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 26, 1998


                                       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 Identification Number)
 Incorporation or Organization)


   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         NO X*

* Effective  January 30, 1998,  registrant  is no longer  subject to such filing
requirements.

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 2,
1998:

                    Class
                    -----
          Common Stock, without par value                    9,530,156

<PAGE>

                                      INDEX



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

       Consolidated Statement of Operations -
          First Quarter Ended September 26, 1998 and September 27, 1997       3


       Consolidated Balance Sheet -
          As of September 26, 1998, June 27, 1998 and September 27, 1997      4


       Consolidated Statement of Cash Flows -
          First Quarter Ended September 26, 1998 and September 27, 1997       5


       Notes to 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.
                      Consolidated Statement of Operations
            (Amounts in thousands of dollars, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                           First Quarter Ended
                                                ----------------------------------------
                                                September 26, 1998    September 27, 1997
                                                ------------------    ------------------
<S>                                             <C>                        <C>        
Net sales                                       $    52,749                $    50,064
                                                                        
Cost of sales (excludes ESOP compensation)           30,142                     29,675
                                                                        
Selling, general, and administrative                                    
expenses (excludes ESOP compensation)                28,094                     22,129
                                                                        
ESOP compensation                                     6,921                      5,055
                                                -----------                -----------
Income (loss) from operations                       (12,408)                    (6,795)
                                                                        
Interest income                                          78                         51
Interest expense                                      3,792                      4,470
                                                -----------                -----------
Income (loss) before income taxes                                       
and extraordinary item                              (16,122)                   (11,214)
                                                                        
Income taxes                                          8,271                      4,086
                                                -----------                -----------
Net income (loss) before extraordinary item          (7,851)                    (7,128)
                                                                        
Extraordinary loss on early extinguishment of                           
debt, net of taxes                                     (448)                        --
                                                -----------                -----------
                                                                        
Net income (loss)                               $    (8,299)               $    (7,128)
                                                ===========                ===========
                                                                        
Earnings per common share:                                              
Income (loss) before extraordinary item         $     (2.68)               $     (3.57)
Extraordinary item                                    (0.15)                        --
                                                -----------                -----------
Net income (loss)                               $     (2.83)               $     (3.57)
                                                ===========                ===========
                                                                        
Weighted average number of common shares                                
outstanding for earnings per share                2,933,819                  1,995,464
                                                ===========                ===========
</TABLE>
                                                                 
See accompanying notes to unaudited  consolidated financial statements.


<PAGE>


                               Herff Jones, Inc.
                           Consolidated Balance Sheet
         As of September 26, 1998, June 27, 1998 and September 27, 1997
                        (Amounts in thousands of dollars)

<TABLE>
<CAPTION>
                                                           (Unaudited)                                 (Unaudited)
                                                        September 26, 1998     June 27, 1998       September 27, 1997
                                                        ------------------     --------------      ------------------
Assets:
     Current Assets
<S>                                                           <C>                 <C>                 <C>
       Cash and cash equivalents                              $   2,571           $   8,964           $   2,259
       Accounts receivable                                       47,893              64,689              42,624
       Inventories                                               45,898              39,526              42,574
       Prepaid expenses                                           8,261               2,321               7,370
       Deferred income taxes                                     10,887              10,887               9,106
                                                              ---------           ---------           ---------
          Total Current Assets                                  115,510             126,387             103,933

     Non-Current Assets
       Property, plant, and equipment                           102,379              99,897              98,475
       Accumulated depreciation                                 (53,236)            (51,029)            (47,285)
                                                              ---------           ---------           ---------
          Net Property, Plant, and Equipment                     49,143              48,868              51,190

       Deferred income taxes                                      1,668               1,668                  --
       Deferred financing cost, net and other assets              3,139               3,454               4,443
                                                              ---------           ---------           ---------
          Total Non-Current Assets                               53,950              53,990              55,633

Total Assets                                                  $ 169,460           $ 180,377           $ 159,566
                                                              =========           =========           =========


Liabilities and Shareholders' Equity:
     Current Liabilities
       Trade accounts payable                                 $  12,160           $   6,625           $  11,448
       Salaries and wages payable                                 5,394               5,430               5,222
       Interest payable                                           1,381               4,190               1,833
       Customer deposits                                         12,061              18,861              13,142
       Commissions payable                                        4,700              22,064               4,329
       Income taxes accrued                                      (8,035)             12,199              (4,090)
       Current portion of long term debt                         61,631              19,678              42,971
       Other accrued liabilities                                  7,766               9,201               7,243
                                                              ---------           ---------           ---------
          Total Current Liabilities                              97,058              98,248              82,098

     Non-Current Liabilities
       Long-term debt                                           112,078             122,903             152,330
       Other                                                      9,357               6,232               3,127
                                                              ---------           ---------           ---------
          Total Non-Current Liabilities                         121,435             129,135             155,457

Total Liabilities                                               218,493             227,383             237,555

Shareholders' Equity (Deficit)
     Common stock                                                 5,683               5,683               5,694
     Retained earnings                                          131,170             137,885             120,956
     Deferred compensation                                     (185,798)           (189,927)           (202,311)
     Excess of cost over market (shares committed
     to be released)                                                 --                (587)             (2,326)
     Foreign currency translation                                   (88)                (60)                 (2)
                                                              ---------           ---------           ---------
Total Shareholders' Equity (Deficit)                            (49,033)            (47,006)            (77,989)

Total Liabilities and Shareholders' Equity (Deficit)          $ 169,460           $ 180,377           $ 159,566
                                                              =========           =========           =========
</TABLE>

See accompanying notes to unaudited  consolidated financial statements.


<PAGE>



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

<TABLE>
<CAPTION>


                                                                                      Three Months Ended
                                                                             --------------------------------------
                                                                             September 26, 1998  September 27, 1997
                                                                             ------------------  ------------------
Cash flows from operating activities:
<S>                                                                             <C>                <C>
    Net income                                                                  $ (8,299)          $ (7,128)
      Adjustments to reconcile net income to net cash (used)
      provided by operating activities:
         Depreciation and amortization                                             2,313              1,958
         Amortization and write off of financing cost                                315                147
         ESOP compensation (before dividend exclusion)                             6,876              5,035
         Tax benefit (effect) of ESOP                                               (576)              (330)
         Long-term incentive plan expense                                          3,125                445
         Other                                                                       (28)                (5)
         (Gain) loss on disposal of property, plant and equipment, net                 4                 (1)
         Increase (decrease) in cash generated by changes in assets
         and liabilities
           Accounts receivable                                                    16,796             13,085
           Inventories                                                            (6,372)            (4,611)
           Prepaid expenses                                                       (5,940)            (5,554)
           Trade accounts payable                                                  5,535              5,592
           Salaries and wages                                                        (36)               174
           Interest payable                                                       (2,809)            (3,249)
           Customer deposits                                                      (6,800)            (6,366)
           Commissions payable                                                   (17,364)           (12,535)
           Income taxes payable                                                  (20,234)           (13,637)
           Other accrued liabilities                                              (1,435)            (2,370)
                                                                                --------           --------
      Total adjustments                                                          (26,630)           (22,222)
                                                                                --------           --------
Net cash (used) provided by operating activities                                 (34,929)           (29,350)

Cash flows from investing activities:
    Proceeds from disposal of property, plant and equipment                            1                 --
    Capital expenditures                                                          (2,593)            (4,133)
                                                                                --------           --------
Net cash (used) provided by investing activities                                  (2,592)            (4,133)

Cash flows from financing activities:
    Redemption of common shares                                                       --                 (9)
    Premium on stock redemption                                                       --                (37)
    Increase in revolver, net                                                     50,150             32,373
    Payment of long-term debt                                                    (19,022)            (2,428)
                                                                                --------           --------
Net cash (used) provided by financing activities                                  31,128             29,899

Cash and cash equivalents:
    Net increase (decrease)                                                       (6,393)            (3,584)
    Beginning of period                                                            8,964              5,843
                                                                                --------           --------
    End of period                                                               $  2,571           $  2,259
                                                                                ========           ========
</TABLE>


See accompanying notes to unaudited consolidated financial statements.



<PAGE>



              Notes to Unaudited Consolidated Financial Statements
                      Three Months Ended September 26, 1998
                        (Amounts in thousands of dollars)

Note 1 - Adjustments

    The unaudited  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  26,  1998,  and  the  results  of its
    operations  and cash flows for the quarter ended  September 26, 1998.  These
    unaudited 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  principles for complete
    financial  statements.  These statements  should be read in conjunction with
    the  consolidated  financial  statements  and notes thereto  included in the
    Company's Form 10-K for the year ended June 27, 1998.

    The Company utilizes a 52/53 week fiscal year for accounting purposes ending
    on the last  Saturday in June.  Fiscal 1998 and fiscal 1999 each contains 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 26, 1998   June 27, 1998     September 27, 1997
                      ------------------   -------------     ------------------
                            $3,767             $5,744              $4,180


Note 3 - Inventories

    The components of inventory balances are summarized below:

<TABLE>
<CAPTION>


                                                       September 26, 1998   June 27, 1998    September 27, 1997
                                                       ------------------   -------------    ------------------

<S>                                                            <C>             <C>                 <C>
    Raw materials and supplies (includes gold)                 $20,537         $17,023             $19,182
    Work-in-process                                             16,199          14,169              13,727
    Finished goods                                               9,162           8,334               9,665
                                                              --------        --------            --------
                                                               $45,898         $39,526             $42,574
                                                               =======         =======             =======
                                                                         
</TABLE>


<PAGE>

<TABLE>
<CAPTION>



Note 4 - Financing
                                                       September 26, 1998   June 27, 1998        September 27, 1997
                                                       ------------------   -------------        ------------------
    Long-Term Debt consists of the following:

<S>                                                        <C>                  <C>                    <C>
    Senior Bank Facility (Revolver)                        $50,150              $8,417                 $32,373

    Senior Bank Facility (Term)                             24,729              27,379                  35,328

    Senior Subordinated Notes                               91,230              99,185                 120,000

    1994 Industrial Development
    Revenue Bonds Due in 2019                                7,600               7,600                   7,600
                                                         ---------            --------                --------

                                                           173,709             142,581                 195,301

    Less:  Current Portion                                 (61,631)            (19,678)                (42,971)
                                                         ----------           ---------                --------

    Long-Term Debt                                        $112,078            $122,903                $152,330
                                                          ========            ========                ========
</TABLE>



Note 5 - Earnings Per Share

Earnings  per  share  have  been  computed  by  dividing  income  (loss)  before
extraordinary  item,  extraordinary  item, and net income (loss) by the weighted
average number of allocated and committed to be released ESOP shares outstanding
for the period.


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, Net   Equity
                                   ---------      ------      --------   -----------  ------------  ----------------  ------------- 
<S>                               <C>            <C>         <C>          <C>           <C>              <C>             <C>      
Balance June 27, 1998             9,530,156      $5,683      $137,885      ($60)      ($189,927)          ($587)        ($47,006)
---------------------                                                                                               
Stock Purchases                       -            -            -            -             -                 -                -
Tax effect of cost over market of                                                                                   
ESOP shares committed to be                    
released, net                         -            -            -            -             -               (576)            (576)
Foreign currency translation          
adjustment                            -            -            -           (28)           -                 -               (28)
Shares committed to be released       -            -            1,584         -           4,129           1,163            6,876
Net income for the quarter            -            -           (8,299)        -            -                 -            (8,299)
                                  ---------      ------      --------      ----       ---------          ------         -------- 
Balance  September 26, 1998       9,530,156      $5,683      $131,170      ($88)      ($185,798)             -          ($49,033)
---------------------------       =========      ======      ========     =====      ==========          ======         ========
</TABLE>
                     
Prior to  fiscal  1998 the cost of ESOP  shares  committed  to be  released  was
greater than the  estimated  fair value of such shares.  The excess of cost over
market was recorded as a charge to a separate component of shareholders' equity,
net of the related tax effect.  Beginning in fiscal  1998,  the  estimated  fair
value of ESOP shares  committed  to be  released  exceeded  cost.  The excess of
market over cost has been credited to equity,  net of the related tax effect, to
the extent of the previous net charges recorded.  Hereafter,  the excess will be
credited to retained earnings.



<PAGE>




Note 7 - Comprehensive Income

The  Comprehensive  income  (loss)  for the  first  quarter  of 1999 and 1998 of
($8,327) and ($7,132), respectively,  includes the reported net loss adjusted by
the non-cash effect of changes in the cumulative translation adjustment.

Note 8 - Extraordinary Item

During the first quarter of fiscal 1999 the Company  repurchased $8.0 million of
its Senior  Subordinated  Notes from  existing  noteholders  at a premium.  As a
result,  the Company  recorded a $.4 million charge  reflecting the premium cost
and the write off of previously  deferred  financing cots, net of the applicable
tax benefit.

Note 9 - Income Taxes

Income taxes, excluding the extraordinary item, are computed on the basis of the
anticipated  effective  tax rate  for  fiscal  1999.  The  significant  tax rate
increase  results from the effect of a rising  estimated  share  value,  and the
related effect on ESOP compensation,  for reporting  purposes.  Estimated market
value per share is used in determining ESOP  compensation.  The excess of market
value  over  cost  per  share  is a  permanent  non-deductible  item  for use in
computing  income  taxes  payable.  In  fiscal  1999,  substantially  all of the
increase in the estimated effective tax rate from 36.6% to 50.8% is attributable
to this item.


<PAGE>



Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                                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.


RESULTS OF OPERATIONS

         The Company utilizes a 52/53 week year for accounting purposes.  Fiscal
1998 and fiscal 1999 each contains 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 the first quarter  typically  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 26, 1998 and September 27, 1997


         General. Net sales rose 5.4% to $52.7 million in fiscal 1999 from $50.0
million in fiscal 1998.  Operating  losses  increased to $12.4 million in fiscal
1999 from $6.8 million in fiscal 1998.  Net losses  increased to $8.3 million in
fiscal 1999 from $7.1 million in fiscal 1998.

         Net Sales. Net sales increased $2.7 million or 5.4% to $52.7 million in
fiscal 1999 from $50.0 million in fiscal 1998. Such increases were due primarily
to increases in the Education and Jewelry  product lines.  Increases were due to
modest price  increases  and earlier  unit  shipping in Jewelry.  The  Education
increase  was the result of  shipping a higher  beginning-of-quarter  backlog of
orders than in the prior year.

         Cost Of Sales.  Cost of sales  increased  $.4  million or 1.3% to $30.1
million in fiscal  1999 from $29.7  million in fiscal  1998.  Cost of sales as a
percentage of sales decreased to 57.1% in fiscal 1999 from 59.3% in fiscal 1998.
The  decrease  was due  primarily to improved  operating  performance  on higher
volumes in the Education and Jewelry  product lines,  offset  somewhat by higher
manufacturing costs in the Photography product line.



<PAGE>



         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative expenses increased $6.0 million or 27% to $28.1 million in fiscal
1999 from $22.1 million in fiscal 1998. Such expense as a percentage of sales is
53.3% in  fiscal  1999,  compared  to 44.2% in fiscal  1998.  The  increase  was
predominantly  attributable  to an increase  in the  Company's  general  expense
resulting primarily from increases in Long-Term Management Incentive expense and
information technology consulting.

         ESOP  Compensation.  ESOP  compensation  increased $1.8 million to $6.9
million in fiscal 1999 from $5.1 million in fiscal 1998.  The ESOP  compensation
expense increase resulted from a 36.5% increase in the estimated market value of
the shares committed to be released.

         Interest  Expense.  Interest  expense  decreased  $.7  million  to $3.8
million  in  the  first  quarter  of  fiscal  1999  from  $4.5  million  in  the
corresponding  quarter of fiscal 1998 due  primarily  to a reduction  of average
debt outstanding.

         Income Tax Benefit.  The first quarter income tax benefit  increased to
$8.3  million  in fiscal  1999  from $4.1  million  in fiscal  1998,  due to the
increase in the loss before income taxes and a higher fiscal 1999  effective tax
rate.  The increase in the  effective  tax rate is a result of increases in ESOP
per share values.  Rising share values  increase ESOP  compensation  expense for
reporting  purposes;  however,  ESOP compensation in excess of share cost is not
deductible for income tax purposes.

         Extraordinary  Item. During the first quarter,  the Company repurchased
$8.0 million of its Senior  Subordinated  Notes from existing  noteholders  at a
premium.  As a result,  the Company recorded a $.4 million charge reflecting the
premium cost and the write off of previously  deferred  financing  costs, net of
the applicable tax benefit.

         Net Loss.  The first  quarter net loss  increased  to $8.3 million from
$7.1 million in fiscal 1998. The increase was due primarily to increases in ESOP
compensation  and  selling,   general  and   administrative   expenses  and  the
extraordinary loss on the repurchase of Senior  Subordinated Notes from existing
noteholders  at a premium,  partially  offset by  increased  gross profit in the
Education and Jewelry  product lines and the impact of the higher  effective tax
rate, as discussed above.

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.

         The cash flow pattern and expectations of the Company's highly seasonal
business  result in the  classification,  at September 26, 1998, of $50.1 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 $2.5  million and $4.1 million in the first
quarter of fiscal 1999 and 1998, respectively.  The decrease from the prior year
is  attributable  to the  timing of  capital  expenditures,  mostly  related  to
information technology purchases.

         Income taxes  accrued are a negative $8.0 million at September 26, 1998
compared to $12.2  million  payable at June 27, 1998 and a negative $4.1 million
at September  27, 1997.  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 quarter.  The increased tax benefit at
the end of first  quarter  compared  to the prior year first  quarter end is the
result of the higher  pre-tax loss in this fiscal  year,  and an increase in the
effective tax rate for fiscal 1999.

         For  the  three  months  ended   September  26,  1998,  cash  and  cash
equivalents  declined  $6.4 million to $2.6 million as compared to a decrease of
$3.6 million to $2.3 million for the three months ended September 27, 1997.

         Cash used in  operating  activities  was $34.9  million in the  quarter
ended  September  26,  1998,  compared  to $29.4  million in the  quarter  ended
September 27, 1997, as described below.

         Accounts  receivable  decreased  $16.8  million in the first quarter of
fiscal 1999  compared to a decrease of $13.1 million in fiscal 1998, as a result
of  collecting  a portion  of the  higher  receivables  balance as of the end of
fiscal 1998.

         Commissions  payable  decreased  $17.4 million for the first quarter of
fiscal 1999  compared to $13.6  million a year ago.  The increase in the decline
resulted  from higher  commission  settlements  paid in fiscal 1999  compared to
fiscal 1998, due primarily to sales increases in fiscal 1998.

         Income taxes  accrued  decreased  $20.2 million in the first quarter of
fiscal 1999 compared to a decline of $13.6  million in fiscal 1998.  The decline
was primarily  attributable to the increased  pre-tax loss of the Company in the
first  quarter of fiscal 1999  compared to the pre-tax loss in fiscal 1998,  and
higher  tax  payments  in fiscal  1999  relating  to the  fiscal  1998  earnings
improvement over fiscal 1997.

         The Company made its scheduled payment on long-term debt in the quarter
and repurchased  $8.0 million of Senior  Subordinated  Notes with funds drawn on
its Revolving Credit Agreement.


YEAR 2000

         In fiscal 1994, the Company  adopted the client server  platform as its
information  technology  strategy  for the  future.  Development  of the initial
client server business system was begun at that time and was completed in fiscal
1998.  In  fiscal  1996,  the  Company  began  addressing  the year  2000  issue
specifically.  Other business  systems which required  replacement in the normal
course of business or which would not be year 2000  compliant  were  identified.
Four  business  systems  fell into this class and  installation  of  replacement
systems is scheduled for completion in fiscal 1999. The implementation  plan for
these four systems is slightly  behind  schedule,  but completion  within fiscal
1999 is anticipated.  The company  believes its most significant risk associated
with the year 2000 lies in the completion of the four business systems scheduled
for completion prior to December 31, 1999.

         Information technology systems that won't be converted to client server
by the end of  fiscal  1999 have  either  been  modified  to make them year 2000
compliant or have been replaced.

         Non-information  technology  systems are under a review  program by the
Resident Manager at each facility. All locations are anticipated to be year 2000
compliant by December, 1999.


<PAGE>


         The  Company  maintains   material  business   relationships  with  its
suppliers  of raw  materials,  services  and  utilities.  The  Company  has  not
conducted  a survey of its  critical  suppliers,  but  believes  most of its raw
materials  are  generic  enough  to allow  for easy  substitution.  However,  if
alternative   suppliers  are  also  unable  to  meet  the   Company's   delivery
requirements,  or if its utility suppliers are unable to operate,  the Company's
business or operations could be adversely affected.

         The total year 2000 project cost was approximately $1.5 million,  which
included  $1.0 million to purchase and  implement new hardware and software that
was capitalized during fiscal 1998 and $.5 million that was expensed as occurred
in fiscal 1998.  Spending on the new systems scheduled for installation prior to
December 31, 1999 relates to on-going technology upgrades and is not viewed as a
response to the year 2000 issue.

         There is currently  no  contingency  plan in place which would  address
business  operations  if the  systems  are not  completed  by  January  2000.  A
contingency  plan  would be  developed  at such  time as it is  determined  that
installation  of the  replacement  systems  will  lapse  beyond  June 30,  1999.
Regarding contingency plans for its material supplier relationships, the Company
believes the nature of its business and diversity of its supplier base minimizes
the risk to its operations.

         The  foregoing   information   regarding  year  2000  preparations  and
compliance  are  forward-looking  statements  subject to important  factors that
could cause Management's expectations to be materially inaccurate.  Such factors
include  unpredictability  of the  timing  of full  implementation  of year 2000
compliant  systems and the year 2000 compliant status of information  systems of
the Company's existing and potential alternative suppliers.




<PAGE>

                           PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K


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

      None.



(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 10, 1998