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 March 29, 1997

                                       OR

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

             For the Transition Period From __________ to __________

Commission File Number  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 May 9, 1997:

                         Class

         Common Stock, without par value                  9,612,563



<PAGE>

                                      INDEX


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

       Condensed Consolidated Statement of Operations -
          Third Quarter and Nine Months Ended March 29, 1997
          and March 30, 1996                                                  3

       Condensed Consolidated Balance Sheet -
          As of March 29, 1997, June 29, 1996 and March 30, 1996              4

       Condensed Consolidated Statement of Cash Flows -
          Nine Months Ended March 29, 1997 and March 30, 1996                 5

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


<TABLE>
<CAPTION>
                                Third Quarter Ended                      Nine Months Ended
                                -------------------                      -----------------
                          March 29, 1997    March 30, 1996      March 29, 1997   March 30, 1996
                          --------------    --------------      --------------   --------------


<S>                          <C>              <C>                  <C>              <C>        
Net Sales                    $    58,264      $    50,239          $   173,208      $   150,057
                                                                                  
Cost of sales (excludes                                                           
   ESOP compensation)             28,559           22,614               92,632           76,590
                                                                                  
Selling, general and                                                              
   administrative expenses                                                        
   (excludes ESOP                                                                 
   compensation)                  26,785           23,172               70,820           63,157
                                                                                  
ESOP compensation                                                                 
   Current year service            4,123            3,603               11,844            9,529
   Prior year service                 --               --                   --            4,033    
                                                                                  
Restructuring charge                  --            2,145                   --            2,145
                             -----------      -----------          -----------      -----------
                                                                                  
                                                                                  
Income (loss) from                                                                
   operations                     (1,203)          (1,295)              (2,088)          (5,397)
                                                                                  
Interest income                        2                7                   10              622
Interest expense                   4,937            4,746               15,049           13,594
                             -----------      -----------          -----------      -----------
                                                                                  
                                                                                  
Income (loss) before                                                              
   income taxes and                                                               
   extraordinary item             (6,138)          (6,034)             (17,127)         (18,369)
                                                                                  
Income taxes                       2,179            2,299                6,080            6,999
                             -----------      -----------          -----------      -----------
                                                                                  
Net income (loss)                                                                 
   before                                                                         
   extraordinary item             (3,959)          (3,735)             (11,047)         (11,370)
                                                                                  
Extraordinary item:                                                               
   Prepayment fee on                                                              
   the senior ESOP                                                                
   notes retirement,                                                              
   less applicable tax                                                            
   benefit of $3,621                  --               --                   --           (5,884)
                             -----------      -----------          -----------      -----------
Net income (loss)            $    (3,959)     $    (3,735)         $   (11,047)     $   (17,254)
                               =========        =========            =========        =========
                                                                                  
                                                                                  
Income (loss) per                                                                 
   common share              $     (1.84)     $     (2.34)         $     (5.50)     $    (11.87)
                               =========        =========            =========        =========
                                                                                  
                                                                                  
Weighted average number                                                           
   of common shares                                                               
   outstanding                 2,150,353        1,596,619            2,008,348        1,452,569
                               =========        =========            =========        =========


See accompanying notes to unaudited condensed consolidated financial statements.

                                                                                  
</TABLE>
                                                                            

<PAGE>

                               Herff Jones, Inc.
                      Condensed Consolidated Balance Sheet
             As of March 29, 1997, June 29, 1996, and March 30, 1996
                        (Amounts in thousands of dollars)

                                     Unaudited                     Unaudited
                                  March 29, 1997  June 29, 1996  March 30, 1996
                                  --------------  -------------  --------------
Assets:
   Current Assets
      Cash and cash equivalents        $   1,740      $   8,680      $     982
      Accounts receivable                 52,172         54,066         42,134
      Inventories                         55,635         36,941         50,132
      Prepaid expense                      8,650          2,651          7,403
      Deferred income taxes                5,321          5,321          2,412
                                       ---------      ---------      ---------
          Total Current Assets           123,518        107,659        103,063
                                                                  
   Non-Current Assets                                             
      Property, plant, and                                        
         equipment                        91,600         87,741         75,266
      Accumulated depreciation           (43,117)       (38,700)       (37,060)
                                       ---------      ---------      ---------
         Net Property, Plant,                                     
            and Equipment                 48,483         49,041         38,206
                                                                  
      Deferred financing cost,                                    
         net and other assets              4,882          5,603          6,331
                                       ---------      ---------      ---------
         Total Non-Current                                        
            Assets                        53,365         54,644         44,537
                                                                  
Total Assets                           $ 176,883      $ 162,303      $ 147,600
                                       =========      =========      =========
                                                                  
                                                                  
Liabilities and Shareholders' Equity                              
   Current Liabilities                                            
      Trade accounts payable           $   7,352      $   7,541      $   4,520
      Salaries and wages payable           5,635          4,068          3,791
      Interest payable                     1,819          5,157          1,446
      Customer deposits                   50,119         19,856         45,307
      Commissions payable                 10,394         14,857          7,704
      Income taxes accrued                (6,428)         3,200        (10,825)
      Other accrued liabilities           10,391          9,749         10,999
      Current portion of                                          
         long term debt                   37,279         22,315         32,905
                                       ---------      ---------      ---------
         Total Current                                            
            Liabilities                  116,561         86,743         95,847
                                                                  
   Non-Current Liabilities                                        
      Other                                2,149          2,247          1,569
      Long term debt                     157,629        173,574        173,100
      Deferred income taxes                  304             81           (402)
                                       ---------      ---------      ---------
         Total Non-Current                                        
            Liabilities                  160,082        175,902        174,267
                                                                  
Total Liabilities                        276,643        262,645        270,114
                                                                  
Shareholders' Equity (Deficit)                                    
   Common stock                            5,724          5,728          5,737
   Retained earnings                     107,931        119,525        101,219
   Deferred compensation                (210,568)      (222,953)      (227,067)
   Foreign currency translation               --             11             13
   Excess of cost over market                                     
      (shares committed to be                                     
      released)                           (2,847)        (2,653)        (2,416)
                                       ---------      ---------      ---------
Total Shareholders' Equity (Deficit)     (99,760)      (100,342)      (122,514)
                                                                  
Total Liabilities and                                             
   Shareholders' Equity (Deficit)      $ 176,883      $ 162,303      $ 147,600
                                       =========      =========      =========
                                                              
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>

                               Herff Jones, Inc.
                 Condensed Consolidated Statement of Cash Flows
                        (Amounts in thousands of dollars)
                                  (Unaudited)
                                                    Nine Months Ended
                                            ----------------------------------
                                            March 29, 1997      March 30, 1997
                                            --------------      --------------
Cash flows from operating activities:
   Net loss                                     $ (11,047)           $ (17,254)
      Adjustments to reconcile net income                          
      to net cash (used) provided by                               
      operating activities:                                        
         Depreciation and amortization              5,153                4,000
         Amortization and write off                                
            of financing cost                         721                  774
         ESOP compensation (before                                 
            dividend exclusion                     12,085               13,676
         Tax benefit of ESOP shares                                
            (cost over market)                        106                1,486
         Other                                        (11)                   7
         (Gain) loss on disposal of                                
         property, plant and equipment,                            
         net Increase (decrease) in cash                           
         generated by changes in assets                            
         and liabilities                               (2)                (302)
            Accounts receivable                     1,894                9,974
            Inventories                           (18,694)             (16,812)
            Prepaid expenses                       (5,999)              (5,907)
            Trade accounts payable                   (189)                 115
            Salaries and wages                      1,567                  (48)
            Interest payable                       (3,338)                 285
            Customer deposits                      30,263               30,421
            Commissions payable                    (4,463)              (6,978)
            Income taxes payable                   (9,628)             (21,253)
            Deferred income taxes                     223                   --
            Other accrued liabilities                 544                  (30)
            Other assets                               --                 (286)
                                                ---------            ---------
      Total adjustments                            10,232                9,122
                                                ---------            ---------
Net cash used by operating activities           $    (815)           $  (8,132)
                                                                   
Cash flows from investing activities:                              
   Proceeds from disposal of property,                             
      plant and equipment                              24                  488
   Capital expenditures                            (4,617)              (3,809)
   Sale of marketable securities                       --                6,219
                                                ---------            ---------
Net cash (used) provided by investing                              
   activities                                   $  (4,593)           $   2,898
                                                                   
Cash flows from financing activities:                              
   Purchase of shares by the ESOP trust                --             (188,278)
   Redemption of common shares                         (4)                  (8)
   Premium on stock redemption                       (166)                 (74)
   Dividends declared                                (381)              (2,687)
   Increase (decrease) in revolver, net            12,083              (13,741)
   Recapitalization financing cost                     --               (5,854)
   Payment of long term debt                       (7,107)              (4,500)
   Advance term payment                            (5,957)                  --
   New borrowings                                      --              216,646
   Prepayment of senior ESOP notes                     --              (69,826)
                                                ---------            ---------
Net cash used in financing activities           $  (1,532)           $ (68,322)
                                                                   
Cash and cash equivalents:                                         
   Net increase (decrease)                         (6,940)             (73,556)
   Beginning of period                              8,680               74,538
                                                ---------            ---------
   End of period                                $   1,740            $     982
                                                =========            =========

See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>                                                          

                         Part I - Financial Information
         Notes to Unaudited Condensed Consolidated Financial Statements
                        Nine Months Ended March 29, 1997
                        (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 March 29, 1997,  and the results of its operations
    for the three and nine month  periods  ended March 29,  1997,  and March 30,
    1996,  and cash flows for the nine month periods  ended March 29, 1997,  and
    March 30, 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 principles 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.

    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 or nine month basis are not  necessarily  indicative  of operating
    results for the full year.  Historically,  sales in the third fiscal quarter
    are at the third highest level of the year,  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

           March 29, 1997             June 29, 1996         March 30, 1996
         --------------------         -------------         --------------
               $   3,733                 $   4,883             $   1,354


Note 3 - Inventories

    The components of inventory balances are summarized below:

<TABLE>
<CAPTION>
                                                          March 29, 1997            June 29, 1996            March 30, 1996
                                                          --------------            -------------            --------------
<S>                                                            <C>                       <C>                     <C>    
    Raw materials and supplies (includes gold)                 $18,391                   $16,017                 $16,061
    Work-in-process                                             27,149                    13,008                  24,445
    Finished goods                                              10,095                     7,916                   9,626
                                                               -------                   -------                 -------
                                                               $55,635                   $36,941                 $50,132
                                                               =======                   =======                 =======
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
Note 4 - Financing
                                                         March 29, 1997             June 29, 1996          March 30, 1996
                                                         --------------             -------------          --------------
    Long-Term Debt consists of the following:
<S>                                                        <C>                         <C>                     <C>    
    Senior Bank Facility (Revolver)                           $ 27,122                   $15,039                 $22,905

    Senior Bank Facility (Term)                                 40,186                    53,250                  55,500

    Senior Subordinated Notes                                  120,000                   120,000                 120,000

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

                                                               194,908                   195,889                 206,005

    Less:  Current Portion                                     (37,279)                  (22,315)                (32,905)
                                                            ----------                 ---------                --------

    Long-Term Debt                                            $157,629                  $173,574                $173,100
                                                              ========                  ========                ========
</TABLE>




Note 5 - Common Stock
                            March 29, 1997    June 29, 1996     March 30, 1996
                            --------------    -------------     --------------
         Common Shares
         Authorized           16,500,000        16,500,000         16,500,000
         Outstanding           9,612,563         9,618,996          9,636,923
                                             

    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 nine
    months ended March 30, 1996, was 3,091,768. The actual loss per common share
    for the nine months ended March 30, 1996, was ($5.58).



<PAGE>

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>       
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 loss for the quarter                -             -          (8,344)          -              -              -          (8,344)
                                     ---------       ------    --------         ---      ---------        -------       --------- 
Balance September 28, 1996           9,618,996       $5,728    $111,181         $12      ($218,824)       ($2,717)      ($104,620)
                                     =========       ======    ========         ===      =========        =======       ========= 
Tax benefit of cost over market of                                                                                      
ESOP shares committed to be released     -             -              -           -              -             34             34    
Dividends declared ($.25/shares)         -             -           (381)          -              -              -           (381) 
Foreign currency 
translation adjustment                   -             -              -          (4)             -              -             (4)
Shares committed to be released          -             -              -           -          4,128           (100)         4,028
Net income for the quarter               -             -          1,256           -              -              -          1,256 
                                     ---------       ------    --------         ---      ---------        -------       --------- 
Balance  December 28, 1996           9,618,996       $5,728    $112,056        $  8      ($214,696)       ($2,783)    ($  99,687)   
                                     =========       ======    ========         ===      =========        =======       ========= 
Stock Purchase                          (6,433)          (4)       (166)                                                     (170)
Tax benefit of cost over market of                                                                                      
ESOP shares committed to be released     -             -              -           -              -             36             36    
Foreign currency 
translation adjustment                   -             -              -          (8)             -              -             (8)
Shares committed to be released          -             -              -           -          4,128           (100)         4,028
Net income for the quarter               -             -         (3,959)          -              -              -         (3,959) 
                                     ---------       ------    --------         ---      ---------        -------       --------- 
Balance  March 29, 1997              9,612,563       $5,724    $107,931        $  -      ($210,568)       ($2,847)    ($  99,760)   
                                     =========       ======    ========         ===      =========        =======       ========= 
</TABLE>


Excess of cost over market  represents  the  cumulative  difference  between the
estimated  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.



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  30,  1995.  Fiscal  1997 will  contain 52 weeks.  The
Company's business is highly seasonal.  Historically,  sales in the third fiscal
quarter  are at the third  highest  level of the year,  while the fourth  fiscal
quarter  is the  highest,  typically  including  over 40% of the  year's  sales.
However, because of the seasonality of the Company's business, operating results
on a quarterly or nine month basis are not  necessarily  indicative of operating
results for the full year.


     For the third quarter ended March 29, 1997 and March 30, 1996.


         General.  Net sales  rose 15.9% to $58.2  million  in fiscal  1997 from
$50.2  million in fiscal  1996.  Operating  losses  decreased to $1.2 million in
fiscal 1997 from $1.3  million in fiscal  1996.  The net loss  increased to $3.9
million in fiscal 1997 from a net loss of $3.7 million in fiscal 1996.

         Net Sales.  Net sales  increased $8.0 million or 15.9% to $58.2 million
in fiscal 1997 from $50.2  million in fiscal 1996.  Such  increases  were due to
sales from Delmar  (Delmar was acquired as of April 29,  1996) of $1.4  million,
earlier shipments in the Fine Paper product line and modest price increases.

         Cost Of Sales.  Cost of sales  increased $6.0 million or 26.5% to $28.6
million  in fiscal  1997 from  $22.6  million  in fiscal  1996,  primarily  as a
function of  increased  sales and costs  associated  with  Delmar.  In addition,
expenses in fiscal 1996 were reduced due to a reduction in worker's compensation
expense.  These factors resulted in an increase in cost of sales as a percentage
of sales to 49.1% in fiscal 1997 compared to 45.0% in fiscal 1996.

<PAGE>

         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative  expense  increased  $3.6  million  or 15.6% to $26.8  million in
fiscal 1997 from $23.2 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 expenses related to Delmar.  Selling,  general and administrative
expense as a percentage  of sales was 46.0% in fiscal  1997,  down from 46.1% in
fiscal 1996.  There are no  commissions  associated  with  Delmar's  photography
dealer sales,  which contributed to the decline in this  relationship.  Further,
the  fiscal  1996  restructuring  program  at one of the  Scholastic  plants has
reduced  general and  administrative  expenses in fiscal 1997 in comparison with
the prior year.

         Restructuring  Charge.  The Company incurred a restructuring  charge of
$2.1  million in the third  quarter  of fiscal  1996  resulting  from a one time
voluntary early retirement  program  completed in one Scholastic plant location.
The program was offered to  management  and  supervisory  employees,  of whom 17
elected to participate in the program.

         ESOP  Compensation.  ESOP  compensation  is $4.1 million in fiscal 1997
compared to $3.6 million in fiscal 1996. ESOP compensation expense increased $.5
million due to an increase in the estimated market value of the shares committed
to be released.

         Loss from  Operations.  Operating  losses decreased $.1 million to $1.2
million  in fiscal  1997 from $1.3  million in fiscal  1996.  The  decrease  was
predominantly due to increases in the operating income from the Jewelry and Fine
Paper product lines and the fiscal 1996 restructuring  charge,  partially offset
by losses related to Delmar, all as discussed above.

         Net Interest. Interest expense increased $.2 million to $4.9 million in
the third quarter of fiscal 1997 from $4.7 million in the corresponding  quarter
of fiscal 1996.

         Income Tax.  Income taxes were a benefit of $2.2 million in fiscal 1997
compared  to a benefit of $2.3  million  in fiscal  1996,  due to the  increased
quarterly  loss  before  tax in  fiscal  1997,  offset  by a lower  fiscal  1997
effective tax rate.

         Net Loss.  The third quarter net loss increased $.2 million from a loss
of $3.7  million  in  fiscal  1996  to  $3.9 in  fiscal  1997.  The  change  was
predominantly  due to increases  in  operating  income from the Jewelry and Fine
Paper product lines and the fiscal 1996 restructuring  charge,  partially offset
by losses related to Delmar, all as discussed above.


         For the nine months ended March 29, 1997 and March 30, 1996.

         General.  Net sales  rose 15.4% to $173.2  million in fiscal  1997 from
$150.1 million in fiscal 1996. Operating losses were $2.1 million in fiscal 1997
compared to $5.4 million in fiscal 1996. Net losses were $11.0 million in fiscal
1997  compared to a net loss before the  extraordinary  item of $11.4 million in
fiscal 1996. Net losses after the extraordinary  item decreased to $11.0 million
in fiscal 1997 from $17.3 million in fiscal 1996.

         Net Sales. Net sales increased $23.1 million or 15.4% to $173.2 million
in fiscal 1997 from $150.1  million in fiscal 1996 due  primarily  to sales from
Delmar of $12.1  million  (Delmar was  acquired as of April 29,  1996),  earlier
shipments in the Fine Paper  product line and  increases in the Jewelry  product
line, which experienced an increase in ring units shipped of 6.6%.

<PAGE>

         Cost Of Sales.  Cost of sales increased $16.0 million or 20.9% to $92.6
million  in fiscal  1997 from  $76.6  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 53.5% in fiscal 1997 from 51.0% in fiscal 1996,
primarily because of higher manufacturing costs at Delmar. In addition, expenses
in fiscal 1996 were reduced due to a reduction in worker's compensation expense.

         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative  expense  increased  $7.7  million  or 12.2% to $70.8  million in
fiscal  1997 from $63.1  million in fiscal  1996.  The  increase  was  primarily
attributable  to increases in the Company's  commission  expense  resulting from
increased net sales in fiscal 1997,  coupled with increases in selling,  general
and   administrative   expense   related  to  Delmar.   Selling,   general   and
administrative  expense as a  percentage  of sales  decreased to 40.9% in fiscal
1997,  from  42.0% in fiscal  1996.  There are no  commissions  associated  with
Delmar's  photography  dealer sales,  which  contributed  to the decline in this
relationship.  Further,  the  fiscal  1996  restructuring  program at one of the
Scholastic  plants has  reduced  general and  administrative  expenses by .9% in
fiscal 1997 in comparison with the prior year.

         Restructuring  Charge.  The Company incurred a restructuring  charge of
$2.1  million in the third  quarter  of fiscal  1996  resulting  from a one time
voluntary early retirement  program  completed in one Scholastic plant location.
The program was offered to  management  and  supervisory  employees,  of whom 17
elected to participate in the program.

         ESOP  Compensation.  ESOP compensation  decreased $1.8 million to $11.8
million in fiscal 1997 from $13.6  million in fiscal  1996.  The August 22, 1995
recapitalization  resulted in a significant  increase in the number of shares to
be allocated to employee  accounts  effective each December 31 from 1995 through
2009.  The shares  allocated  effective  December  31,  1995  related to service
rendered by employees  during calendar 1995. ESOP  compensation  expense for the
nine months  ended March 30, 1996  includes  $4.0  million  relating to employee
service  rendered in fiscal 1995 and $9.5 million  relating to employee  service
rendered in fiscal 1996.  The increase in the current year service  expense over
the  comparable  prior year  amount  results  primarily  from an increase in the
market value of the shares committed to be released.

         Loss from Operations. Operating losses were $2.1 million in fiscal 1997
compared to $5.4 million in fiscal 1996. The decrease was  predominantly  due to
increases in the operating income from the Jewelry and Fine Paper product lines,
coupled  with a  decrease  in ESOP  compensation  expense  and the  fiscal  1996
restructuring  charge,  partially  offset by losses  related to  Delmar,  all as
discussed above.

         Net  Interest.  Net interest  expense  increased  $2.0 million to $15.0
million  in the first  nine  months of fiscal  1997 from  $13.0  million  in the
corresponding  nine months of fiscal  1996,  due to a full nine months in fiscal
1997 of increased debt associated with the recapitalization.

         Income Tax Benefit. The income tax benefit decreased to $6.1 million in
fiscal  1997  compared  to $7.0  million in fiscal 1996 due to a decrease in the
loss before income taxes and the extraordinary item, coupled with 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.


<PAGE>

         Net Loss. Net losses  decreased $6.2 million to a loss of $11.0 million
in fiscal 1997 from a loss of $17.3 million in fiscal 1996.  The decreased  loss
was primarily  attributable to increased  profitability  in the Jewelry and Fine
Paper product lines,  coupled with a decrease in ESOP compensation  expense, the
fiscal 1996 restructuring  charge and extraordinary item. The preceding positive
changes to  profitability  are partially  offset by seasonal  losses  related to
Delmar,  increased  interest  expense  due to the  recapitalization  debt  being
outstanding for a longer period, and the virtual  elimination of interest income
in the current year, all as discussed above.

FINANCIAL CONDITION AND LIQUIDITY

         The Company's business is highly seasonal.  Historically the first nine
months 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 spring
shipments of graduation  related  products;  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
and the receipt of customer deposits for products that ship in the spring.

         Beginning  in the first  quarter of fiscal  1996,  the August 22,  1995
recapitalization 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 March 29, 1997,  of $27.1
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 $4.6  million and $3.8 million in the first
nine months of fiscal 1997 and 1996,  respectively.  The increase over the prior
year is attributable to increased  expenditures for equipment in the Photography
and Yearbook product lines.

         A 25(cent)  per share  dividend was paid during  fiscal 1997,  totaling
$2.4  million,  which was less than the 35(cent) per share  dividend paid in the
fiscal  1996.  Substantially  all of this  dividend  was paid to the ESOP trust,
which used the funds to make payments on the loan from the Company.  In addition
to normal distributions, approximately 22,000 shares are expected to be put back
to  the  Company  in  fiscal  1997,   to  liquidate  the  accounts  of  inactive
participants with small balances as provided by the ESOP plan.

         Income  taxes  accrued  are a negative  $6.4  million at March 29, 1997
compared to $3.2 million at June 29, 1996 and a negative  $10.8 million at March
30, 1996.  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 the
third quarter  compared to the prior year third 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.

         For the nine months  ended March 29,  1997,  cash and cash  equivalents
declined $6.9 million to $1.7 million as compared to a decrease of $73.6 million
to $1.0  million for the nine months  ended March 30,  1996.  The  substantially
greater  decline in the first nine  months of 1996 was  primarily  the result of
funding the ESOP trust's  purchase of  substantially  all remaining  outstanding
shares of the Company's stock in the first quarter of fiscal 1996.

         Cash used in  operating  activities  was $.8 million in the nine months
ended March 29,  1997,  compared to $8.1  million in the nine months ended March
30, 1996, as described below.

<PAGE>

         Net  losses  were  $11.0  million  in the nine  months of  fiscal  1997
compared to $17.3  million in fiscal 1996.  This was primarily  attributable  to
increases in the Jewelry,  Fine Papers and Education product lines, coupled with
a decrease in ESOP compensation  expense,  the fiscal 1996 restructuring  charge
and extraordinary item, partially offset by increased seasonal losses related to
Delmar,  increased  interest  expense  due to the  recapitalization  debt  being
outstanding for a longer period, and the virtual  elimination of interest income
in the current year.

         Accounts receivable  decreased $1.9 million in the first nine months of
fiscal 1997 compared to a decline of $10.0 million in fiscal 1996. The reduction
in the decline was primarily the result of increased third quarter sales and the
timing of receipts  from  customers,  which is expected to be comparable by year
end.

         Inventories  increased $18.7 million in the first nine months of fiscal
1997  compared  to an  increase  of $16.8  million  in fiscal  1996.  The larger
increase was attributable to increased inventory related to the Delmar activity.

         Customer  deposits  decreased $30.3 million in the first nine months of
fiscal 1997  compared  to a decline of $30.4  million in fiscal  1996.  The 1997
decline was attributable to increased Fine Paper product line sales in the first
nine months of fiscal 1997,  mostly offset by increases in customer  deposits in
the Delmar product lines.

         Income taxes accrued decreased $9.6 million in the first nine months of
fiscal 1997 compared to a decline of $21.3  million in fiscal 1996.  The decline
was primarily  attributable to the decreased  pre-tax loss of the Company in the
first nine  months of fiscal  1997  compared to the  combined  pre-tax  loss and
pre-tax  extraordinary  item in fiscal  1996.  Additionally,  the payment of the
previous  year tax  liability  in fiscal 1997 was lower than the payment made in
fiscal 1996 related to the 1995 tax liability.

         Net cash used by  investing  activities  was $4.6  million for the nine
months ended March 29, 1997 compared to $2.9 million provided in the nine months
ended March 30, 1996.  The primary  reason for the decrease was the sale of $6.2
million of marketable securities in fiscal 1996.

         Net cash used in  financing  activities  was $1.5  million  in the nine
months  ended March 29, 1997  compared to $68.3  million used in the nine months
ended March 30, 1996. The decrease 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 $128.6 million. In addition,  there were higher seasonal borrowings under the
revolver  in fiscal  1997 of $12.1  million,  partially  offset by  payments  on
long-term debt of $13.1 million.

         Deferred  Compensation  at March 29, 1997  decreased to $210.6  million
from $223.0  million at June 29, 1996 and $227.1  million at March 30, 1996. The
decrease is the result of recording ESOP shares committed to be released.

<PAGE>



                           PART II - OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibit Index appears on page E-1.



(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



May 9, 1997



<PAGE>




                                  EXHIBIT INDEX

Exhibit No.                       Description                          Page


     10.1               Amendement No. 3 to the Rhode Island
                        Hospital Trust Consignment Agreement.         17-18

     27                 Financial Data Schedule                          19







                                       E-1