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 28, 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 May 7, 1998:


                                 Class
                   Common Stock, without par value      9,527,645




<PAGE>

Preliminary Note:

     Effective  January  30,  1998,  the  registrant  is no  longer  subject  to
     reporting  requirements  under  the  Securities  Exchange  Act of 1934,  as
     amended.  Pursuant to the terms governing its outstanding  debt securities,
     registrant is filing Part I only of this report on Form 10-Q.

                                      INDEX

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

       Condensed Consolidated Statement of Operations -
          Third Quarter and Nine Months Ended March 28, 1998
          and March 29, 1997                                                 3

       Condensed Consolidated Balance Sheet -
          As of March 28, 1998, June 28, 1997 and March 29, 1997             4

       Condensed Consolidated Statement of Cash Flows -
          Nine Months Ended March 28, 1998 and March 29, 1997                5

       Notes to Condensed Consolidated Financial Statements             6 -  7

       Management's Discussion and Analysis of
          Financial Condition and Results of Operations                 8 - 12



<PAGE>

                         Part I - Financial Information

 Item 1.  FINANCIAL STATEMENTS

                                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 28, 1998      March 29, 1997      March 28, 1998      March 29, 1997
                                                     --------------      --------------      --------------      --------------

<S>                                                  <C>                 <C>                 <C>                 <C>        
Net sales                                            $    64,114         $    58,264         $   188,752         $   173,208

Cost of sales (excludes ESOP compensation)                29,013              28,559              94,672              92,632

Selling, general, and administrative expenses
(excludes ESOP compensation)                              31,245              26,785              80,960              70,820

ESOP compensation                                          5,125               4,123              14,682              11,844
                                                     -----------         -----------         -----------         -----------
Income (loss) from operations                             (1,269)             (1,203)             (1,562)             (2,088)

Interest income                                                7                   2                  59                  10
Interest expense                                           4,492               4,937              13,583              15,049
                                                     -----------         -----------         -----------         -----------

Income (loss) before income taxes and
extraordinary item                                        (5,754)             (6,138)            (15,086)            (17,127)

Income taxes                                               2,097               2,179               5,497               6,080
                                                     -----------         -----------         -----------         -----------

Net income (loss) before extraordinary item               (3,657)             (3,959)             (9,589)            (11,047)

Extraordinary loss on early extinguishment of
debt, net of taxes                                          (743)                 --                (743)                 --
                                                     -----------         -----------         -----------         -----------
Net income (loss)                                    $    (4,400)        $    (3,959)        $   (10,332)        $   (11,047)
                                                     ===========         ===========         ===========         ===========

Earnings per common share:
Income (loss) before extraordinary item              $     (1.35)        $     (1.84)        $     (3.79)        $     (5.50)

Extraordinary item                                         (0.28)                 --               (0.28)                 --
                                                     -----------         -----------         -----------         -----------
Net income (loss)                                    $     (1.63)        $     (1.84)        $     (4.07)        $     (5.50)
                                                     ===========         ===========         ===========         ===========

Weighted average number of common shares
outstanding                                            2,700,878           2,150,353           2,535,606           2,008,348
                                                     ===========         ===========         ===========         ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.


<PAGE>

                                Herff Jones, Inc.
                      Condensed Consolidated Balance Sheet
             As of March 28, 1998, June 28, 1997, and March 29, 1997
                        (Amounts in thousands of dollars)
       

<TABLE>
<CAPTION>
                                                            (Unaudited)                         (Unaudited)
                                                           March 28, 1998     June 28, 1997    March 29, 1997
                                                           --------------     -------------    --------------
Assets:                                                                                         
      Current Assets
<S>                                                           <C>               <C>               <C>      
         Cash and cash equivalents                            $   3,617         $   5,843         $   1,740
         Accounts receivable                                     58,625            55,709            52,172
         Inventories                                             58,484            37,963            55,635
         Prepaid expense                                          8,378             1,816             8,650
         Deferred income taxes                                    9,106             9,106             5,321
                                                              ---------         ---------         ---------
            Total Current Assets                                138,210           110,437           123,518

      Non-Current Assets
         Property, plant, and equipment                         101,740            94,378            91,600
         Accumulated depreciation                               (51,059)          (45,364)          (43,117)
                                                              ---------         ---------         ---------
            Net Property, Plant, and Equipment                   50,681            49,014            48,483

         Deferred financing cost, net and other assets            3,925             4,590             4,882
                                                              ---------         ---------         ---------
            Total Non-Current Assets                             54,606            53,604            53,365

Total Assets                                                  $ 192,816         $ 164,041         $ 176,883
                                                              =========         =========         =========


Liabilities and Shareholders' Equity:
      Current Liabilities
         Trade accounts payable                               $   7,186         $   5,856         $   7,352
         Salaries and wages payable                               5,687             5,048             5,635
         Interest payable                                         1,712             5,082             1,819
         Customer deposits                                       53,369            19,508            50,119
         Commissions payable                                     12,685            16,864            10,394
         Income taxes accrued                                    (5,036)            9,547            (6,428)
         Other accrued liabilities                                8,675             9,613            10,391
         Current portion of long term debt                       38,309            10,377            37,279
                                                              ---------         ---------         ---------
            Total Current Liabilities                           122,587            81,895           116,561

      Non-Current Liabilities
         Other                                                    4,679             2,239             2,149
         Long term debt                                         137,639           154,979           157,629
         Deferred income taxes                                      442               443               304
                                                              ---------         ---------         ---------
            Total Non-Current Liabilities                       142,760           157,661           160,082

Total Liabilities                                               265,347           239,556           276,643

Shareholders' Equity (Deficit)
      Common stock                                                5,691             5,703             5,724
      Retained earnings                                         117,034           128,122           107,931
      Deferred compensation                                    (194,055)         (206,440)         (210,568)
      Foreign currency translation                                  (29)                2                --
      Excess of cost over market
      (shares committed to be
      released)                                                  (1,172)           (2,902)           (2,847)
                                                              ---------         ---------         ---------
Total Shareholders' Equity (Deficit)                            (72,531)          (75,515)          (99,760)

Total Liabilities and Shareholders' Equity (Deficit)          $ 192,816         $ 164,041           176,883
                                                              =========         =========         =========
</TABLE>
       
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)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                            ------------------------------------
                                                            March 28, 1998        March 29, 1997
                                                            --------------        --------------
Cash flows from operating activities:
<S>                                                           <C>                    <C>      
     Net income (loss)                                        $(10,332)              $(11,047)
        Adjustments to reconcile net income                                       
        (loss) to net cash (used)                                                 
        provided by operating activities:                                         
           Depreciation and amortization                         5,747                  5,153
           Amortization and write off of financing cost            665                    721
           ESOP compensation (before dividend exclusion)        15,105                 12,085
           Tax benefit of ESOP shares (market over cost)                          
               cost over market                                   (990)                   106
           Other                                                   (31)                   (11)
           (Gain) loss on disposal of property,                                   
               plant and equipment, net                             (1)                    (2)
           Increase (decrease) in cash generated                                  
           by changes in assets                                                   
           and liabilities                                                        
              Accounts receivable                               (2,916)                 1,894
              Inventories                                      (20,521)               (18,694)
              Prepaid expenses                                  (6,562)                (5,999)
              Trade accounts payable                             1,330                   (189)
              Salaries and wages                                   639                  1,567
              Interest payable                                  (3,370)                (3,338)
              Customer deposits                                 33,861                 30,263
              Commissions payable                               (4,179)                (4,463)
              Income taxes accrued                             (14,583)                (9,628)
              Deferred income taxes                                 (1)                   223
              Other accrued liabilities                          1,502                    544
                                                              --------               --------
        Total adjustments                                        5,695                 10,232
                                                              --------               --------
Net cash (used) provided by operating activities              $ (4,637)              $   (815)
                                                                                  
Cash flows from investing activities:                                             
     Proceeds from disposal of property,                                          
          plant and equipment                                        2                     24
     Capital expenditures                                       (7,415)                (4,617)
                                                              --------               --------
Net cash (used) provided by investing activities              $ (7,413)              $ (4,593)
                                                                                  
Cash flows from financing activities:                                             
     Redemption of common shares                                   (12)                    (4)
     Premium on stock redemption                                  (186)                  (166)
     Dividends declared                                           (570)                  (381)
     Increase in revolver, net                                  27,269                 12,083
     Early extinguishment of debt                               (8,950)                    --
     Payment of long term debt                                  (7,727)                (7,107)
     Advance term payment                                           --                 (5,957)
                                                              --------               --------
Net cash (used) provided                                                          
     by financing activities                                  $  9,824               $ (1,532)
                                                                                  
Cash and cash equivalents:                                                        
     Net increase (decrease)                                    (2,226)                (6,940)
     Beginning of period                                         5,843                  8,680
                                                              --------               --------
     End of period                                            $  3,617               $  1,740
                                                              ========               ========
</TABLE>                                                                  


See accompanying notes to unaudited condensed consolidated financial statements.


<PAGE>



         Notes to Unaudited Condensed Consolidated Financial Statements
                        Nine Months Ended March 28, 1998
                        (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 28, 1998,  and the results of its operations
    and cash flows for the three and nine month  periods  ended March 28,  1998.
    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, insofar as they relate to Part 1 of Form 10-Q.
    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 28, 1997.

    The Company utilizes a 52/53 week fiscal year for accounting purposes ending
    on the last  Saturday in June.  Fiscal 1997 and fiscal 1998 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 third fiscal  quarter is the third 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

                    March 28, 1998       June 28, 1997      March 29, 1997
                    --------------       -------------      --------------
                        $4,654            $   5,754             $3,733


Note 3 - Inventories

    The components of inventory balances are summarized below:

<TABLE>
<CAPTION>
                                                March 28, 1998     June 28, 1997    March 29, 1997
                                                --------------     -------------    --------------

<S>                                                <C>              <C>                 <C>    
    Raw materials and supplies (includes gold)     $19,467          $16,736             $18,391
    Work-in-process                                 27,446           13,187              27,149
    Finished goods                                  11,571            8,040              10,095
                                                    ------         --------            --------
                                                   $58,484          $37,963             $55,635
                                                   =======          =======             =======
</TABLE>



<PAGE>




Note 4 - Financing
<TABLE>
<CAPTION>
                                                  March 28, 1998         June 28, 1997        March 29, 1997
                                                  --------------         --------------       --------------
    Long-Term Debt consists of the following:

<S>                                                   <C>                 <C>                     <C>    
    Senior Bank Facility (Revolver)                   $27,269             $     -                 $27,122

    Senior Bank Facility (Term)                        30,029              37,756                  40,186

    Senior Subordinated Notes                         111,050             120,000                 120,000

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

                                                      175,948             165,356                 194,908

    Less:  Current Portion                            (38,308)            (10,377)                (37,279)
                                                  ------------        ------------                --------

    Long-Term Debt                                   $137,640            $154,979                $157,629
                                                     ========            ========                ========
</TABLE>



Note 5 - Common Stock
                            March 28, 1998      June 28, 1997     March 29, 1997
                            --------------      -------------     --------------
         Common Shares
         -------------
         Authorized          16,500,000          16,500,000          16,500,000
         Outstanding          9,562,871           9,569,304           9,612,563


Note 6 - Statement of Shareholders' Equity

<TABLE>
<CAPTION>

                                                                             Foreign                                      Total
                                            Common Stock        Retained    Currency       Deferred     Excess Cost    Shareholders'
                                       Shares       Amount      Earnings   Translation  Compensation  Over Market, Net    Equity
                                       ------       ------      --------   -----------  ------------  ----------------    ------
<S>                                   <C>         <C>          <C>            <C>        <C>            <C>            <C>        
Balance June 28, 1997                 9,569,304   $    5,703   $  128,122     $    2     ($ 206,440)    ($   2,902)    ($  75,515)
----------------------------------
Stock Purchases                          (1,804)          (9)         (38)        --             --             --            (47)
Tax effect of cost over market of
ESOP shares committed to be                  
released, net                                --           --           --         --             --           (330)          (330)
Foreign currency translation                 
adjustment                                   --           --           --         (4)            --             --             (4)
Shares committed to be released              --           --           --         --          4,129            906          5,035
Net income (loss) for the quarter            --           --       (7,128)        --             --             --         (7,128)
                                     ----------   ----------   ----------     ------     ----------     ----------     ---------- 
Balance September 27, 1997            9,567,500   $    5,694   $  120,956     ($   2)    ($ 202,311)    ($   2,326)    ($  77,989)
---------------------------------    ==========   ==========   ==========     ======     ==========     ==========     ==========
Tax effect of cost over market of
ESOP shares committed to be                  
released, net                                --           --           --         --             --           (330)          (330)
Dividends declared on allocated
shares ($.28/share)                          --           --         (569)        --             --             --           (569)
Foreign currency translation                 
adjustment                                   --           --           --        (38)            --             --            (38)
Shares committed to be released              --           --           --         --          4,128            907          5,035
Net income for the quarter                   --           --        1,196         --             --             --          1,196
                                     ----------   ----------   ----------     ------     ----------     ----------     ---------- 
Balance  December 27, 1997            9,567,500   $    5,694   $  121,583     ($  40)    ($ 198,183)    ($   1,749)    ($  72,695)
---------------------------------    ==========   ==========   ==========     ======     ==========     ==========     ==========
Stock Purchases                          (4,629)          (3)          --         --             --             --             (3)
Tax effect of cost over market of
ESOP shares committed to be                  
released, net                                --           --           --         --             --           (330)          (330)
Foreign currency translation                 
adjustment                                   --           --           --         11             --             --             11
Shares committed to be released              --           --           --         --          4,128            907          5,035
Net income (loss) for the quarter            --           --       (4,549)        --             --             --         (4,549)
                                     ----------   ----------   ----------     ------     ----------     ----------     ---------- 
Balance March 28, 1998                9,562,871   $    5,691   $  117,034     ($  29)    ($ 194,055)    ($   1,172)    ($  72,531)
---------------------------------    ==========   ==========   ==========     ======     ==========     ==========     ==========
</TABLE>

<PAGE>

During fiscal 1996 and 1997 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 exceeds cost. The excess of market
over cost will be  credited to equity,  net of the  related  tax effect,  to the
extent of the  previous  net charges  recorded.  Thereafter,  the excess will be
credited to retained earnings.

Note 7 - Extraordinary Item

During  fiscal  1998  the  Company   repurchased  $9.0  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.


Item 2.   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
1997 and fiscal 1998 each contains 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. 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 28, 1998 and March 29, 1997.


         General.  Net sales  rose 10.0% to $64.1  million  in fiscal  1998 from
$58.3 million in fiscal 1997. Operating loss increased to $1.3 million in fiscal
1998 from $1.2 million in fiscal 1997.  Net loss before the  extraordinary  item
was $3.8  million in fiscal  1998  compared  to $4.0  million in 1997.  Net loss
increased to $4.4 million in fiscal 1998 from $4.0 million in fiscal 1997.




         Net Sales.  Net sales  increased $5.8 million or 10.0% to $64.1 million
in fiscal 1998 from $58.3 million in fiscal 1997.  While sales increased to some
extent in all product lines, the more significant increases were in the Jewelry,
Fine Paper, and Education product lines.  Increases were due to some unit growth
and modest price increases.

         Cost Of Sales.  Cost of sales  increased  $.4  million or 1.4% to $29.0
million in fiscal  1998 from $28.6  million in fiscal  1997.  Cost of sales as a
percentage of sales decreased to 45.3% in fiscal 1998 from 49.0% in fiscal 1997.
The decrease was due primarily to improved operating  performance in the Jewelry
and Education product lines.

         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased  $4.4  million or 16.4% to $31.2  million in
fiscal  1998 from $26.8  million in fiscal  1997.  The  increase  was  primarily
attributable to an increase in the Company's commission expense,  resulting from
increased  net sales in fiscal 1998 and  increased  expenses for payroll  (which
includes  expense for the  Long-Term  Incentive  Plan),  information  technology
consulting in the Fine Paper and Cap and Gown product lines,  and  depreciation.
Selling, general and administrative expense as a percentage of sales is 48.7% in
fiscal 1998, compared to 46.0% in fiscal 1997.

         ESOP  Compensation.  ESOP  compensation  increased $1.0 million to $5.1
million in fiscal 1998 from $4.1 million in fiscal 1997.  The ESOP  compensation
expense increase  resulted from an increase in the estimated market value of the
shares committed to be released.

         Loss from  Operations.  Operating  losses increased $.1 million to $1.3
million  in fiscal  1998 from $1.2  million in fiscal  1997.  The  increase  was
predominantly  due to increased  expenses for  commissions,  ESOP  compensation,
payroll, and information technology consulting.

         Interest  Expense.  Interest  expense  decreased  $.2  million  to $4.7
million  in  the  third  quarter  of  fiscal  1998  from  $4.9  million  in  the
corresponding  quarter  of  fiscal  1997  due to a  reduction  of  average  debt
outstanding.

         Income Tax  Benefit.  The third  quarter  income tax  benefit  was $2.1
million in both fiscal 1998 and in fiscal 1997.

         Income  (Loss)  Before   Extraordinary  Item.  Net  losses  before  the
extraordinary  item  decreased to $3.8  million in fiscal 1998  compared to $4.0
million in 1997. The decrease was primarily  attributable to increased operating
performance  in the Jewelry and  Education  product  lines and reduced  interest
cost,   partially  offset  by  ESOP   compensation  and  selling,   general  and
administrative expenses, as discussed above.

         Extraordinary  Item.  During the third quarter the Company  repurchased
$9.0 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 third  quarter net loss  increased  to $4.4 million from
$4.0 million in fiscal 1997. The increase was due primarily to increases in ESOP
compensation  and  selling,   general  and   administrative   expenses  and  the
extraordinary loss on the repurchase of Senior  Subordinated Notes from existing
noteholders at a premium, partially offset by increased operating performance in
the Jewelry and Education  product lines and reduced interest cost, as discussed
above.



<PAGE>



         For the nine months ended March 28, 1998 and March 29, 1997.

         General.  Net sales  rose 9.0% to $188.8  million  in fiscal  1998 from
$173.2 million in fiscal 1997. Operating losses were $1.6 million in fiscal 1998
compared to $2.1 million in fiscal  1997.  Net losses  before the  extraordinary
item were $9.7  million in fiscal 1998  compared to $11.0  million in 1997.  Net
losses were $10.3 million in fiscal 1998 compared to a net loss of $11.0 million
in fiscal 1997.

         Net Sales.  Net sales increased $15.6 million or 9.0% to $188.8 million
in fiscal 1998 from $173.2 million in fiscal 1997 due to sales  increases in all
product lines, with the most significant  increases in the Jewelry,  Fine Paper,
Photography, and Education product lines. Increases were due to some unit growth
and modest price increases.

         Cost Of Sales.  Cost of sales  increased  $2.1 million or 2.3% to $94.7
million  in fiscal  1998 from  $92.6  million  in fiscal  1997,  primarily  as a
function of increased sales. Cost of sales as a percentage of sales decreased to
50.2% in fiscal 1998 from 53.5% in fiscal  1997,  primarily  because of improved
operating performance in the Jewelry and Education product lines.

         Selling,  General And  Administrative  Expenses.  Selling,  general and
administrative  expenses  increased  $10.2  million or 14.4% to $81.0 million in
fiscal  1998 from $70.8  million in fiscal  1997.  The  increase  was  primarily
attributable  to increases in the Company's  commission  expense  resulting from
increased  net sales in fiscal  1998,  coupled with  increases  in  compensation
expense under the Long-Term Incentive Plan, information technology consulting in
the  Fine  Paper  and  Cap  and  Gown  product  lines,  sales  incentives,   and
depreciation.  Selling,  general and  administrative  expense as a percentage of
sales  increased to 42.9% in fiscal 1998,  from 40.9% in fiscal 1997,  primarily
due to the cost of commission expense and the Long-Term Incentive Plan.

         ESOP  Compensation.  ESOP compensation  increased $2.9 million to $14.7
million in fiscal 1998 from $11.8  million in fiscal  1997.  The increase in the
current  year  expense  over the  comparable  prior year amount  results from an
increase in the estimated market value of the shares committed to be released.

         Loss from Operations. Operating losses were $1.6 million in fiscal 1998
compared to $2.1 million in fiscal 1997. The improvement was  predominantly  due
to increased profitability in the Jewelry and Education product lines, partially
offset  by  increased  ESOP  compensation  expense  and  selling,   general  and
administrative expenses, as described above.

         Net  Interest.  Net interest  expense  decreased  $1.3 million to $13.7
million  in the first  nine  months of fiscal  1998 from  $15.0  million  in the
corresponding nine months of fiscal 1997, due to a reduction in the average debt
outstanding.

         Income Tax Benefit. The income tax benefit decreased to $5.6 million in
fiscal  1998  compared  to $6.1  million in fiscal 1997 due to a decrease in the
loss for the nine month period.

         Income  (Loss)  Before   Extraordinary  Item.  Net  losses  before  the
extraordinary item were $9.7 million in fiscal 1998 compared to $11.0 million in
1997. The decreased loss was primarily  attributable to increased  profitability
in the Jewelry and Education product lines,  coupled with a decrease in interest
expense,  offset  somewhat by  increased  ESOP  compensation  expense and higher
selling, general and administrative expenses.

         Extraordinary  Item.  During the third quarter the Company  repurchased
some 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 Income (Loss).  Net losses decreased $.7 million to a loss of $10.3
million in fiscal 1998 from a loss of $11.0 in fiscal 1997.  The decreased  loss
was  primarily  attributable  to  increased  profitability  in the  Jewelry  and
Education  product lines,  coupled with a decrease in interest  expense,  offset
somewhat by increased ESOP  compensation  expense,  higher selling,  general and
administrative  expenses,  and the repurchase of Senior  Subordinated Notes at a
premium, 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.

         The cash flow pattern and expectations of the Company's highly seasonal
business  result in the  classification,  at March 28, 1998, of $27.3 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 $7.4  million and $4.6 million in the first
nine months of fiscal 1998 and 1997,  respectively.  The increase over the prior
year is  attributable  to increased  expenditures  for equipment in the Jewelry,
Fine Paper, and Yearbook product lines, mostly related to information technology
items.

         Income  taxes  accrued  are a negative  $5.0  million at March 28, 1998
compared to $9.5  million at June 28, 1997 and a negative  $6.4 million at March
29, 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 decreased tax benefit at the end of the
third quarter  compared to the prior year third quarter end is due to the effect
of estimated dividends on allocated ESOP shares.

         For the nine months  ended March 28,  1998,  cash and cash  equivalents
declined  $2.2 million to $3.6 million as compared to a decrease of $6.9 million
to $1.7 million for the nine months ended March 29, 1997.

         Cash used by operating  activities  was $4.6 million in the nine months
ended March 28, 1998, compared to $.8 million in the nine months ended March 29,
1997, as described below.

         Net  losses  were  $10.3  million  in the nine  months of  fiscal  1998
compared to $11.0  million in fiscal 1997.  This was primarily  attributable  to
increases in the Jewelry and Education product lines, coupled with a decrease in
interest expense,  partially offset by an increase in ESOP compensation expense,
higher  selling,  general and  administrative  expenses,  and the  repurchase of
Senior Subordinated Notes at a premium.

         Accounts Receivable  increased $2.9 million in the first nine months of
fiscal 1998 compared to a decline of $1.9 million in fiscal 1997. The change was
primarily the result of increased  sales in the first nine months of fiscal 1998
compared with fiscal 1997.

         Customer  deposits  increased $33.9 million in the first nine months of
fiscal 1998 compared to an increase of $30.3 million in fiscal 1997.  The larger
increase  was  attributable  to  increases  in deposits  for spring sales in the
Yearbook and Fine Paper product lines.

         Income taxes accrued  decreased  $14.6 million in the first nine months
of fiscal  1998  compared  to a decrease  of $9.6  million in fiscal  1997.  The
increase in the decline was primarily  attributable to a higher payment of taxes
related to the prior fiscal year.

         Net cash used by  investing  activities  was $7.4  million for the nine
months  ended March 28, 1998  compared to $4.6  million in the nine months ended
March 29, 1997.  The  increase  over prior year is  attributable  to higher 1998
capital expenditures in the Scholastic and Yearbook product lines.

         Net cash provided by financing  activities was $9.8 million in the nine
months  ended March 28, 1998  compared to $1.5  million  used in the nine months
ended  March 29,  1997.  The  Company's  financing  arrangements  in fiscal 1997
required an additional, "advanced" payment on the term loan of $6.0 in the first
half  of  fiscal  1997.   Subsequently  a  1997  amendment  to  those  financing
arrangements eliminated the requirement for advanced payments;  therefore, there
was not a corresponding advanced payment made during the nine months ended March
28, 1998. Additionally,  the Company repurchased $9.0 million of its outstanding
Senior  Subordinated  Notes and paid an  additional  $6.3  million  income taxes
during the  fiscal  1998  period,  which is  reflected  in the  increase  in the
revolving credit line.

         Deferred  Compensation  at March 28, 1998  decreased to $194.1  million
from $206.4  million at June 28, 1997 and $210.6  million at March 29, 1997. The
decrease is the result of recording ESOP shares committed to be released.



<PAGE>



                                                             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 8, 1998