FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

         For the Quarterly Period Ended September 28, 1996

                                       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  33-96680

                                HERFF JONES, INC.
--------------------------------------------------------------------------------
             (Exact Name of registrant as specified in its charter)


        INDIANA                                             35-1637714
--------------------------------------------------------------------------------
  (State or other Jurisdiction of                       (I.R.S. Employer 
  Incorporation or Organization)                      Identification Number)


    4501 West 62nd Street, Indianapolis, Indiana              46268
--------------------------------------------------------------------------------
  (Address of principal executive offices)                 (Zip Code)


                                 (317) 297-3740
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                       Yes   X        No


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Number of shares outstanding of the issuer's Common Stock as of November 8,1996:

                 Class

      Common Stock, without par value                  9,618,996





<PAGE>

                                      INDEX


Part  I. - Financial Information                                      Page No.
                                                                      --------

       Condensed Consolidated Statement of Operations -
          First Quarter Ended September 28, 1996 
          and September 30, 1995                                          3

       Condensed Consolidated Balance Sheet -
          As of September 28, 1996, June 29, 1996 
          and September 30, 1995                                          4

       Condensed Consolidated Statement of Cash Flows -
          First Quarter Ended September 28, 1996 
          and September 30, 1995                                          5

       Notes to Condensed Consolidated 
          Financial Statements                                       6 -  8

       Management's Discussion and Analysis of
          Financial Condition and 
          Results of Operations                                      9 - 12



Part II. - Other Information                                             13

Item 6.    Exhibits and Reports on Form 8-K



<PAGE>





                         Part I - Financial Information
                                Herff Jones, Inc.
                       Condensed Consolidated Statement of
                                   Operations
                    (Amounts in thousands of dollars, except
                                 per share data)
                                   (Unaudited)



                                                    First Quarter Ended
                                         ---------------------------------------
                                         September 28, 1996   September 30, 1995
                                         ------------------   ------------------



Net sales                                 $    46,656               $    43,543
                                                                
Cost of sales (excludes                                         
     ESOP compensation)                        30,122                    26,339
                                                                
Selling, general, and                                           
     administrative expenses                                    
     (excludes ESOP compensation)              20,441                    19,178
                                                                
ESOP compensation                                               
                                                                
   Current year service                         4,058                     2,760
                                                                
   Prior year service                              --                     4,033
                                                                
                                          -----------               -----------
Income (loss) from operations                  (7,965)                   (8,767)
                                                                
Interest income                                     5                       617
                                                                
Interest expense                                4,977                     3,506
                                          -----------               -----------
                                                                
Income (loss) before                                            
     income taxes and                                           
     extraordinary item                       (12,937)                  (11,656)
                                                                
Income taxes                                    4,593                     4,441
                                          -----------               -----------
                                                                
Net income (loss) before                                        
     extraordinary item                        (8,344)                   (7,215)
                                                                
Extraordinary item:  Prepayment                                 
fee on the senior ESOP notes                       --                    (5,884)
retirement, less applicable                                     
tax benefit of $3,621                                           
                                          -----------               -----------
Net income (loss)                         $    (8,344)              $   (13,099)
                                          ===========               ===========
                                                                
                                                                
Income (loss) per common share            $     (4.48)              $    (10.01)
                                          ===========               ===========
                                                                
                                                                
Weighted average number of                                      
common shares                                                   
outstanding, pro-forma for                                      
periods prior  to                                               
August 22, 1995                             1,863,248                 1,308,519
                                          ===========               ===========
                                                                


See accompanying notes to unaudited condensed consolidated financial statements.


<PAGE>

                                Herff Jones, Inc.
                      Condensed Consolidated Balance Sheet
        As of September 28, 1996, June 29, 1996, and September 30, 1995
                        (Amounts in thousands of dollars)

<TABLE>
<CAPTION>

                                                                                                              
                                                              (Unaudited)                                    (Unaudited)
                                                               September                 June                 September
                                                               28, 1996                29, 1996               30, 1995
                                                              ------------            -----------            ------------
Assets:
     Current Assets
<S>                                                              <C>                   <C>                   <C>      
          Cash and cash equivalents                              $     643             $   8,680             $   1,792
          Accounts receivable                                       39,018                54,066                33,545
          Inventories                                               41,127                36,941                37,332
          Prepaid expense                                            7,585                 2,651                 6,422
          Deferred income taxes                                      5,321                 5,321                 2,412
                                                                 ---------             ---------             ---------
          Total Current Assets                                      93,694               107,659                81,503
                                                                                                            
     Non-Current Assets                                                                                     
          Property, plant, and equipment                            89,408                87,741                73,701
          Accumulated depreciation                                 (40,095)              (38,700)              (35,404)
                                                                 ---------             ---------             ---------
          Net Property, Plant,                                                                                   
          and Equipment                                             49,313                49,041                38,297
                                                                                                            
     Deferred financing cost, net and                                                                       
          other assets                                               5,363                 5,603                 6,552
                                                                 ---------             ---------             ---------
     Total Non-Current Assets                                       54,676                54,644                44,849
                                                                                                            
          Total Assets                                           $ 148,370             $ 162,303             $ 126,352
                                                                 =========             =========             =========
                                                                                                            
                                                                                                            
Liabilities and Shareholders' Equity:                                                                       
     Current Liabilities                                                                                    
     Trade accounts payable                                      $   8,759             $   7,541             $   7,029
     Salaries and wages payable                                      4,986                 4,068                 3,108
     Interest payable                                                1,900                 5,157                 1,711
     Customer deposits                                              12,175                19,856                10,677
     Commissions payable                                             2,531                14,857                 2,156
     Income taxes accrued                                           (4,596)                3,200                (7,562)
     Other accrued liabilities                                       7,926                 9,749                 8,760
     Current portion of long-term debt                              54,053                22,315                45,646
                                                                 ---------             ---------             ---------
          Total Current Liabilities                                 87,734                86,743                71,525
                                                                                                            
Non-Current Liabilities                                                                                     
     Other                                                           2,247                 2,247                 2,085
     Long-term debt                                                162,928               173,574               178,600
     Deferred income taxes                                              81                    81                  (401)
                                                                 ---------             ---------             ---------
Total Non-Current Liabilities                                      165,256               175,902               180,284
                                                                                                            
Total Liabilities                                                  252,990               262,645               251,809
                                                                                                            
Shareholders' Equity (Deficit)                                                                              
     Common stock                                                    5,728                 5,728                 5,745
     Retained earnings                                             111,181               119,525               106,323
     Deferred compensation                                        (218,824)             (222,953)             (235,299)
     Foreign currency translation                                       12                    11                    26
     Excess of cost over market                                                                                  
     (shares committed to be released)                             (2,717)               (2,653)               (2,252)
                                                                 ---------             ---------             ---------
Total Shareholders' Equity (Deficit)                             (104,620)             (100,342)             (125,457)
                                                                                                            
Total Liabilities and Shareholders' Equity (Deficit)            $ 148,370             $ 162,303             $ 126,352
                                                                 =========             =========             =========
                                                                                                   
</TABLE>


                
See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>
                                Herff Jones, Inc.
                      Consolidated Statement of Cash Flows
                       (Amounts in thousands of dollars)
                                   (Unaudited)

                                                          Three Months Ended
                                                     ---------------------------

                                                       September     September
                                                       28, 1996       30, 1995
                                                     -----------    -----------
Cash flows from operating activities:
Net income (loss)                                        (8,344)     (13,099)
    Adjustments to reconcile net income to net
    cash (used) provided by operating activities:
       Depreciation and amortization                      1,697        1,313
       Amortization and write off of financing cost         240          295
       ESOP compensation (before
       dividend exclusion)                                4,029        7,094
       Tax benefit of ESOP shares
       (cost over market)                                    36          878
       Other                                                  1           20
       (Gain) loss on disposal of
       property, plant and equipment, net                    (1)          (6)
       Increase (decrease) in cash generated by
       changes in assets and liabilities
           Accounts receivable                           15,048       18,563
           Inventories                                   (4,186)      (4,012)
           Prepaid expenses                              (4,934)      (4,926)
           Trade accounts payable                         1,218        2,624
           Salaries and wages                               918         (731)
           Interest payable                              (3,257)      (1,711)
           Customer deposits                             (7,681)      (4,209)
           Commissions payable                          (12,326)     (12,526)
           Income taxes payable                          (7,796)     (17,990)
           Deferred income taxes                             --            1
           Other accrued liabilities                     (1,823)         508
           Other assets                                      --          (28)
                                                      ---------    ---------
    Total adjustments                                   (18,817)     (14,843)
                                                      ---------    ---------
Net cash (used) provided by operating activities      $ (27,161)   $ (27,942)

Cash flows from investing activities:
   Proceeds from disposal of property,
    plant and equipment                                       4           55
   Capital expenditures                                  (1,972)      (1,076)
   Sale of marketable securities                             --        6,219
                                                      ---------    ---------
Net cash (used) provided by investing activities      $  (1,968)   $   5,198

Cash flows from financing activities:
   Purchase of shares by the ESOP trust                      --     (188,278)
   Premium on stock redemption                               --           (3)
   Dividends declared                                        --       (2,687)
   Increase  in revolver, net                            29,299       12,120
   Recapitalization financing cost                           --       (5,854)
   Payment of long-term debt                             (2,250)          --
   Advance term  payment                                 (5,957)          --
   New borrowings                                            --      204,526
   Prepayment of senior ESOP notes                           --      (69,826)
                                                      ---------    ---------
Net cash (used) provided in financing activities      $  21,092    $ (50,002)

Cash and cash equivalents:
   Net increase (decrease)                               (8,037)     (72,746)
   Beginning of period                                    8,680       74,538
                                                      =========    =========
   End of period                                      $     643    $   1,792
                                                      =========    =========

See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>


                         Part I - Financial Information
         Notes to Unaudited Condensed Consolidated Financial Statements
                      Three Months Ended September 28, 1996
                        (Amounts in thousands of dollars)

Note 1 - Adjustments

         The unaudited condensed  consolidated  financial  statements  presented
         herein have been  prepared  by the Company and contain all  adjustments
         (consisting of only normal recurring  adjustments) necessary to present
         fairly the Company's  financial  position as of September 28, 1996, and
         the  results of its  operations  and cash flows for the  quarter  ended
         September 28, 1996. These unaudited  condensed  consolidated  financial
         statements  have been prepared in accordance  with  generally  accepted
         accounting  principles for interim  financial  information and with the
         instructions   to  Form  10-Q  and  Rule  10-01  of   Regulation   S-X.
         Accordingly,  they do not include all of the  information and footnotes
         required by  generally  accepted  accounting  principals  for  complete
         financial statements.

         The  significant  accounting  policies  followed by the Company are set
         forth in Note (3) of the Company's  consolidated  financial  statements
         for the year  ended June 29,  1996,  which  have been  included  in the
         Company's Form 10-K which was filed on September 24, 1996. Statement of
         Financial  Accounting  Standards No. 121  "Accounting for Impairment of
         Long Lived  Assets and Long Lived Assets to be Disposed of" was adopted
         by the Company on June 30,  1996 with no material  impact on results of
         operations.  The  Company  has  restated  certain  prior  year items to
         conform to the current year presentation.

         During the first quarter of fiscal 1996, the Herff Jones, Inc. Employee
         Stock  Ownership  Plan (ESOP)  purchased  substantially  all  remaining
         shares  (6,724,200) of common stock held by shareholders other than the
         ESOP.

         The Company  issued  Series A Notes and used the  proceeds,  along with
         borrowings under the New Credit Agreement and internally generated cash
         from operations,  to fund the purchase of outstanding  shares of common
         stock by the ESOP and to prepay the Senior ESOP Notes. In prepaying the
         Senior ESOP Notes,  the Company incurred a prepayment fee of $5,884 net
         of the applicable tax benefit.

         The Company  utilizes a 52/53 week fiscal year for accounting  purposes
         ending on the last  Saturday in June.  Fiscal 1996  contained  53 weeks
         with the additional  week included in the first quarter ended September
         30, 1995. Fiscal 1997 will contain 52 weeks.

         Because of the seasonality of the Company's business, operating results
         on a quarterly  basis are not  indicative of operating  results for the
         full year.  Historically,  the first fiscal quarter is the lowest sales
         quarter,  while the fourth  fiscal  quarter is the  highest,  typically
         including over 40% of the year's sales.



Note 2 - Allowance for Doubtful Accounts and Returns

                     September 28, 1996     June 29, 1996     September 30, 1995
                     ------------------     -------------     ------------------
                        $      3,304         $    4,883           $   1,279





<PAGE>



Note 3 - Inventories

The components of inventory balances are summarized below:

                              September 28,         June 29,       September 30,
                                 1996                1996              1995
                              -------------         --------       -------------
Raw materials and supplies 
     (includes gold)            $19,278             $16,017           $16,588
Work-in-process                  13,197              13,008            12,789
Finished goods                    8,652               7,916             7,955
                                -------             -------           -------
                                $41,127             $36,941           $37,332
                                =======             =======           =======
                                                               

Note 4 - Financing
                              September 28,         June 29,       September 30,
                                 1996                1996              1995
                              -------------         --------       -------------
Long-Term Debt consists 
of the following:

Senior Bank 
     Facility (Revolver)      $  44,338            $  15,039        $  36,646
                                                                  
Senior Bank                                                       
     Facility (Term)             45,043               53,250           60,000
                                                                  
Senior Subordinated                                               
     Notes                      120,000              120,000          120,000
                                                                  
1994 Industrial Development                                       
Revenue Bonds Due in 2019         7,600                7,600            7,600
                              ---------            ---------        ---------
                                                                  
                                216,981              195,889          224,246
                                                                   
                                                                  
Less: Current Portion           (54,053)             (22,315)         (45,646)
                              ---------            ---------        ---------
Long-Term Debt                $ 162,928            $ 173,574        $ 178,600
                              =========            =========        =========
                                                          
In the first quarter  ended,  September 28, 1996,  the Company  (pursuant to the
credit  agreement  underlying the Senior Bank Facility) made a required  advance
payment  on the  Term  Loan of  $5,957.  This  was in  addition  to the year one
scheduled  amortization  payments  made  of  $9,000.  The  subsequent  scheduled
payments on the Term Loan are adjusted down pro rata by this advance payment.


Note 5 - Common Stock
                              September 28,         June 29,       September 30,
                                 1996                1996              1995
                              -------------         --------       -------------
Common Shares
Authorized                    16,500,000           16,500,000        16,500,000
Outstanding                    9,618,996            9,618,996         9,640,356
                                                                  

<PAGE>



Note 5 - Common Stock (Con't)

         Pursuant to the August 22, 1995 recapitalization plan in which the ESOP
         purchased  substantially  all remaining  shares of common stock held by
         shareholders other than the ESOP, the weighted average number of common
         shares  outstanding  was  calculated on a pro forma basis  assuming the
         recapitalization occurred at June 25, 1995. The number of common shares
         outstanding  immediately  after  the  recapitalization  took  place was
         1,236,494.  This number has been used as the pro forma weighted average
         number of common shares outstanding for the first one and a half months
         of fiscal 1996.

         The actual weighted average number of common shares outstanding for the
         first quarter ended  September 30, 1995 was 5,406,506.  The actual loss
         per common share for the first  quarter  ended  September  30, 1995 was
         ($2.42).


Note 6 - Statement of Shareholders' Equity

<TABLE>
<CAPTION>
                                                                              Foreign                                     Total
                                            Common Stock         Retained    Currency      Deferred      Excess Cost   Shareholders'
                                       Shares       Amount       Earnings   Translation  Compensation    Over Market     Equity    
                                       ------       ------       --------   -----------  ------------    -----------     ------    
<S>          <C> <C>                 <C>              <C>       <C>             <C>      <C>              <C>           <C>       
Balance June 29, 1996                9,618,996        $5,728    $119,525        $11      ($222,953)       ($2,653)      ($100,342)
Tax benefit of cost over market of                                                                                      
ESOP shares committed to be                                       
     released                           -             -           -              -               -             36              36
Foreign currency translation                     
adjustment                                                                        1                                             1
Shares committed to be released         -             -           -               -          4,129           (100)          4,029   
Net income for the quarter              -             -          (8,344)          -              -              -          (8,344)
                                     ---------       ------    --------         ---      ---------        -------       --------- 
Balance September 28, 1996           9,618,996       $5,728    $111,181         $12      ($218,824)       ($2,717)      ($104,620)
                                     =========       ======    ========         ===      =========        =======       ========= 
                                                                         

</TABLE>




Excess of cost over market  represents  the  cumulative  difference  between the
market value of shares  committed to be released and the cost of those shares to
the ESOP, net of tax effects.




<PAGE>


                                HERFF JONES, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



OVERVIEW

         Herff Jones is one of the leading  manufacturers of recognition awards,
educational products and  graduation-related  products for the scholastic market
in the United States. Its product lines include class rings,  medals and awards,
diplomas  and  graduation  announcements  (also  referred  to as "fine  paper"),
yearbooks,  caps and gowns, school photography services and multimedia education
products. The Company historically has sold approximately 80% of its products to
the high school and elementary  market and  approximately 20% of its products to
the  college  and  commercial  or  non-scholastic  market  through a network  of
approximately  700  primarily  independent  sales  representatives.  The Company
believes  that  the  Herff  Jones  name is  widely  recognized  in  schools  and
universities nationwide.


RECAPITALIZATION

         Pursuant to a plan of  recapitalization  adopted by the Company's Board
of Directors in May 1995 and effective as of August 22, 1995,  (a) the Company's
outstanding  shares in three classes of common stock were  converted to a single
class of Common Stock on a share-for-share basis, (b) the Company-sponsored ESOP
trust  purchased  substantially  all of the shares of Common  Stock so converted
held by  shareholders  other than the ESOP, (c) the ESOP borrowed  approximately
$188.3 million from the Company (the "ESOP Loan") to fund its purchase of Common
Stock and (d) the  Company  used the  proceeds  of the  offering  of the  Senior
Subordinated  Notes  ("Notes"),  along  with  borrowings  under  the New  Credit
Agreement and internally  generated cash from operations,  to fund the ESOP Loan
and to prepay the Senior ESOP Notes.  In  prepaying  the Senior ESOP Notes,  the
Company  incurred a prepayment  fee of $5.9 million,  net of the  applicable tax
benefit.

         In connection with the forgoing transactions (the "ESOP Transactions"),
the Company entered into the New Credit  Agreement  pursuant to which a group of
financial  institutions  have  provided  the Company  with a new $120.0  million
credit  facility,  which  includes a $60.0 million senior secured term loan (the
"Term Loan") and a $60.0 million senior secured  revolving  credit facility (the
"Revolving Credit Facility"),  which includes a letter of credit facility with a
$12.0 million  sublimit.  The Term Loan and the Revolving Credit Facility have a
final maturity of September 30, 2000. The Company incurred significant financing
costs,  which have been  deferred as other assets and will be charged to expense
over the life of the related debt instruments.

         As a  result  of the  issuance  of the  Notes  and  the  incurrence  of
additional  indebtedness  under the New  Credit  Agreement  to  effect  the ESOP
Transactions,  as well as anticipated working capital borrowings,  the Company's
interest expense increased significantly in fiscal 1996 and such higher interest
expense is expected to continue for a number of years.



<PAGE>


RESULTS OF OPERATIONS

         The Company utilizes a 52/53 week year for accounting purposes.  Fiscal
1996  contained  53 weeks  and the  additional  week was  included  in the first
quarter  ended  September  28,  1996.  Fiscal  1997 will  contain 52 weeks.  The
Company's business is highly seasonal.  Historically,  sales in the first fiscal
quarter  are at the lowest  level of the year and as a result the first  quarter
produces operating losses. However,  because of the seasonality of the Company's
business,  operating results on a quarterly basis are not necessarily indicative
of operating results for the full year.


         For the first quarter ended September 28, 1996 and September 30, 1995.


         General. Net sales rose 7.2% to $46.7 million in fiscal 1997 from $43.5
million in fiscal  1996.  Operating  losses  decreased to $8.0 million in fiscal
1997 from $8.8 million in fiscal 1996. Net losses before the extraordinary  item
increased to $8.3  million in fiscal 1997 from $7.2 million in fiscal 1996.  Net
losses  after the  extraordinary  item  decreased to $8.3 million in fiscal 1997
from $13.1 million in fiscal 1996.

         Net Sales. Net sales increased $3.2 million or 7.2% to $46.7 million in
fiscal 1997 from $43.5 million in fiscal 1996.  Such increases were due to sales
from Delmar, which was acquired as of April 29, 1996, of $4.4 million, partially
offset by lower sales in the yearbook and photography  product lines, due to the
timing of shipments.

         Cost Of Sales.  Cost of sales  increased $3.8 million or 14.4% to $30.1
million  in fiscal  1997 from  $26.3  million  in fiscal  1996,  primarily  as a
function of increased sales and costs associated with Delmar. Cost of sales as a
percentage of sales increased to 64.6% in fiscal 1997 from 60.5% in fiscal 1996,
primarily because of higher manufacturing costs at Delmar.

         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative expense increased $1.2 million or 6.6% to $20.4 million in fiscal
1997 from $19.2  million in fiscal 1996.  The increase  was  attributable  to an
increase in the Company's  commission expense resulting from increased net sales
in fiscal 1997 coupled with  increases  to selling,  general and  administrative
expense spending related to Delmar. Selling,  general and administrative expense
as a percentage of sales remained relatively consistent at 43.8% in fiscal 1997,
down slightly from 44.0% in fiscal 1996.

         ESOP  Compensation.  ESOP  compensation  decreased $2.7 million to $4.1
million in fiscal 1997 from $6.8 million in fiscal 1996. The ESOP  Transactions,
which were completed during fiscal 1996,  resulted in a significant  increase in
the  number  of shares to be  allocated  to  employee  accounts  effective  each
December  31 from 1995  through  2009.  In fiscal  1996,  the  shares  allocated
effective  December  31, 1995 related to service  rendered by  employees  during
calendar 1995.  ESOP  compensation  expense for the quarter ended  September 30,
1995 included  $4.0 million  related to employee  service  rendered in the prior
fiscal year.  Excluding the fiscal 1996 amount  relating to fiscal 1995 service,
ESOP  compensation  expense  increased  $1.3  million  due to an increase in the
market value of the shares and the lack of a current quarter dividend.

         Loss from Operations.  Operating losses decreased $.8 million to a loss
of $8.0 million in fiscal 1997 from a loss of $8.8  million in fiscal 1996.  The
decreased  loss  was  predominantly  due to the  decrease  in ESOP  compensation
expense as  discussed  above,  partially  offset by  increased  seasonal  losses
related to Delmar.

<PAGE>


         Interest  Expense.  Interest  expense  increased  $1.5  million to $5.0
million  in  the  first  quarter  of  fiscal  1997  from  $3.5  million  in  the
corresponding  quarter of fiscal 1996 due to a full  quarter of  increased  debt
associated with the recapitalization.

         Income Tax Benefit. Income taxes increased to a benefit of $4.6 million
in fiscal 1997 from $4.4 million in fiscal 1996, due to the increase in the loss
before  income taxes and the  extraordinary  item,  partially  offset by a lower
fiscal 1997 effective tax rate.

         Extraordinary  Item.  In fiscal 1996 the Company  incurred a prepayment
fee of $5.9 million, net of the applicable tax benefit, on the retirement of the
Senior ESOP Notes.

         Net Loss.  The first  quarter net loss  decreased  to $8.3 million from
$13.1 million in fiscal 1996. The decreased loss was primarily  attributable  to
the  decrease in ESOP  compensation  expense  and the fiscal 1996  extraordinary
item, as discussed above,  partially offset by increased seasonal losses related
to Delmar, increased interest expense due to the increased debt, and the virtual
elimination of interest income in the current year.

FINANCIAL CONDITION AND LIQUIDITY

          The  Company's  business is highly  seasonal.  Historically  the first
quarter  requires  the use of working  capital  due to losses  from  operations,
caused by relatively low shipping of product; the absorption of fixed costs that
are incurred  evenly  throughout the year;  the build up of inventories  for the
pre-Christmas  photography and class ring activity; the payment of the Company's
income taxes from the previous  fiscal year;  and the  settlement  of commission
accounts with the Company's independent sales representatives. This is partially
offset by the  reduction  of  accounts  receivable  resulting  from  payment for
products  shipped  prior to  graduations  in the fourth  quarter of the previous
fiscal year.

         Beginning  in the first  quarter of fiscal 1996,  the  recapitalization
described  previously  significantly  changed the Company's financial condition,
adding substantial  indebtedness and resulting in a deficit shareholders' equity
position.  The cash  flow  pattern  and  expectations  of the  Company's  highly
seasonal business result in the classification,  at September 28, 1996, of $44.3
of the senior bank facility (revolver) as a current liability,  although payment
within the next year is not  necessarily  required by the terms of the Company's
financing arrangements.

         Capital  expenditures  were $2.0  million and $1.1 million in the first
quarter of fiscal 1997 and 1996, respectively.  The increase over the prior year
is  attributable  to increased  expenditures  in the  Photography  and Education
product lines.

         In the first  quarter of 1997, a dividend was not paid. It is projected
that fiscal 1997  dividends will be paid in December and June. A $0.35 per share
dividend  was paid  during  the first  quarter  of fiscal  1996,  totaling  $3.4
million. Approximately $1.0 million of the $3.4 million of fiscal 1996 dividends
was paid to the ESOP trust,  which used those funds to make payments on its loan
from the Company.

         Income taxes  accrued are a negative $4.6 million at September 28, 1996
compared  to $3.2  million  at June 29,  1996 and a  negative  $7.6  million  at
September 30, 1995. The decrease from June is the result of the payment of taxes
for the prior  fiscal  year,  coupled  with the  provision  for the tax  benefit
associated  with the seasonal losses this year. The decreased tax benefit at the
end of first quarter  compared to the prior year first quarter end is the result
of the lower pre-tax loss in this fiscal year  compared to the combined  pre-tax
loss and pre-tax extraordinary item in the prior fiscal year.

<PAGE>

         For  the  three  months  ended   September  28,  1996,  cash  and  cash
equivalents  declined  $8.0  million to $.6 million as compared to a decrease of
$72.7 million to $1.8 million for the three months ended September 30, 1995. The
decrease  in the decline was  primarily  the result of funding the ESOP  trust's
purchase of  substantially  all  remaining  outstanding  shares of the Company's
stock in first quarter of fiscal 1996.

         Cash used in  operating  activities  was $27.2  million in the  quarter
ended  September  28,  1996,  compared  to $27.9  million in the  quarter  ended
September 30, 1995, as described below.

         Net  losses  were $8.3  million  in the first  quarter  of fiscal  1997
compared to $13.1 million in fiscal 1996.  The primary  causes for the decreased
loss were decreases in ESOP  compensation  (which is a non-cash expense) and the
fiscal 1996 extraordinary item charge .

         Accounts  receivable  decreased  $15.0  million in the first quarter of
fiscal 1997 compared to a decline of $18.6 million in fiscal 1996. The reduction
in the  decline  was  primarily  the result of  increased  sales and  additional
accounts  receivable  balances  related to Delmar in the first quarter of fiscal
1997 compared with fiscal 1996.

         Customer deposits decreased $7.7 million in the first quarter of fiscal
1997  compared to a decline of $4.6 million in fiscal 1996.  The larger  decline
was  attributable  to increased  sales and Delmar  sales  activity in the first
quarter of fiscal 1997.

         Income taxes  accrued  decreased  $7.8 million in the first  quarter of
fiscal 1997 compared to a decline of $18.0  million in fiscal 1996.  The decline
was primarily  attributable to the decreased  pre-tax loss of the Company in the
first quarter of fiscal 1997  compared to the combined  pre-tax loss and pre-tax
extraordinary  item in fiscal 1996 and a lower  payment of taxes  related to the
prior fiscal year.

         Net cash used by investing  activities was $2.0 million for the quarter
ended September 28, 1996 compared to $5.2 million  provided in the quarter ended
September  30,  1995.  The  primary  reason  for the  decrease  was the  sale of
marketable securities of $6.2 million to finance the ESOP Transactions in fiscal
1996.

         Net cash  provided in  financing  activities  was $21.0  million in the
quarter  ended  September 28, 1996 compared to $50.0 million used in the quarter
ended  September  30, 1995.  The increase  was  attributable  to the fiscal 1996
purchase of  substantially  all the remaining shares of Herff Jones stock by the
ESOP Trust for $188.3 million,  partially  offset by the related net increase in
borrowings of $134.7 million. In addition, there were higher seasonal borrowings
under the revolver in fiscal 1997 of $17.2 million  partially offset by payments
on long-term debt of $8.2 million.

         Deferred Compensation at September 28, 1996 decreased to $218.8 million
from $223.0  million at June 29, 1996 and $235.3  million at September 30, 1995.
The decrease is the result of recording ESOP shares committed to be released.



<PAGE>



                           PART II - OTHER INFORMATION

Exhibits and Reports on Form 8-K

Item 6.

(a)  The following Exhibits are filed as a part of this report:

     Exhibit 27 Financial Data Schedule 

(b)  Reports on Form 8-K;  
     No reports on Form 8-K were filed  during the quarter
     for which the report is filed.




                                    SIGNATURE


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



                                      HERFF JONES, INC.
                                      (Registrant)





                                       By: / S / Lawrence F. Fehr
                                           -------------------------------------
                                                   Lawrence F. Fehr
                                                   Vice President and
                                                   Chief Financial Officer



November 12, 1996