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   December 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 February 8,
1999:


                  Class      
     Common Stock, without par value                  9,525,710

<PAGE>




Voluntary filing - effective  January 30, 1998, Herff Jones, Inc. is not subject
to filing requirements of the Securities Exchange Act of 1934.





                                      INDEX

Part  I. - Financial Information                                       Page No.
                          
       Consolidated Statement of Operations -
          Second Quarter and Six Months Ended December 26, 1998
          and December 27, 1997                                            3

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

       Consolidated Statement of Cash Flows -
          Six Months Ended December 26, 1998 and December 27, 1997         5

       Notes to Consolidated Financial Statements                     6 -  8

       Management's Discussion and Analysis of
          Financial Condition and Results of Operations               9 - 13


Part II. - Other Information                                              14


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>

                                                             Second Quarter Ended                    Six Months Ended
                                                   -------------------------------------   -------------------------------------

                                                   December 26, 1998   December 27, 1997   December 26, 1998   December 27, 1997
                                                   -----------------   -----------------   -----------------   -----------------

<S>                                                <C>                 <C>                 <C>                 <C>        
Net sales                                          $    77,508         $    74,574         $   130,257         $   124,638

Cost of sales (excludes ESOP compensation)              38,105              35,984              67,831              65,659

Selling, general, and administrative
expenses (excludes ESOP compensation)                   33,463              27,586              61,973              49,715

ESOP compensation                                        6,010               4,502              12,931               9,557
                                                   -----------         -----------         -----------         -----------
Income (loss) from operations                              (70)              6,502             (12,478)               (293)

Interest income                                              5                   1                  83                  52
Interest expense                                         3,781               4,621               7,573               9,091
                                                   -----------         -----------         -----------         -----------

Income (loss) before income taxes
and extraordinary item                                  (3,846)              1,882             (19,968)             (9,332)

Income taxes                                             1,997                (686)             10,268               3,400
                                                   -----------         -----------         -----------         -----------

Net income (loss) before extraordinary item             (1,849)              1,196              (9,700)             (5,932)

Extraordinary loss on early
extinguishment of debt, net of taxes                      (237)                 --                (685)                 --
                                                   -----------         -----------         -----------         -----------

Net income (loss)                                  $    (2,086)        $     1,196         $   (10,385)        $    (5,932)
                                                   ===========         ===========         ===========         ===========

Earnings per common share:
Income (loss) before extraordinary item            $     (0.60)        $      0.47         $     (3.23)        $     (2.41)
Extraordinary item                                       (0.07)                 --               (0.23)                 --
                                                   -----------         -----------         -----------         -----------
Net income (loss)                                  $     (0.67)        $      0.47         $     (3.45)        $     (2.41)
                                                   ===========         ===========         ===========         ===========

Weighted average number of
common shares outstanding                            3,102,872           2,560,604           3,006,270           2,464,775
                                                   ===========         ===========         ===========         ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


<PAGE>

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

<TABLE>
<CAPTION>
                                                               (Unaudited)                         (Unaudited)
                                                            December 26, 1998   June 27, 1998   December 27, 1997
                                                            -----------------   -------------   -----------------
<S>                                                            <C>               <C>               <C>      
Assets:                                                        
      Current Assets
        Cash and cash equivalents                              $      76         $   8,964         $   1,117
        Accounts receivable                                       49,663            64,689            45,482
        Inventories                                               47,926            39,526            46,241
        Prepaid expense                                            7,562             2,321             6,875
        Deferred income taxes                                     10,887            10,887             9,106
                                                               ---------         ---------         ---------
           Total Current Assets                                  116,114           126,387           108,821

      Non-Current Assets
        Property, plant, and equipment                           104,990            99,897           100,439
        Accumulated depreciation                                 (55,528)          (51,029)          (49,217)
                                                               ---------         ---------         ---------
           Net Property, Plant, and Equipment                     49,462            48,868            51,222

        Deferred income taxes                                      1,669             1,668                --
        Deferred financing cost, net and other assets              2,921             3,454             4,296
                                                               ---------         ---------         ---------
           Total Non-Current Assets                               54,052            53,990            55,518

Total Assets                                                   $ 170,166         $ 180,377         $ 164,339
                                                               =========         =========         =========

Liabilities and Shareholders' Equity:
      Current Liabilities
        Trade accounts payable                                 $   6,970         $   6,625         $   5,546
        Salaries and wages payable                                 5,638             5,430             5,089
        Interest payable                                           3,648             4,190             5,096
        Customer deposits                                         35,089            18,861            33,499
        Commissions payable                                        6,373            22,064             6,466
        Income taxes accrued                                     (10,442)           12,199            (3,349)
        Other accrued liabilities                                  7,570             9,201             7,031
        Current portion of long term debt                         43,892            19,678            24,626
                                                               ---------         ---------         ---------
           Total Current Liabilities                              98,738            98,248            84,004

      Non-Current Liabilities
        Other                                                     12,482             6,232             3,129
        Long term debt                                           104,356           122,903           149,459
        Deferred income taxes                                         --                --               442
                                                               ---------         ---------         ---------
           Total Non-Current Liabilities                         116,838           129,135           153,030

Total Liabilities                                                215,576           227,383           237,034

Shareholders' Equity (Deficit)
      Common stock                                                 5,673             5,683             5,694
      Retained earnings                                          130,697           137,885           121,583
      Deferred compensation                                     (181,670)         (189,927)         (198,183)
      Foreign currency translation                                  (110)              (60)              (40)
      Excess of cost over market, net (shares committed
      to be released)                                                 --              (587)           (1,749)
                                                               ---------         ---------         ---------
Total Shareholders' Equity (Deficit)                             (45,410)          (47,006)          (72,695)

Total Liabilities and Shareholders' Equity (Deficit)           $ 170,166         $ 180,377         $ 164,339
                                                               =========         =========         =========
</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>

                                                                                      Six Months Ended
                                                                             -------------------------------------

                                                                             December 26, 1998   December 27, 1997
                                                                             -----------------   -----------------
<S>                                                                               <C>                <C>      
Cash flows from operating activities:
     Net income (loss)                                                            $(10,385)          $ (5,932)
        Adjustments to reconcile net income (loss) to net cash (used)
        provided by operating activities:
           Depreciation and amortization                                             4,625              3,915
           Amortization and write off of financing cost                                536                294
           ESOP compensation (before dividend exclusion)                            13,752              9,740
           Tax benefit (effect) of ESOP                                               (576)              (330)
           Long-term incentive plan expense                                          6,250                890
           Other                                                                       (50)               (42)
           (Gain) loss on disposal of property, plant and equipment, net               (10)                (1)
           Increase (decrease) in cash generated by changes in assets
           and liabilities
              Accounts receivable                                                   15,026             10,227
              Inventories                                                           (8,400)            (8,278)
              Prepaid expenses                                                      (5,241)            (5,059)
              Trade accounts payable                                                   345               (310)
              Salaries and wages                                                       208                 41
              Interest payable                                                        (542)                14
              Customer deposits                                                     16,228             13,991
              Commissions payable                                                  (15,691)           (10,398)
              Income taxes payable                                                 (22,641)           (12,896)
              Deferred income taxes                                                     (1)                (1)
              Other accrued liabilities                                             (1,631)            (2,582)
              Other assets                                                              (3)                --
                                                                                  --------           --------
        Total adjustments                                                            2,184               (785)
                                                                                  --------           --------
Net cash (used) provided by operating activities                                    (8,201)            (6,717)

Cash flows from investing activities:
     Proceeds from disposal of property, plant and equipment                            15                  2
     Capital expenditures                                                           (5,224)            (6,124)
                                                                                  --------           --------
Net cash (used) provided by investing activities                                    (5,209)            (6,122)

Cash flows from financing activities:
     Redemptions of common stock                                                      (193)               (46)
     Dividends declared                                                               (952)              (570)
     Increase (decrease) in revolver, net                                           31,969             13,807
     Decrease in long term debt                                                    (26,302)            (5,078)
                                                                                  --------           --------
Net cash (used) provided by financing activities                                     4,522              8,113

Cash and cash equivalents:
     Net increase (decrease)                                                        (8,888)            (4,726)
     Beginning of period                                                             8,964              5,843
                                                                                  ========           ========
     End of period                                                                $     76           $  1,117
                                                                                  ========           ========

</TABLE>
See accompanying notes to unaudited consolidated financial statements.



<PAGE>


              Notes to Unaudited Consolidated Financial Statements
                       Six Months Ended December 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  December  26,  1998,  and  the  results  of  its
    operations and cash flows for the six months ended December 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 second fiscal quarter is the second highest 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

                 December 26, 1998    June 27, 1998        December 27, 1997
                 -----------------    -------------        -----------------
                       $3,939           $   5,744               $4,340


Note 3 - Inventories

    The components of inventory balances are summarized below:

<TABLE>
<CAPTION>


                                                       December 26, 1998    June 27, 1998        December 27, 1997
                                                       -----------------    -------------        -----------------

<S>                                                        <C>                  <C>                 <C>    
    Raw materials and supplies (includes gold)             $19,223              $17,023             $18,469
    Work-in-process                                         17,582               14,169              16,649
    Finished goods                                          11,121                8,334              11,123
                                                           -------              -------             -------
                                                           $47,926              $39,526             $46,241
                                                           =======              =======             =======
</TABLE>



<PAGE>




<TABLE>
<CAPTION>
Note 4 - Financing
                                                       December 26, 1998    June 27, 1998        December 27, 1997
                                                       -----------------    -------------        -----------------
Long-Term Debt consists of the following:

<S>                                                      <C>                 <C>                 <C>      
Senior Bank Facility (Revolver)                          $  31,969           $   8,417           $  13,807
                                                    
Senior Bank Facility (Term)                                 21,859              27,379              32,678
                                                    
Senior Subordinated Notes                                   86,820              99,185             120,000
                                                    
1994 Industrial Development                         
Revenue Bonds Due in 2019                                    7,600               7,600               7,600
                                                         ---------           ---------           ---------
                                                    
                                                           148,248             142,581             174,085
                                                    
Less:  Current Portion                                     (43,892)            (19,678)            (24,626)
                                                         ---------           ---------           ---------
                                                    
Long-Term Debt                                           $ 104,356           $ 122,903           $ 149,459
                                                         =========           =========           =========
</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>
                                       Common Stock                       Foreign                                        Total
                                  ----------------------      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)             -          ($49,033)
---------------------------       =========      ======      ========      ====       =========          ======         ========
Stock Purchases                      (4,446)         (2)         (191)        -            -                 -              (193)
Dividends declared on allocated
shares ($.35/share)                   -            -             (952)        -            -                 -              (952)
Foreign currency translation          
adjustment                            -            -            -           (22)           -                 -               (22)
Shares committed to be released       -            -            2,748         -           4,128              -             6,876
Net income for the quarter            -            -           (2,086)        -            -                 -            (2,086)
                                  ---------      ------      --------     -----       ---------          ------         -------- 
Balance  December 26, 1998        9,525,710      $5,681      $130,689     ($110)      ($181,670)             -          ($45,410)
---------------------------       =========      ======      ========     =====       =========          ======         ========
</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 second quarter of fiscal 1999 and fiscal
1998 was ($8,321) and  ($7,166),  respectively  and the first six months of 1999
and 1998 was  ($10,435) and ($5,974),  respectively.  These amounts  include the
reported net loss adjusted by the non-cash  effect of changes in the  cumulative
translation adjustment.

Note 8 - Extraordinary Item

During  the first six  months of fiscal  1999,  the  Company  repurchased  $12.4
million of its Senior Subordinated Notes from existing noteholders at a premium.
As a result,  the Company  recorded a $.7 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  annual effective tax rate of 50.8% 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  financial  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. Substantially, all of the increase in
the  estimated  effective  tax rate to slightly  over 51.0% for fiscal 1999 from
slightly  over 36.0% in fiscal  1998 is  attributable  to this item for both the
second quarter and the six month period.


<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 second  fiscal  quarter are at the second
highest level of the year. 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 second quarter ended December 26, 1998 and December 27, 1997


         General. Net sales rose 3.9% to $77.5 million in fiscal 1999 from $74.6
million in fiscal 1998.  Operating  profit decreased to a loss of $.1 million in
fiscal 1999 from a profit of $6.5 million in fiscal 1998.  Net income  decreased
to a loss of $2.1 million in fiscal 1999 from a profit of $1.2 million in fiscal
1998.

         Net Sales. Net sales increased $2.9 million or 3.9% to $77.5 million in
fiscal 1999 from $74.6 million in fiscal 1998. Such increases were due primarily
to  modest  price  increases  in  all  product  lines  and  unit  growth  in the
Photography  and Jewelry  product lines,  offset by lower sales in the Education
product line due to earlier shipment of backlogs in the first quarter.

         Cost Of Sales.  Cost of sales  increased  $2.1 million or 5.9% to $38.1
million in fiscal  1999 from $36.0  million in fiscal  1998.  Cost of sales as a
percentage of sales increased to 49.2% in fiscal 1999 from 48.3% in fiscal 1998.
The increase was due primarily to higher  manufacturing  costs in the Fine Paper
product  line,  offset  somewhat  by  improved  operating   performance  in  the
Photography product line.



<PAGE>



         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased  $5.9  million or 21.4% to $33.5  million in
fiscal 1999 from $27.6  million in fiscal 1998.  Such expense as a percentage of
sales is 43.2% in fiscal 1999,  compared to 37.0% in fiscal  1998.  The increase
was predominantly  attributable to increases in Long-Term  Management  Incentive
expense and information  technology  consulting,  coupled with higher commission
and selling expenses resulting from increased fiscal 1999 sales.

         ESOP  Compensation.  ESOP  compensation  increased $1.5 million to $6.0
million in fiscal 1999 from $4.5 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  $.8  million  to $3.8
million  in  the  second  quarter  of  fiscal  1999  from  $4.6  million  in the
corresponding period of fiscal 1998 due primarily to a reduction of average debt
outstanding.

         Income Tax  Benefit.  The second  quarter  income tax  benefit was $2.0
million in fiscal  1999,  compared to an expense of $.7 million in fiscal  1998,
due to the fiscal  1999 loss  before  income  taxes  (compared  to a fiscal 1998
profit)  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  financial  reporting
purposes;  however,  ESOP compensation in excess of share cost is not deductible
for income tax purposes.

         Extraordinary Item. During the second quarter,  the Company repurchased
$4.4 million of its Senior  Subordinated  Notes from existing  noteholders  at a
premium.  As a result,  the Company recorded a $.2 million charge reflecting the
premium cost and the write off of previously  deferred  financing  costs, net of
the applicable tax benefit.

         Net Loss. The second  quarter net loss was $2.1 million,  compared to a
profit of $1.2  million  in fiscal  1998.  The  unfavorable  comparison  was due
primarily to the aforementioned increases in selling, general and administrative
expenses,  higher  ESOP  compensation  cost  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 Photography  product line and
the impact of the higher effective tax rate, as discussed above.


         For the six months ended December 26, 1998 and December 27, 1997


         General.  Net sales  rose 4.6% to $130.3  million  in fiscal  1999 from
$124.6 million in fiscal 1998.  Operating  losses  increased to $12.5 million in
fiscal  1999,  compared to $.3 million in fiscal 1998.  Net losses  increased to
$10.4 million in fiscal 1999 from $5.9 million in fiscal 1998.

         Net sales.  Net sales  increased $5.7 million or 4.6% to $130.3 million
in fiscal 1999. The increase was due primarily to modest price  increases in all
product lines and unit growth in the Photography and Jewelry product lines.

         Cost of Sales.  Cost of sales  increased  $2.1 million or 3.2% to $67.8
million in fiscal  1999 from $65.7  million in fiscal  1998.  Cost of sales as a
percentage of sales decreased to 52.1% in fiscal 1999 from 52.7% in fiscal 1998.
The  decrease  was due to  improved  operating  performance  in the  Jewelry and
Photography product lines, offset by somewhat higher  manufacturing costs in the
Fine Paper product line.


         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased  $12.3  million or 24.7% to $62.0 million in
fiscal 1999 from $49.7  million in fiscal 1998.  The increase was  predominantly
attributable  to  increases  in  Long-Term   Management  Incentive  expense  and
information  technology  consulting,  coupled with higher commission and selling
expenses resulting from increased fiscal 1999 sales.

         ESOP  Compensation.  ESOP compensation  increased $3.4 million to $12.9
million in fiscal 1999 from $9.6 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  $1.5  million to $7.5
million in fiscal 1999 from $9.1  million in fiscal  1998,  due  primarily  to a
reduction of average debt outstanding.

         Income Tax  Benefit.  The income  tax  benefit  for the period is $10.3
million for fiscal 1999,  compared to $3.4  million in fiscal  1998,  due to the
increase in the loss before 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
financial reporting purposes; however, ESOP compensation in excess of share cost
is not deductible for income tax purposes.

         Extraordinary  Item. During the period,  the Company  repurchased $12.4
million of its Senior Subordinated Notes from existing noteholders at a premium.
As a result,  the Company  recorded a $.7 million charge  reflecting the premium
cost and the  write-off  of  previously  deferred  financing  costs,  net of the
applicable tax benefit.

         Net Loss.  The net loss for the period  increased to $10.4 million from
$5.9   million  in  fiscal  1998.   The  increase  was  due   primarily  to  the
aforementioned  increases  in  selling,  general  and  administrative  and  ESOP
compensation  expense 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  Photography  product line 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 six
months require 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 December 26, 1998, of $32.0 million 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 $5.2  million and $6.1 million in the first
six months 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.


<PAGE>




         Income taxes accrued are a negative $10.4 million at December 26, 1998,
compared to $12.2  million  payable at June 27, 1998 and a negative $3.3 million
at December  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 year. The increased tax benefit at the
end of the second quarter,  compared to the prior year second 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 six months ended December 26, 1998,  cash and cash  equivalents
declined  $8.9  million to $.1 million as compared to a decrease of $4.7 million
to $1.1 million for the six months ended December 27, 1997.

         Cash used in operating  activities  was $8.2 million for the six months
ended  December  26,  1998,  compared to $6.7  million for the six months  ended
December 27, 1997, as described below.

         Net  losses  were  $10.4  million  in the six  months of  fiscal  1999,
compared to $5.9  million in fiscal 1998.  This was  primarily  attributable  to
increases in Long-Term Management  Incentive expense,  ESOP compensation expense
and  information  technology  consulting,  partially  offset by increased  gross
profit in the Photography product line and an increased tax benefit.

         Accounts receivable decreased $15.0 million in fiscal 1999, compared to
a decrease of $10.2  million in fiscal 1998,  as a result of collecting a larger
portion of the higher receivables  balance as of the end of fiscal 1998, coupled
with a smaller  sales  increase  in the six months of fiscal  1999  compared  to
fiscal 1998.

         Customer deposits  increased by $2.2 million to $16.2 million primarily
due to the timing of deposit receipts for the Yearbook product line.

         Commissions  payable decreased $15.7 million for fiscal 1999,  compared
to $10.4  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 payable  decreased $22.6 million in fiscal 1999,  compared
to a decline  of $12.9  million  in  fiscal  1998.  The  decline  was  primarily
attributable  to the  increased  pre-tax  loss of the  Company  in 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.

         Net cash used by  investing  activities  was $5.2  million  for the six
months of fiscal 1999,  compared to $6.1  million for fiscal 1998.  The decrease
from prior year is due to timing of capital expenditures.

         Net cash  provided by financing  activities  was $4.5 million in fiscal
1999,  compared to $8.1 million in fiscal 1998.  During the six months of fiscal
1999, the Company made its scheduled  payment on long-term debt and  repurchased
$12.4  million of Senior  Subordinated  Notes with funds drawn on its  Revolving
Credit Agreement.


<PAGE>





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.

         The  Company  maintains   material  business   relationships  with  its
suppliers of raw materials,  services and utilities.  The Company will conduct 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 incurred
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 not be completed  before December
31, 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


February 9, 1999