaudited, in thousands)

<TABLE>
<CAPTION>


                                                                           September 30,              December 31,
                                                                                1997                      1996
                                                                         -------------------       -------------------
                          ASSETS
<S>                                                                      <C>                        <C>   
Current assets:
  Cash and cash equivalents                                                       $ 105,549                  $ 85,259
  Marketable securities                                                             276,558                   345,398
  Accounts receivable, net                                                          189,635                   185,724
  Inventories (Note 2)                                                              102,239                   123,745
  Other current assets                                                               16,910                    13,629
                                                                         -------------------       -------------------
    Total current assets                                                            690,891                   753,755
                                                                         -------------------       -------------------

Timber and timberlands                                                              396,372                   395,675
Fixed assets, net                                                                 1,571,591                 1,636,705
Other assets                                                                         78,834                    79,409
                                                                         ===================       ===================
                                                                                $ 2,737,688               $ 2,865,544
                                                                         ===================       ===================
                 LIABILITIES AND CAPITAL
Current liabilities:
  Current installments of long-term debt                                            $ 1,604                   $ 1,604
  Accounts payable and accrued liabilities (Note 3)                                 192,313                   216,328
  Income taxes payable                                                                  382                     6,057
  Dividends payable (Note 4)                                                          8,644                    29,892
                                                                         -------------------       -------------------
    Total current liabilities                                                       202,943                   253,881
                                                                         -------------------       -------------------

Long-term debt, net of current installments                                         757,742                   759,029
Other long-term liabilities                                                         164,569                   171,651
Deferred income taxes                                                               343,903                   358,858
Minority interests in subsidiaries                                                  125,483                   126,246
Commitments and contingencies (Note 5)                                                    -                         -
Redeemable LIBOR preferred stock (Note 6)                                                 -                    24,746

Shareholders' equity:
   Series C cumulative preferred stock                                               25,465                    25,465
   Common stock (Note 7)                                                             44,887                    43,994
   Additional paid-in capital                                                       561,748                   531,598
   Retained earnings                                                                695,501                   698,301
   Equity adjustments                                                               (12,858)                  (12,370)
   Loan to ESOT                                                                      (4,969)                   (6,324)
   Treasury stock, at cost (Note 8)                                                (166,726)                 (109,531)
                                                                         -------------------       -------------------
    Total shareholders' equity                                                    1,143,048                 1,171,133
                                                                         ===================       ===================
                                                                                $ 2,737,688               $ 2,865,544
                                                                         ===================       ===================
</TABLE>





          See accompanying notes to consolidated financial statements.

                                        3
<PAGE>


                      BOWATER INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
               (Unaudited, in thousands except per share amounts)

<TABLE>
<CAPTION>



                                                                      Three Months Ended                Nine Months Ended
                                                                --------------------------------------------------------------------
                                                                 September 30,    September 30,   September 30,     September 30,
                                                                    1997             1996              1997             1996
                                                                --------------   --------------   ---------------  -----------------
<S>                                                                 <C>              <C>             <C>          <C>        
Net sales                                                           $ 378,631        $ 423,188     $ 1,083,480      $ 1,346,022
Cost of sales                                                         276,950          296,270         829,723          853,708
Depreciation, amortization and cost of timber harvested                42,447           43,402         126,165          131,084
                                                                --------------   --------------   -------------   --------------
    Gross profit                                                       59,234           83,516         127,592          361,230
Selling and administrative expense                                     18,782           23,629          53,827           68,283
                                                                --------------   --------------   -------------   --------------
    Operating income                                                   40,452           59,887          73,765          292,947

Other expense / (income):
  Interest income                                                      (5,518)          (4,837)        (15,664)         (14,880)
  Interest expense, net of capitalized interest                        17,047           17,758          50,626           54,328
  Gain on sale of timberlands                                             (21)          (1,152)            (44)         (77,853)
  Other, net                                                              428           (1,096)            (67)          (3,449)
                                                                --------------   --------------   -------------   --------------
                                                                       11,936           10,673          34,851          (41,854)
                                                                --------------   --------------   -------------   --------------

Income before income taxes and minority interests                      28,516           49,214          38,914          334,801

Provision for income taxes (Note 9)                                    10,551           18,209          14,399          123,877
Minority interests in net income of subsidiaries                        1,180            2,738             948           25,409
                                                                --------------   --------------   -------------   --------------

Income before extraordinary charge                                     16,785           28,267          23,567          185,515

Extraordinary charge, net of taxes of $1,012  and
$2,234 , respectively.                                                      -           (1,600)              -           (3,531)
                                                                --------------   --------------   -------------   --------------

Net income                                                           $ 16,785         $ 26,667        $ 23,567        $ 181,984
                                                                ==============   ==============   =============   ==============

Earnings per common share - primary (Note 10):
  Income before extraordinary charge                                   $ 0.40           $ 0.65          $ 0.52           $ 4.28
  Extraordinary charge                                                      -            (0.04)           -               (0.08)
                                                                ==============   ==============   =============   ==============
    Net income                                                         $ 0.40           $ 0.61          $ 0.52           $ 4.20
                                                                ==============   ==============   =============   ==============

Average common and common equivalent shares outstanding                41,012           41,756          40,659           42,463
                                                                ==============   ==============   =============   ==============

Earnings per common share - fully diluted (Note 10):
  Income before extraordinary charge                                   $ 0.40           $ 0.64          $ 0.52           $ 4.19
  Extraordinary charge                                                      -            (0.04)           -               (0.08)
                                                                ==============   ==============   =============   ==============
    Net income                                                         $ 0.40           $ 0.60          $ 0.52           $ 4.11
                                                                ==============   ==============   =============   ==============

Average common and common equivalent shares outstanding                41,012           42,714          40,733           43,356
                                                                ==============   ==============   =============   ==============


</TABLE>





          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>



                      BOWATER INCORPORATED AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF CAPITAL ACCOUNTS
                      Nine Months Ended September 30, 1997
               (Unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>


                                                Redeemable  Series C
                                                  LIBOR    Cumulative            Additional
                                                Preferred   Preferred Common    Paid in   Retained     Equity    Loan to  Treasury
                                                  Stock       Stock   Stock     Capital   Earnings   Adjustments   ESOT     Stock
                                                -----------------------------------------------------------------------------------
<S>                                              <C>       <C>        <C>      <C>        <C>        <C>         <C>      <C>      
 Balance at December 31, 1996                     $ 24,746  $ 25,465   43,994  $ 531,598 $ 698,301  $ (12,370)  $ (6,324)$(109,531)

Net income                                               -         -        -          -    23,567          -          -         -

Dividends on common stock ($.60 per share)               -         -        -          -   (24,055)         -          -         -

Dividends on preferred stock:
  LIBOR   ($  .79 per share)                             -         -        -          -      (393)         -          -         -
  Series C ($6.30 per share)                             -         -        -          -    (1,665)         -          -         -

Increase in stated value of LIBOR preferred stock      254         -        -          -      (254)         -          -         -

Redemption of LIBOR preferred stock (Note 6 )      (25,000)        -        -          -         -          -          -         -

Common stock issued for exercise of stock options        -         -      893     22,540         -          -          -         -

Tax benefit on exercise of stock options                 -         -        -      7,603         -          -          -         -

Reduction in loan to ESOT                                -         -        -          -         -          -      1,355         -

Purchase of common stock (Note 8)                        -         -        -          -         -          -          -   (57,244)

Treasury stock used for employee benefit
   and dividend reinvestment plans                       -         -        -          7         -          -          -        49

Foreign currency translation                             -         -        -          -         -       (488)         -         -
                                                 ==================================================================================
 Balance at September 30, 1997                         $ -  $ 25,465   44,887  $ 561,748 $ 695,501  $ (12,858)  $ (4,969)$(166,726)
                                                 ==================================================================================

</TABLE>








          See accompanying notes to consolidated financial statements.

                                        5
<PAGE>




                      BOWATER INCORPORATED AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            (Unaudited, in thousands)
<TABLE>
<CAPTION>



                                                                                Nine Months Ended
                                                                      ---------------------------------------
                                                                         September 30,       September 30,
                                                                          1997                   1996
                                                                      --------------       ------------------
<S>                                                                      <C>                      <C>    
Cash flows from operating activities:
Net income                                                                 $ 23,567                $ 181,984
Adjustments to reconcile net income to net cash
  provided by operating activities:
Depreciation, amortization and cost of timber harvested                     126,165                  131,084
Deferred income taxes                                                        (1,556)                  40,176
Minority interests                                                              948                   25,409
Gain from sale of timberlands                                                   (44)                 (77,853)
Extraordinary charge, net of taxes                                                -                    3,531
Change in working capital:
  Accounts receivable, net                                                   (3,911)                  31,460
  Inventories                                                                21,506                      754
  Accounts payable and accrued liabilities                                  (23,030)                  (2,963)
  Income taxes payable                                                      (11,379)                 (76,258)
Other, net                                                                   (5,510)                   3,154
                                                                      --------------       ------------------
          Net cash from operating activities                                126,756                  260,478
                                                                      --------------       ------------------

Cash flows from investing activities:
Cash invested in fixed assets, timber and timberlands                       (70,643)                 (64,596)
Disposition of fixed assets, timber and timberlands                           2,765                  118,893
Cash from sale of (invested in ) marketable securities                       68,840                 (246,021)
                                                                      --------------       ------------------
          Net cash provided by (used for) investing activities                  962                 (191,724)
                                                                      --------------       ------------------

Cash flows from financing activities:
Cash dividends, including minority interests                                (48,630)                 (59,668)
Purchase of common stock (Note 8)                                           (57,244)                 (94,293)
Purchases/payments of long-term debt                                         (1,342)                 (57,695)
Stock options exercised                                                      23,433                   11,185
Redemption of LIBOR preferred stock ( Note 6)                               (25,000)                       -
Other                                                                         1,355                    1,280
                                                                      --------------       ------------------
          Net cash used for financing activities                           (107,428)                (199,191)
                                                                      --------------       ------------------

Net increase (decrease) in cash and cash equivalents                         20,290                 (130,437)

Cash and cash equivalents at beginning of year                               85,259                  264,571
                                                                      --------------       ------------------
Cash and cash equivalents at end of period                                 $105,549                $ 134,134
                                                                      ==============       ==================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest, net of capitalized interest                                   $ (46,025)               $ (51,962)
  Income taxes                                                            $ (27,333)              $ (159,959)



</TABLE>




          See accompanying notes to consolidated financial statements.

                                       6


<PAGE>







                      BOWATER INCORPORATED AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

1.   The accompanying  consolidated financial statements include the accounts of
     Bowater  Incorporated  and  Subsidiaries  (the Company).  The  consolidated
     balance  sheets,  and statements of operations,  capital  accounts and cash
     flows are unaudited.  However,  in the opinion of Company  management,  all
     adjustments (consisting of normal recurring adjustments) necessary for fair
     presentation  of the  interim  financial  statements  have been  made.  The
     results of the interim period ended September 30, 1997, are not necessarily
     indicative of the results to be expected for the full year.

2.     The  composition  of  inventories at September 30, 1997, and December 31,
       1996, was as follows (in thousands):
<TABLE>
<CAPTION>


                                                 September 30,            December 31,
                                                      1997                     1996
                                                 -------------------    ----------------
         <S>                                  <C>                      <C>     
             (Unaudited)

              At lower of cost or market:
              Raw materials                       $    13,499                 $ 17,990
                                                                          
              Work in process                           2,723
                                                                                 3,077
              Finished goods
                                                       33,079                   47,577
              Mill stores and other supplies
                                                       64,762                   66,925
                                                 -------------    ---------------------

                                                      114,063                  135,569
                                                 -------------    ---------------------
              Excess of current cost over
                LIFO inventory value
                                                     (11,824)                 (11,824)
                                                 =============    =====================
                                                                                    
                                                $    102,239         $        123,745
                                                 =============    =====================

</TABLE>

3.   During  1997,  the  Company  paid $25.4  million  pursuant  to a  long-term
     incentive  compensation  plan  accrued  for the three  year  period  ending
     December 31, 1996.

4.   In December 1996, the Board of Directors of Calhoun Newsprint Company (CNC)
     declared a $40.0 million dividend.  As a result,  $19.6 million was paid to
     the minority  shareholder  in January  1997.  In the third quarter of 1997,
     another  dividend  was paid in the  amount  of $1.3  million.  In the first
     quarter  of  1996,  a $29.4  million  dividend  was  paid  to the  minority
     shareholder.

5.   The Company is involved in various legal proceedings relating to contracts,
     commercial disputes,  taxes,  environmental issues, employment and workers'
     compensation  claims, and other matters.  The Company's management believes
     that the  ultimate  disposition  of these  matters will not have a material
     adverse effect on the Company's operations or its financial condition taken
     as a whole.

6.   On May 12,  1997,  the  company  redeemed  for  cash  all of the  remaining
     outstanding shares of LIBOR Preferred Stock,  Series A, at its par value of
     $50 per share.

7.   On January 9, 1997, the Company converted all of the outstanding depositary
     shares of its 7% PRIDES Series B Convertible  Preferred Stock using Bowater
     common  stock  at a  conversion  ratio of .82 of a  common  share  for each
     depositary share, resulting in the issuance of 4,012,765 common shares. The
     Company  reflected this  transaction in the  Consolidated  Balance Sheet at
     December 31, 1996.


                                       7
<PAGE>



                 

                      BOWATER INCORPORATED AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

8.   During the first quarter of 1997, the Company  purchased 1.4 million shares
     of common stock at a cost of $57.2 million, completing the stock repurchase
     program  authorized in February 1996. Since the beginning of the program, 4
     million shares were purchased at a total cost of $156 million. In the first
     nine months of 1996,  2.5 million  shares were purchased at a cost of $94.3
     million.

9.   The  effective  tax rate for the second  quarter of 1997 and 1996,  and the
     first nine months of 1997 and 1996, was 37.0 percent.

10.  The  calculation  of earnings per share for the three and nine months ended
     September  30, 1997,  includes a deduction of $.5 million and $2.3 million,
     respectively,  for any dividend  requirements  of the  Company's  LIBOR and
     Series C preferred stock and the amortization of the difference between the
     net proceeds from the LIBOR  preferred  stock and its mandatory  redemption
     value.  For the  three  and nine  months  ended  September  30,  1996,  the
     calculation  of earnings per share included a deduction of $1.2 million and
     $3.6 million, respectively, for the same items.




                                       8
<PAGE>




                      BOWATER INCORPORATED AND SUBSIDIARIES
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations



                                     Summary

The Company  reported  1997 third quarter  earnings of $17 million,  or $.40 per
fully diluted  share.  This  compares to net income of $27 million,  or $.60 per
fully  diluted  share in the third quarter of 1996 and net income of $7 million,
or $.16 per fully diluted share in the second  quarter of 1997.  Included in net
income for the third quarter of 1996 was an extraordinary  charge of $2 million,
or $.04 per fully  diluted  share,  resulting  from the open market  purchase of
outstanding  debt.  Third quarter 1997 net sales were $379 million,  compared to
$423  million  for the third  quarter  of 1996 and $356  million  for the second
quarter of this year. Selling prices for most of the Company's  products,  while
rising, are still below the levels of a year ago. This accounts for the majority
of the lower sales and profitability compared to 1996 results.




Product Line Information:
(Unaudited, $ in thousands)
<TABLE>
<CAPTION>


                                                 Three Months Ended                  Nine Months Ended
                                          ---------------------------------- ----------------------------------
                                           September 30,    September 30,     September 30,     September 30,
                                               1997              1996              1997             1996
                                          ---------------- ----------------- ----------------- ----------------

<S>                                              <C>             <C>             <C>                 <C> 
Net sales:
   Newsprint                                                                                              
                                               $  184,501        $  201,413       $   529,765    $     662,285
   Coated groundwood
                                                   83,725            84,053           240,233          275,899
   Directory paper
                                                   43,678            45,497           131,823          140,456
   Market pulp
                                                   47,260            46,098           138,568          114,871
   Uncoated groundwood specialties
                                                   10,511             9,639            33,678           28,505
   Lumber and other wood products
                                                   36,643            29,359            97,288           78,791
   Communication papers (1)
                                                        -            40,393                 -          135,656
   Distribution costs
                                                 (27,687)          (33,264)          (87,875)         (90,441)
                                          ================ ================= ================= ================
                                             $   378,631       $   423,188      $  1,083,480      $ 1,346,022
                                                                            
                                          ================ ================= ================= ================

Operating income                                                                                          
                                                $ 40,452        $   59,887      $     73,765     $    292,947
                                          ================ ================= ================= ================

</TABLE>

(1) Communication papers were produced by Star Forms Incorporated which was sold
in November 1996.

                                       9
<PAGE>


                      BOWATER INCORPORATED AND SUBSIDIARIES
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations




        Three Months Ended September 30, 1997, versus September 30, 1996

For the third  quarter of 1997,  the Company's  operating  income of $40 million
decreased  $19 million  compared  to the third  quarter of 1996.  Lower  average
transaction  prices for all of the  Company's  products  except  market pulp and
lumber caused operating income to decline.

                            Product Line Information

Although  all Company  operations  are grouped in a single  segment,  market and
operating  trends are  discussed by major  product.  In general,  the  Company's
products are globally traded commodities.  Pricing and the level of shipments of
these products will continue to be influenced by the balance  between supply and
demand as affected by global  economic  conditions,  changes in consumption  and
capacity, the level of customer and producer inventories as well as fluctuations
in exchange rates.

Newsprint  - The  Company's  newsprint  average  transaction  price in the third
quarter of 1997 was 8 percent lower than the same period last year and 3 percent
higher than the prior  quarter.  The decrease in prices  versus prior year was a
result of lower consumption and higher consumer and producer  inventories during
1996.  By the end of  1996,  however,  market  conditions  began to  improve  as
consumption  increased and inventories  held by U. S. daily newspapers and North
American producers declined compared to levels earlier in the year. In the first
quarter of 1997,  the  Company  announced  a $75 per metric ton  domestic  price
increase. This price increase is fully implemented;  however, the average amount
realized  was less than  announced  due to customer  mix and the effect of lower
export  price  increases.  Favorable  market  conditions  continued in the third
quarter.  U. S.  dailies'  newsprint  consumption  and  total  U.  S.  newsprint
consumption increased in the third quarter of 1997 compared to the third quarter
of 1996.  Inventory levels at the end of the third quarter also improved.  U. S.
dailies'  newsprint  inventory  decreased compared to the third quarter of 1996,
while  North  American  mill  inventory  levels  decreased  compared to the same
quarter and the second  quarter of 1997.  On October 1, 1997,  the Company began
implementing a second domestic price increase of $35 per metric ton. As with the
previous  price  increase,  this price  increase  will be phased in over several
months.

----------------- ---------------- ----------------
                                   3rd Qtr. 1997
                                      vs. 1996
   Newsprint                          Increase/
   Statistics         Source         (Decrease)
----------------- ---------------- ----------------
                   Canadian Pulp
                     and Paper
  Total U. S.       Association          2%
  Consumption         (CPPA)
----------------- ---------------- ----------------
 U. S. Dailies'
  Consumption          CPPA              4%
----------------- ---------------- ----------------
                     Newspaper
 U. S. Dailies'   Association of
   Inventory          America           (3)%
----------------- ---------------- ----------------
 North American
Mill Inventories

                       CPPA             (32)%
----------------- ---------------- ----------------

Coated  Groundwood - The Company's coated groundwood  average  transaction price
declined 4 percent  comparing  the third quarter of 1997 to the same period last
year,  but  increased  9 percent  versus the prior  quarter.  Tonnage  shipments
increased  slightly  comparing the third quarter of 1997 to the third quarter of
1996.  Throughout 1996, coated groundwood selling prices declined while producer
inventory  levels  surpassed  historical  levels,  as  customers  reduced  their
inventories from levels built up during 1995. Market conditions  improved in the
first and second  quarters of 1997  allowing the Company to implement  two price
increases:  up to $60 per ton for certain market segments effective April 1, and
between $50 and $80 per ton, depending upon market segment, for all domestic and
export customers  effective July 1. Improved market conditions  continued in the
third  quarter  of  1997.  U.  S.  coated  groundwood   shipments  and  magazine
advertising  pages  increased in the third  quarter  compared to the same period
last year. U. S. coated groundwood mill inventory levels continued to improve in
the third quarter,  decreasing significantly since the third quarter of 1996. On
October 1, 1997,  the Company  announced a third price increase of up to $40 per
ton for certain market segments, which it is currently implementing.

                                       10
<PAGE>

                      BOWATER INCORPORATED AND SUBSIDIARIES
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations

----------------- ---------------- ----------------
                                   3rd Qtr. 1997
                                      vs. 1996
 Coated Paper                         Increase/
   Statistics         Source         (Decrease)
----------------- ---------------- ----------------
                     American
                    Forest and
  U. S. Coated         Paper
   Groundwood       Association          14%
   Shipments          (AF&PA)
----------------- ---------------- ----------------
                  Media Industry
  Magazine Ad       Newsletter           5%
     Pages
----------------- ---------------- ----------------
  U. S. Coated
Groundwood Mill
  Inventories
                       AF&PA            (57)%
----------------- ---------------- ----------------

Directory Paper - The Company's  average  transaction  price for directory paper
decreased 12 percent in the third  quarter of 1997 compared to the third quarter
of 1996, and decreased 5 percent compared to the second quarter of 1997.  During
1996, demand in the directory paper market declined and prices  decreased,  with
conditions and pricing  similar to those in the newsprint  market.  Lower prices
continued  through  the third  quarter  of 1997,  since a large  portion  of the
Company's  directory  sales was based on  contracts,  the  pricing  of which was
determined during 1996. In addition, the Company sold lower priced, higher basis
weight  directory  paper in the  third  quarter  of 1997  compared  to the prior
quarter.  The Company's  shipments during the third quarter of 1997 increased 10
percent  and 19  percent  compared  to the third  quarter of 1996 and the second
quarter of 1997, respectively.

Market Pulp - The Company's market pulp average  transaction price for the third
quarter of 1997 increased 11 percent  compared to the third quarter of last year
and the second quarter of this year. NORSCAN (U.S., Canada,  Finland, Norway and
Sweden  producers)  shipments of softwood pulp increased in the third quarter of
1997 compared to the year ago period.  NORSCAN inventory levels of softwood pulp
at the end of the third quarter continued to decrease from levels earlier in the
year and  compared to the end of September  1996.  Favorable  market  conditions
enabled the Company to implement price increases during the first nine months of
1997, causing its average transaction price to rise approximately $35 per metric
ton since the end of 1996.

-------------------- ----------- ------------------
                                  3rd Qtr. 1997
     Softwood                        vs. 1996
   Market Pulp                       Increase/
    Statistics         Source       (Decrease)
-------------------- ----------- ------------------
 NORSCAN Shipments
                       AF&PA            4%
-------------------- ----------- ------------------
NORSCAN Inventories
                       AF&PA           (7)%
-------------------- ----------- ------------------

Lumber  - The  average  transaction  price  for the  Company's  lumber  products
increased  3  percent  in the third  quarter  of 1997  compared  to the year ago
period. The Company's shipment levels also increased slightly comparing the same
periods.  Lumber  prices  increased  significantly  during 1996 due primarily to
record high U. S. housing starts of 1.5 million.  The government  estimate of U.
S. housing starts for the full year of 1997 stands at 1.4 million.  In the first
half of 1997,  prices  continued  to rise,  but at a slower  rate.  In the third
quarter of 1997, prices in the U. S. lumber market began to decrease, as a slump
in the Japanese  housing  market forced  producers to divert lumber to the U. S.
market, causing an oversupply.

Cost of Sales and Other Income and Expenses

Cost of sales  decreased 7 percent in the third  quarter of 1997 compared to the
third  quarter of last year.  This  decrease  was due to the  absence of product
costs  relating  to the  Company's  subsidiary,  Star Forms  Incorporated  (Star
Forms),  which was sold in November of 1996,  partially  offset by higher  costs
associated  with planned  maintenance.  Comparing the same periods,  selling and
administrative  expenses decreased $5 million or 21 percent.  This reduction was
also due to the sale of Star Forms.  Interest  expense for the third  quarter of
1997  compared to the same period last year  decreased due to lower average debt
balances,  while interest income,  comparing the same periods,  increased due to
higher average  investment  balances.  In the third quarter of 1996, the Company
sold approximately 1,700 acres of timberlands  resulting in a pre-tax gain of $1
million.

                                       11
<PAGE>

                      BOWATER INCORPORATED AND SUBSIDIARIES
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations


         Nine Months Ended September 30, 1997, versus September 30, 1996

For the first  nine  months of 1997,  the  Company's  operating  income  was $74
million,  a decrease of $219 million  compared to the first nine months of 1996.
This  significant   decrease  is  attributed  to  substantially   lower  average
transaction  prices for all of the  Company's  products  except  market pulp and
lumber, partially offset by higher tonnage shipments.

                            Product Line Information

Newsprint - For the first nine months of 1997, the Company's  newsprint  average
transaction  price  decreased 22 percent  compared to the same period last year.
During the second half of 1996,  prices decreased due to lower demand brought on
by  conservation  measures  taken by users in reaction to the record high prices
experienced in 1995. During the first nine months of 1997, however,  total U. S.
newsprint  consumption  and  U.  S.  dailies'  newsprint  consumption  increased
compared to the same period in 1996. In addition,  both U. S. dailies' newsprint
inventory  and North  American  newsprint  mill  inventory  levels at the end of
September 1997 were lower than September 1996 levels.  These conditions  enabled
the Company to announce two price increases in 1997,  including an October price
increase of $35 per metric ton.

----------------- ---------------- ----------------
                                    9 Mos. 1997
                                      vs. 1996
   Newsprint                          Increase/
   Statistics         Source         (Decrease)
----------------- ---------------- ----------------
  Total U. S.
  Consumption          CPPA              5%
----------------- ---------------- ----------------
 U. S. Dailies'
  Consumption          CPPA              4%
----------------- ---------------- ----------------
                     Newspaper
 U. S. Dailies'   Association of
   Inventory          America           (3)%
----------------- ---------------- ----------------
 North American
Mill Inventories

                       CPPA             (32)%
----------------- ---------------- ----------------

Coated  Groundwood - The Company's coated groundwood  average  transaction price
decreased 23 percent  during the first nine months of 1997  compared to the year
ago period, offset by higher shipments of 13 percent. In 1996, coated groundwood
prices declined as customers reduced their excessive inventory levels from 1995.
In 1997, demand increased.  U. S. coated groundwood  shipments  increased during
the first nine months of 1997 compared to the prior year period and U. S. coated
groundwood mill inventory levels declined significantly.  Since the beginning of
1997,  the  Company   implemented  two  price  increases   causing  its  average
transaction price to increase approximately $100 per ton. A third price increase
of $40 per ton is currently being implemented for certain market segments.

----------------- ---------------- ----------------
                                    9 Mos. 1997
                                      vs. 1996
 Coated Paper                         Increase/
   Statistics         Source         (Decrease)
----------------- ---------------- ----------------
  U. S. Coated
   Groundwood
   Shipments           AF&PA             24%
----------------- ---------------- ----------------
                  Media Industry
  Magazine Ad       Newsletter           5%
     Pages
----------------- ---------------- ----------------
  U. S. Coated
Groundwood Mill
  Inventories
                       AF&PA            (57)%
----------------- ---------------- ----------------

Directory Paper - The Company's  average  transaction  price for directory paper
decreased 12 percent in the first nine months of 1997 compared to the first nine
months of 1996,  while  shipments  increased 7 percent.  A large  portion of the
Company's current directory paper sales was based on contracts  completed in the
latter part of 1996, when prices had decreased from the high levels of 1995.

Market  Pulp - The  average  transaction  price for the  Company's  market  pulp
increased 9 percent in the first nine months of 1997  compared to the first nine
months of 1996,  while  shipments  increased 11 percent.  NORSCAN  softwood pulp
shipments  also  increased  during this period  compared to the same period last
year, while inventory levels decreased.  As of September 30, 1997, the Company's
average  transaction price increased  approximately $30 per metric ton since the
end of 1996.

                                       12
<PAGE>


                      BOWATER INCORPORATED AND SUBSIDIARIES
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations

-------------------- ----------- ------------------
                                 9 Mos. 1997 vs.
     Softwood                          1996
   Market Pulp                       Increase/
    Statistics         Source       (Decrease)
-------------------- ----------- ------------------
-------------------- ----------- ------------------
 NORSCAN Shipments
                       AF&PA            8%
-------------------- ----------- ------------------
-------------------- ----------- ------------------
NORSCAN Inventories
                       AF&PA           (7)%
-------------------- ----------- ------------------

Lumber  - The  Company's  average  transaction  price  for its  lumber  products
increased 16 percent  comparing  the first nine months of 1997 to the first nine
months of last year. The lumber market continued its healthy pace from 1996 into
the first half of 1997,  due to the high level of housing  starts.  In the third
quarter  of 1997,  however,  prices  began to  decline  as the  supply of lumber
increased.

Cost of Sales and Other Income and Expenses

Cost of sales  for the first  nine  months of 1997 was $24  million  lower  when
compared  to the same  period  last year due to the  absence  of  product  costs
associated  with Star  Forms,  offset by  planned  maintenance  costs and higher
tonnage  shipments.  Selling and  administrative  expenses decreased $14 million
comparing  the same  periods.  The majority of this decrease was also due to the
sale of Star Forms. Interest expense decreased comparing the same periods due to
lower average debt balances in 1997 versus 1996, while interest income increased
due to higher average investment balances. In the first nine months of 1996, the
Company sold 108,000  acres of  timberlands  resulting in a $78 million  pre-tax
gain.

                         Liquidity and Capital Resources

The Company's  cash,  cash  equivalents,  and marketable  securities  balance at
September  30, 1997,  totaled $382 million  compared to $431 million at December
31,  1996,  and $380 million at  September  30, 1996.  Aside from cash flow from
operations and capital  expenditures,  significant  cash outflows since December
31, 1996,  included the repurchase of 1.4 million common shares for $57 million,
three dividend payments to the minority shareholder of CNC totaling $21 million,
and the redemption of $25 million of the Company's  remaining  outstanding LIBOR
preferred stock. During the first nine months of 1997, the Company's  operations
generated $127 million of cash compared to $260 million of cash during the first
nine months of 1996, a decrease of $133 million. This decrease was primarily the
result of a decrease in operating  income of $219  million,  offset in part by a
decrease in tax payments of $133  million.  Tax payments were higher in 1996 due
to the  higher  level  of  income  and the  payment  of the  Company's  1995 tax
liability in the first quarter of 1996. In addition, other working capital needs
in  1997  were  higher  by  $34  million,  and  payments  for  employee  benefit
liabilities were higher by $12 million.

     Cash flow from investing  activities in the first nine months of 1997 of $1
million was $193 million higher than the first nine months of last year. Capital
expenditures  for the first nine months of 1997 were $6 million higher  compared
to the first nine months of 1996. The Company expects total capital expenditures
for  1997 to  approximate  $110  million,  roughly  the  same  as  1996  capital
expenditures  of $107 million.  In the first nine months of 1997, $69 million of
net cash  flow  was from the  maturity  of  marketable  securities  versus a net
investment  of $246 million in the first nine months of 1996.  Also in the first
nine months of 1996, the Company sold timberlands  resulting in proceeds of $119
million.

     On  September  17,  1997,   the  Company   announced  its  plan  to  invest
approximately  $180 million  over the next two years to  modernize  its Calhoun,
Tennessee,  newsprint  facility.  The plan calls for  expansion of the Company's
thermomechanical  pulp facility and conversion of an idle recovery boiler. Aside
from reducing operating costs, these changes will have a positive  environmental
impact by  utilizing  old  tires as fuel,  which  reduces  landfill  usage.  The
Company's  estimate  of total  capital  expenditures  for  1997 of $110  million
includes approximately $5 million relating to these two projects.

     Cash flow used for financing  activities was $92 million lower in the first
nine  months of 1997  compared  to the year ago  period.  The  majority  of this
decrease was due to debt repurchases in 1996 of approximately $55 million.  Cash
dividends  for the first nine months of 1997 and 1996  included  payments to the
minority shareholder of CNC totaling $21 million and $29 million,  respectively.
Also included in the first nine months of 1996 were cash dividends of $6 million
on the Company's 7% 

                                       13
<PAGE>

                      BOWATER INCORPORATED AND SUBSIDIARIES
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations

PRIDES Series B Convertible  Preferred Stock  (PRIDES).  On January 9, 1997, the
Company converted all of the outstanding  depositary  shares,  each representing
one-fourth  of a share of PRIDES,  using  Bowater  common  stock at a conversion
ratio of .82 of a common share for each depositary  share.  This resulted in the
issuance of 4,012,765 common shares.

     On May 12, 1997, the Company redeemed for $25 million the remaining 500,000
outstanding  shares of LIBOR Preferred Stock,  Series A, at its par value of $50
per share,  plus  accrued and unpaid  dividends.  The LIBOR stock was subject to
mandatory redemption in 1998.

     On February 10, 1997, the Company completed the repurchase of approximately
10 percent of its  outstanding  common stock as part of a  previously  announced
stock repurchase  program. In total, the Company purchased 4 million shares at a
cost of $156 million.  During the first quarter of 1997, the Company repurchased
1.4 million common shares at a cost of $57 million.  In the first nine months of
1996, 2.5 million shares were purchased at a cost of $94 million. On November 6,
1997,  the Company  announced  the adoption of a new stock  repurchase  program,
authorizing  it to  repurchase  up to 10  percent of the  company's  outstanding
common  stock in the open market  subject to normal  trading  restrictions.  The
Company   continues  to  consider   both   internal   and  external   investment
opportunities as well as additional debt reductions.

                                  Organization

On July 23, 1997,  the Company  announced  the  reorganization  of its U. S. and
Canadian  forest and wood  products  operations  into a new division  called the
Forest Products Division.  The consolidation of these operations will enable the
Company to explore new  opportunities  to improve returns on its forest products
assets. These opportunities  include:  optimizing the use of existing properties
by using wood to its highest value end-use;  optimizing  silviculture techniques
to match sustainable wood usage goals; selling certain non-strategic  timberland
tracts, and studying  organizational  structures which could provide an enhanced
market valuation.

     The Company also announced the consolidation of its newsprint and directory
paper businesses into one division called the Newsprint and Directory  Division.
The combination of these businesses will enhance the Company's  opportunities to
better serve its groundwood  based  customers  while  developing  strategies for
improving financial returns.

                              Year 2000 Compliance

Since 1990, the Company has reengineered its major internally developed software
programs.  During this effort,  the Company examined  potential problems arising
from the  inability of certain  application  software  programs to recognize the
year 2000. A formal review of all internally  developed  software is in progress
and will be completed by 1998. No major problems have been  encountered to date.
In addition,  all major third party licensed  application software programs have
been reviewed and are either  compliant or have released a compliant  version to
which the Company will migrate in 1998. The costs  associated  with this project
are currently expected to be less than $1 million.

                              Accounting Standards

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." The implementation
of this  standard  in the fourth  quarter of 1997 will not impact the  Company's
results of  operations,  but will  result in a  different  calculation  of basic
earnings per share versus primary earnings per share. Fully diluted earnings per
share will remain the same.

                                       14

<PAGE>



                                     PART II

                                OTHER INFORMATION



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

         (a)      Exhibits (numbered in accordance with Item 601 of
Regulation S-K):

         Exhibit No.       Description

         10.1     Employment  Agreement,  dated as of  August  1,  1997,  by and
                  between the Company and Arthur D. Fuller.

         10.2     Change in Control  Agreement,  dated as of August 1, 1997,  by
                  and between the Company and Arthur D. Fuller.

         27.1     Financial Data Schedule (electronic filing only).

         (b)      Reports on Form 8-K:

                  None



                                       15

<PAGE>




                           BOWATER INCORPORATED AND SUBSIDIARIES

                                   SIGNATURES


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



                                               BOWATER INCORPORATED

                                    By         /s/  David G. Maffucci
                                               David G. Maffucci
                                               Senior Vice President and
                                               Chief Financial Officer



                                    By         /s/  Michael F. Nocito
                                               Michael F. Nocito
                                               Vice President and Controller





Dated: November 13, 1997







                                       16

<PAGE>


                                INDEX TO EXHIBITS

Exhibit No.       Description


         10.1     Employment  Agreement,  dated as of  August  1,  1997,  by and
                  between the Company and Arthur D. Fuller.

         10.2     Change in Control  Agreement,  dated as of August 1, 1997,  by
                  and between the Company and Arthur D. Fuller.


         27.1     Financial Data Schedule (electronic filing only).



<PAGE>