FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



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



         For the Quarterly Period Ended   December 27, 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 Identification Number)
    Incorporation or Organization)


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



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



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

                                                      Yes       No  X *
                                                         -----     ------

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


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

Number of shares  outstanding  of the  issuer's  Common  Stock as of February 4,
1998:


                  Class      
     Common Stock, without par value                  9,562,871




<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 -
          Second Quarter and Six Months Ended December 27, 1997
          and December 28, 1996                                               3

       Condensed Consolidated Balance Sheet -
          As of December 27, 1997, June 28, 1997 and December 28, 1996        4

       Condensed Consolidated Statement of Cash Flows -
          Second Quarter and Six Months Ended December 27, 1997
          and December 28, 1996                                               5


       Notes to Condensed Consolidated Financial Statements               6 - 7

       Management's Discussion and Analysis of
          Financial Condition and Results of Operations                   8 -11




                                       -2-
<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>
                                                             Second Quarter Ended                       Six Months Ended
                                                   -------------------------------------     ---------------------------------------
                                                   December 27, 1997   December 28, 1996     December 27, 1997     December 28, 1996
                                                   -----------------   -----------------     -----------------     -----------------
<S>                                                 <C>                   <C>                   <C>                   <C>        
Net sales                                           $    74,574           $    68,288           $   124,638           $   114,944
                                                                                                                    
Cost of sales (excludes ESOP compensation)               35,984                33,951                65,659                64,073
                                                                                                                    
Selling, general, and administrative expenses                                                                       
     (excludes ESOP compensation)                        27,586                23,594                49,715                44,035
                                                                                                                    
ESOP compensation                                         4,502                 3,663                 9,557                 7,721
                                                    -----------           -----------           -----------           -----------
Income (loss) from operations                             6,502                 7,080                  (293)                 (885)
                                                                                                                    
Interest income                                               1                     3                    52                     8
Interest expense                                          4,621                 5,135                 9,091                10,112
                                                    -----------           -----------           -----------           -----------
                                                                                                                    
Income (loss) before income taxes                         1,882                 1,948                (9,332)              (10,989)
                                                                                                                    
Income taxes                                               (686)                 (692)                3,400                 3,901
                                                    -----------           -----------           -----------           -----------
                                                                                                                    
Net income (loss)                                   $     1,196           $     1,256           $    (5,932)          $    (7,088)
                                                    ===========           ===========           ===========           ===========
                                                                                                                    
Income (loss) per common share                      $      0.47           $      0.63           $     (2.41)          $     (3.66)
                                                    ===========           ===========           ===========           ===========
                                                                                                                    
Weighted average number of                                                                                          
   common shares outstanding                          2,560,604             2,007,307             2,464,775             1,935,281
                                                    ===========           ===========           ===========           ===========
                                                                                                                
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.



                                      -3-
<PAGE>

                                Herff Jones, Inc.
                      Condensed Consolidated Balance Sheet
          As of December 27, 1997, June 28, 1997, and December 28, 1996
                        (Amounts in thousands of dollars)
       
<TABLE>
<CAPTION>
                                                              (Unaudited)                         (Unaudited)
                                                           December 27, 1997   June 28, 1997    December 28, 1996
                                                           -----------------   -------------    -----------------
Assets:                                                                                        
      Current Assets
<S>                                                            <C>                <C>                <C>      
         Cash and cash equivalents                             $   1,117          $   5,843          $   2,638
         Accounts receivable                                      45,482             55,709             40,168
         Inventories                                              46,241             37,963             44,585
         Prepaid expense                                           6,875              1,816              7,859
         Deferred income taxes                                     9,106              9,106              5,321
                                                               ---------          ---------          ---------
           Total Current Assets                                  108,821            110,437            100,571

      Non-Current Assets
         Property, plant, and equipment                          100,439             94,378             90,602
         Accumulated depreciation                                (49,217)           (45,364)           (41,741)
                                                               ---------          ---------          ---------
           Net Property, Plant, and Equipment                     51,222             49,014             48,861

         Deferred financing cost, net and other assets             4,296              4,590              5,122
                                                               ---------          ---------          ---------
           Total Non-Current Assets                               55,518             53,604             53,983

Total Assets                                                   $ 164,339          $ 164,041          $ 154,554
                                                               =========          =========          =========


Liabilities and Shareholders' Equity:
      Current Liabilities
         Trade accounts payable                                $   5,546          $   5,856          $   5,145
         Salaries and wages payable                                5,089              5,048              5,126
         Interest payable                                          5,096              5,082              5,082
         Customer deposits                                        33,499             19,508             32,355
         Commissions payable                                       6,466             16,864              4,697
         Income taxes accrued                                     (3,349)             9,547             (4,236)
         Other accrued liabilities                                 7,031              9,613              8,759
         Current portion of long-term debt                        24,626             10,377             35,097
                                                               ---------          ---------          ---------
           Total Current Liabilities                              84,004             81,895             92,025

      Non-Current Liabilities
         Other                                                     3,129              2,239              2,149
         Long-term debt                                          149,459            154,979            160,278
         Deferred income taxes                                       442                443               (211)
                                                               ---------          ---------          ---------
           Total Non-Current Liabilities                         153,030            157,661            162,216

Total Liabilities                                                237,034            239,556            254,241

Shareholders' Equity (Deficit)
      Common stock                                                 5,694              5,703              5,728
      Retained earnings                                          121,583            128,122            112,056
      Deferred compensation                                     (198,183)          (206,440)          (214,696)
      Foreign currency translation                                   (40)                 2                  8
      Excess of cost over market (shares committed
      to be released)                                             (1,749)            (2,902)            (2,783)
                                                               ---------          ---------          ---------
Total Shareholders' Equity (Deficit)                             (72,695)           (75,515)           (99,687)

Total Liabilities and Shareholders' Equity (Deficit)           $ 164,339          $ 164,041          $ 154,554
                                                               =========          =========          =========

</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.


                                      -4-
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                        Six Months Ended
                                                                               -------------------------------------
                                                                               December 27, 1997   December 28, 1996
                                                                               -----------------   -----------------
Cash flows from operating activities:
<S>                                                                               <C>                <C>      
     Net income (loss)                                                            $ (5,932)          $ (7,088)
        Adjustments to reconcile net income (loss) to net cash (used)
        provided by operating activities:
           Depreciation and amortization                                             3,915              3,428
           Amortization and write off of financing cost                                294                481
           ESOP compensation (before dividend exclusion)                             9,740              8,057
           Tax benefit (effect) of ESOP                                               (330)                70
           Other                                                                       (42)                (3)
           (Gain) loss on disposal of property, plant and equipment, net                (1)                (4)
           Increase (decrease) in cash generated by changes in assets
           and liabilities
              Accounts receivable                                                   10,227             13,898
              Inventories                                                           (8,278)            (7,644)
              Prepaid expenses                                                      (5,059)            (5,208)
              Trade accounts payable                                                  (310)            (2,396)
              Salaries and wages                                                        41              1,058
              Interest payable                                                          14                (75)
              Customer deposits                                                     13,991             12,499
              Commissions payable                                                  (10,398)           (10,160)
              Income taxes payable                                                 (12,896)            (7,436)
              Deferred income taxes                                                     (1)              (292)
              Other accrued liabilities                                             (1,692)            (1,088)
                                                                                  --------           --------
        Total adjustments                                                             (785)             5,185
                                                                                  --------           --------
Net cash (used) provided by operating activities                                  $ (6,717)          $ (1,903)

Cash flows from investing activities:
     Proceeds from disposal of property, plant and equipment                             2                 10
     Capital expenditures                                                           (6,124)            (3,254)
                                                                                  --------           --------
Net cash (used) provided by investing activities                                  $ (6,122)          $ (3,244)

Cash flows from financing activities:
     Redemption of common shares                                                        (9)                --
     Premium on stock redemption                                                       (37)                --
     Dividends declared                                                               (570)              (381)
     Increase in revolver, net                                                      13,807             10,122
     Payment of long term debt                                                      (5,078)            (4,679)
     Advance term payment                                                               --             (5,957)
                                                                                  --------           --------
Net cash (used) provided by financing activities                                  $  8,113           $   (895)

Cash and cash equivalents:
     Net increase (decrease)                                                        (4,726)            (6,042)
     Beginning of period                                                             5,843              8,680
                                                                                  ========           ========
     End of period                                                                $  1,117           $  2,638
                                                                                  ========           ========
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                      -5-
<PAGE>


         Notes to Unaudited Condensed Consolidated Financial Statements
                       Six Months Ended December 27, 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  December  27,  1997,  and  the  results  of  its
    operations  and cash flows for the quarter  ended  December 27, 1997.  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.   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 second fiscal quarter is the second highest sales quarter,
    while the fourth fiscal quarter is the highest, typically including over 40%
    of the year's sales.



Note 2 - Allowance for Doubtful Accounts and Returns

                      December 27, 1997    June 28, 1997     December 28, 1996
                      -----------------    -------------     -----------------
                           $4,340           $   5,754             $3,486


Note 3 - Inventories

    The components of inventory balances are summarized below:

<TABLE>
<CAPTION>
                                                       December 27, 1997    June 28, 1997        December 28, 1996
                                                       -----------------    -------------        -----------------

<S>                                                       <C>                   <C>                 <C>    
    Raw materials and supplies (includes gold)            $18,469               $16,736             $19,009
    Work-in-process                                        16,649                13,187              15,970
    Finished goods                                         11,123                 8,040               9,606
                                                           ------              --------            --------
                                                          $46,241               $37,963             $44,585
                                                          =======               =======             =======
</TABLE>






                                      -6-
<PAGE>

<TABLE>
<CAPTION>
Note 4 - Financing
                                                       December 27, 1997    June 28, 1997        December 28, 1996
                                                       -----------------    -------------        -----------------
    Long-Term Debt consists of the following:

<S>                                                        <C>                 <C>                       <C>    
    Senior Bank Facility (Revolver)                        $13,807             $       -                 $25,161

    Senior Bank Facility (Term)                             32,678                37,756                  42,614

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

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

                                                           174,085               165,356                 195,375

    Less:  Current Portion                                 (24,626)              (10,377)                (35,097)
                                                       -----------              --------                --------

    Long-Term Debt                                        $149,459              $154,979                $160,278
                                                          ========              ========                ========
</TABLE>


<TABLE>
<CAPTION>
Note 5 - Common Stock
                                                       December 27, 1997    June 28, 1997        December 28, 1996
                                                       -----------------    -------------        -----------------
         Common Shares
         -------------
<S>                                                         <C>             <C>                     <C>       
         Authorized                                         16,500,000      16,500,000              16,500,000
         Outstanding                                         9,567,500       9,569,304               9,618,996

</TABLE>

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 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)
--------------------------            =========    ======     ========      =====      ==========        ========        =========
                                                                                                                      
</TABLE>

                                      -7-
<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.



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 second  fiscal  quarter are at the second
highest level of the year. However,  because of the seasonality of the Company's
business,  operating  results  on  a  quarterly  or  six  month  basis  are  not
necessarily indicative of operating results for the full year.


         For the second quarter ended December 27, 1997 and December 28, 1996.


         General. Net sales rose 9.2% to $74.6 million in fiscal 1998 from $68.3
million in fiscal  1997.  Operating  profit  decreased to $6.5 million in fiscal
1998 from $7.1 million in fiscal 1997.  Net income  decreased to $1.2 million in
fiscal 1998 from $1.3 million in fiscal 1997.

                                      -8-
<PAGE>


         Net Sales. Net sales increased $6.3 million or 9.2% to $74.6 million in
fiscal  1998 from  $68.3  million in fiscal  1997.  Such  increases  were due to
increases in the Jewelry,  Yearbook,  Photography,  and Education product lines.
Increases were due primarily to modest price increases and some unit growth.

         Cost Of Sales.  Cost of sales  increased  $2.0 million or 5.9% to $36.0
million in fiscal  1998 from $34.0  million in fiscal  1997.  Cost of sales as a
percentage of sales decreased to 48.3% in fiscal 1998 from 49.7% 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  expense  increased  $4.0  million  or 16.9% to $27.6  million in
fiscal  1998 from $23.6  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),  depreciation,  and sales
incentives. Selling, general and administrative expense as a percentage of sales
is 37.0% in fiscal 1998, compared to 34.6% in fiscal 1997.

         ESOP  Compensation.  ESOP  compensation  increased  $.8 million to $4.5
million in fiscal 1998 from $3.7 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.

         Income from Operations.  Operating profit decreased $.6 million to $6.5
million  in fiscal  1998 from $7.1  million in fiscal  1997.  The  decrease  was
predominantly  due to increased  expenses for  commissions,  ESOP  compensation,
payroll, depreciation, and sales incentives.

         Interest  Expense.  Interest  expense  decreased  $.5  million  to $4.6
million  in  the  second  quarter  of  fiscal  1998  from  $5.1  million  in the
corresponding  quarter  of  fiscal  1997  due to a  reduction  of  average  debt
outstanding.

         Income  Tax.  The second  quarter  income  tax was $.7  million in both
fiscal 1998 and in fiscal 1997.

         Net Income.  The second  quarter net income  decreased  to $1.2 million
from $1.3 million in fiscal 1997.  The decrease was  primarily  attributable  to
increased ESOP compensation and selling, general and administrative expenses, as
discussed  above,  partially  offset  by  reduced  interest  cost  and  improved
operating performance in the Jewelry and Education product lines.


         For the six months ended December 27, 1997 and December 28, 1996.

         General.  Net sales  rose 8.4% to $124.6  million  in fiscal  1998 from
$114.9 million in fiscal 1997.  Operating losses were $.3 million in fiscal 1998
compared to $.9 million in fiscal  1997.  Net losses were $5.9 million in fiscal
1998 compared to a net loss of $7.1 million in fiscal 1997.

         Net Sales.  Net sales  increased $9.7 million or 8.4% to $124.6 million
in fiscal 1998 from $114.9 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 primarily to modest
price increases and some unit growth.


                                      -9-
<PAGE>

         Cost Of Sales.  Cost of sales  increased  $1.6 million or 2.5% to $65.7
million  in fiscal  1998 from  $64.1  million  in fiscal  1997,  primarily  as a
function of increased sales. Cost of sales as a percentage of sales decreased to
52.7% in fiscal 1998 from 55.8% 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  expense  increased  $5.7  million  or 13.0% to $49.7  million in
fiscal  1998 from $44.0  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 selling,  general
and  administrative  expense  resulting  from  compensation  expense  under  the
Long-Term Incentive Plan.  Selling,  general and administrative
expense as a percentage of sales  increased to 39.9% in fiscal 1998,  from 38.3%
in  fiscal  1997,  primarily  due to the  cost  of  commission  expense  and the
Long-Term Incentive Plan.

         ESOP  Compensation.  ESOP  compensation  increased $1.9 million to $9.6
million in fiscal 1998 from $7.7  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 $.3 million in fiscal 1998
compared to $.9 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  $1.1 million to $9.0
million  in the first  six  months of fiscal  1998  from  $10.1  million  in the
corresponding  six months of fiscal 1997, due to a reduction in the average debt
outstanding.

         Income Tax Benefit. The income tax benefit decreased to $3.4 million in
fiscal  1998  compared  to $3.9  million in fiscal 1997 due to a decrease in the
loss for the six month period.

         Net Income (Loss).  Net losses decreased $1.2 million to a loss of $5.9
million in fiscal 1998 from a loss of $7.1 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 and higher selling,  general and
administrative expenses.

FINANCIAL CONDITION AND LIQUIDITY

         The Company's  business is highly seasonal.  Historically the first six
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
pre-Christmas  photography and class ring activity; the payment of the Company's
income taxes from the previous  fiscal year;  and the  settlement  of commission
accounts with the Company's independent sales representatives. This is partially
offset by the  reduction  of  accounts  receivable  resulting  from  payment for
products  shipped  prior to  graduations  in the fourth  quarter of the previous
fiscal year 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 December 27, 1997, of $13.8 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 $6.1  million and $3.3 million in the first
six months of fiscal 1998 and 1997,  respectively.  The increase  over the prior
year is attributable to increased  expenditures  for equipment in the Scholastic
and Yearbook product lines, mostly related to information technology purchases.

         Income taxes  accrued are a negative  $3.3 million at December 27, 1997
compared  to $9.5  million  at June 28,  1997 and a  negative  $4.2  million  at
December 28, 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 second  quarter  compared to the prior year second quarter end is the
result of the lower  pre-tax  loss in this  fiscal  year  compared  to the prior
fiscal year.


                                      -10-
<PAGE>

         For the six months ended December 27, 1997,  cash and cash  equivalents
declined  $4.7 million to $1.1 million as compared to a decrease of $6.0 million
to $2.6 million for the six months ended December 28, 1996.

         Cash used in  operating  activities  was $6.7 million in the six months
ended  December  27,  1997,  compared  to $1.9  million in the six months  ended
December 28, 1996, as described below.

         Net losses were $5.9 million in the six months of fiscal 1998  compared
to $7.1 million in fiscal 1997. This was primarily  attributable to increases in
the Jewelry, Photography and Education product lines, coupled with a decrease in
interest expense,  partially offset by an increase in ESOP compensation  expense
and higher selling, general and administrative expenses.

         Accounts Receivable  decreased $10.2 million in the first six months of
fiscal 1998 compared to a decline of $13.9 million in fiscal 1997. The reduction
in the  decline was  primarily  the result of  increased  sales in the first six
months of fiscal 1998 compared with fiscal 1997.

         Customer  deposits  increased  $14.0 million in the first six months of
fiscal 1998 compared to an increase of $12.5 million in fiscal 1997.  The larger
increase  was  attributable  to  increases  in deposits  for spring sales in the
Yearbook and Photography product lines.

         Income taxes accrued decreased $12.9 million in the first six months of
fiscal 1998 compared to a decrease of $7.4 million in fiscal 1997.  The increase
in the decline was primarily  attributable to a decrease in the pre-tax loss the
first six months of fiscal 1998 compared to fiscal 1997 and a higher  payment of
taxes related to the prior fiscal year.

         Net cash used by  investing  activities  was $6.1  million  for the six
months ended  December 27, 1997 compared to $3.2 million in the six months ended
December 28, 1996. 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 $8.1 million in the six
months ended  December  27, 1997  compared to $.9 million used in the six months
ended December 28, 1996.  The Company's  financing  arrangements  in fiscal 1997
required an  additional,  "advanced"  payment on the term loan of $5, 957 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 six  months  ended
December  27,  1997,  which was the  primary  reason  for the  increase  in cash
provided by financing activities.

         Deferred  Compensation at December 27, 1997 decreased to $198.2 million
from $206.4  million at June 28, 1997 and $214.7  million at December  28, 1996.
The decrease is the result of recording ESOP shares committed to be released.

                                      -11-
<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



February 9, 1998




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