<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the quarterly period ended September 30, 1996 or

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the transition period from ____________ to ____________

                         Commission file number 0-27444


                              F.Y.I. INCORPORATED
                              -------------------
             (Exact name of registrant as specified in its charter)


               DELAWARE                                     75-2560895
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification
               organization)                                     No.)

3232 MCKINNEY AVENUE, SUITE 900, DALLAS, TEXAS                75204
(Address of principal executive offices)                    (Zip code)



      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (214) 953-7555



     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
                  ------             -----

     As of November 12, 1996, 6,165,450 shares of the registrant's Common Stock,
$.01 par value per share, were outstanding.



                                       1


<PAGE>   2


                      F.Y.I. INCORPORATED AND SUBSIDIARIES
               FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996

                                     INDEX


<TABLE>
<S>      <C> <C>                                                                    <C>
PART I.      FINANCIAL INFORMATION
             ---------------------

Item 1   Financial Statements                                                       3

         Consolidated Balance Sheets - December 31, 1995 and September 30, 1996     4

         Consolidated Statements of Operations - Three months and nine months
            ended September 30, 1995 and 1996                                       5

         Consolidated Statements of Cash Flows - Nine months ended September 30,
            1995 and 1996                                                           6

         Notes to Consolidated Financial Statements - September 30, 1996            7

Item 2   Management's Discussion and Analysis of Financial Condition and Results
            of Operations                                                          13

PART II.     OTHER INFORMATION
             -----------------

Item 5   Other Information                                                         16

Item 6   Exhibits and Reports on Form 8-K                                          19

SIGNATURES                                                                         20

</TABLE>


                                       2


<PAGE>   3

PART I.      FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS





                                       3


<PAGE>   4


                      F.Y.I. INCORPORATED AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                           December 31,   September 30,
                                                                               1995           1996      
                                                                           ------------   -------------
  <S>                                                                        <C>             <C>         
                                       ASSETS                   
                                                                
  CURRENT ASSETS:                                               
    Cash and cash equivalents                                                  $   52        $  3,336
    Accounts receivable and notes receivable, less allowance                        -          14,191
    Inventory                                                                       -             567
    Prepaid expenses and other current assets                                      52             687
                                                                               ------        --------
         Total current assets                                                     104          18,781
                                                                                                     
  PROPERTY, PLANT AND EQUIPMENT, net                                               15          10,105
  GOODWILL AND OTHER INTANGIBLES                                                    -          28,099
  DEFERRED OFFERING COSTS                                                       2,190               -
  ACCOUNTS RECEIVABLE, SHAREHOLDER - LONG TERM                                      -             643
  OTHER NONCURRENT ASSETS                                                           6           2,273
                                                                               ------        --------
                                                                                                     
         Total assets                                                          $2,315        $ 59,901
                                                                               ======        ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:                                                                                
    Accounts payable and accrued liabilities                                   $1,101        $ 7,177
    Short-term obligations                                                          -          3,545
    Current maturities of long-term obligations                                     -            294
    Unearned revenue                                                                -            686
    Federal income taxes payable                                                    -          1,752
    Current portion of deferred income taxes                                        -            289
                                                                               ------        -------
         Total current liabilities                                              1,101         13,743
                                                                                                    
LONG-TERM OBLIGATIONS, net of current maturities                                    -         16,956
DEFERRED INCOME TAXES, net of current portion                                       -            278
                                                                               ------        -------
                                                                                                    
         Total liabilities                                                      1,101         30,977
                                                                               ------        -------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
    Preferred stock, Series A, $.01 par value, 1,000,000 and
      0 shares authorized, 9,000 and 0 shares issued and
      outstanding at December 31, 1995 and September 30, 1996,
      respectively                                                                  -              - 
    Preferred stock, $.01 par value, 1,000,000 shares authorized,                                        
      0 shares issued and outstanding                                               -              - 
    Common stock, $.01 par value, 26,000,000 shares authorized,                                          
      663,125 and 5,928,074 shares issued and outstanding at                                               
      December 31, 1995 and September 30, 1996, respectively                        7             59 
    Additional paid-in-capital                                                  1,207         26,805 
    Retained earnings                                                               -          2,561 
                                                                               ------        ------- 
                                                                                1,214         29,425 
Less - Treasury stock, $.01 par value, 0 and 36,670 shares                                           
at December 31, 1995 and September 30, 1996, respectively                           -           (501)
                                                                               ------        ------- 
Total stockholders' equity                                                      1,214         28,924 
                                                                               ------        ------- 
Total liabilities and stockholders' equity                                     $2,315        $59,901 
                                                                               ======        ======= 
</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                       4


<PAGE>   5


                      F.Y.I. INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (See Note 1)


<TABLE>
<CAPTION>
                                                Three Months      Nine Months    
                                                   Ended             Ended       
                                               September 30,     September 30,   
                                               ---------------  ---------------- 
                                               1995     1996      1995    1996   
                                               ------  -------  -------  ------- 
                                                 (unaudited)         

                                               <S>     <C>       <C>   <C>      
   REVENUE:                                                            
     Service revenue                          $     -   $19,548  $  -   $ 41,262
     Product revenue                                -     1,571     -      4,211
     Other revenue                                  -       201     -        498                  
                                              --------  -------  -----  --------   
            Total revenue                           -    21,320     -     45,971            
                                                                               
      COST OF SERVICES                              -    12,390     -     26,020   
      COST OF PRODUCTS SOLD                         -     1,251     -      3,225   
      DEPRECIATION                                  -       390     -      1,023   
                                              --------  -------  -----  --------   
            Gross profit                            -     7,289     -     15,703   
      SELLING, GENERAL AND ADMINISTRATIVE                                         
        EXPENSES                                    -     4,722     -     10,891   
      AMORTIZATION                                  -       218     -        290   
                                              --------  -------  -----  --------   
            Operating income                        -     2,349     -      4,522   
      OTHER (INCOME) EXPENSE:                                                     
        Interest expense                            -       362     -        479   
        Interest income                             -       (27)    -       (207)   
        Other (income) expense, net                 -        20     -        (40)   
                                              --------  -------  -----  --------   
                                                                                  
            Income before income taxes              -     1,994     -      4,290   
      PROVISION FOR INCOME TAXES                    -       806     -      1,729   
                                              --------  -------  -----  --------   
                                                                                  
      NET INCOME                              $     -  $  1,188  $  -   $  2,561   
                                              ======== ========  =====  ========   
                                                                                  
      WEIGHTED AVERAGE COMMON SHARES                                              
        OUTSTANDING                                 -     5,784     -      5,450   
                                              ========  =======  =====  ========   
                                                                                  
      NET INCOME PER COMMON SHARE             $     -   $  0.21  $  -   $   0.47   
                                              ========  =======  =====  ========   
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                       5


<PAGE>   6


                      F.Y.I. INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (See Note 1)

<TABLE>
<CAPTION>
                                                                           Nine Months Ended
                                                                     ------------------------------
                                                                     September 30,    September 30,
                                                                         1995             1996
                                                                     -------------   --------------
                                                                              (unaudited)
<S>                                                                  <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                            $   -            $ 2,561
  Adjustments to reconcile net income to net cash provided                            
    by operating activities                                                           
        Depreciation and amortization                                       -              1,313
        Deferred tax benefit                                                                (274)
        Change in operating assets and liabilities:                                   
           Accounts receivable and notes receivable                         -               (159)
           Inventory                                                        -                (58)
           Prepaid expenses and other assets                                -               (325)
           Accounts payable and accrued liabilities                         -             (1,798)
           Unearned revenue                                                 -                 95
                                                                        -----           --------
                                                                                      
                Net cash provided by operating activities                   -              1,355
                                                                                      
CASH FLOWS FROM INVESTING ACTIVITIES:                                                 
  Purchase of property, plant and equipment                               (7)             (2,328)
  Cash paid for acquisitions, net of cash received                          -            (27,365)
                                                                        -----           --------
                Net cash used for investing activities                    (7)            (29,693)
                                                                                      
CASH FLOWS FROM FINANCING ACTIVITIES:                                                 
  Proceeds from common stock issuance, net of underwriting                            
    discounts and other costs                                           (251)             23,448
  Proceeds from preferred stock issuance                                  135                  -
  Proceeds from short-term obligations                                      -              3,500
  Proceeds from long-term obligations                                       -             14,101
  Cash paid for debt issuance costs                                         -             (1,602)
  Principal payments on short-term obligations                              -             (5,252)
  Principal payments on long-term obligations                               -             (2,573)
                                                                        -----           --------
                Net cash (used in) provided by financing activities     (116)             31,622
                                                                                      
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    (123)              3,284
                                                                                      
CASH AND CASH EQUIVALENTS, beginning of period                            669                 52
                                                                        -----           --------
                                                                                      
CASH AND CASH EQUIVALENTS, end of period                                $ 546           $  3,336
                                                                        =====           ========
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                       6


<PAGE>   7
                      F.Y.I. INCORPORATED AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION AND BASIS OF PRESENTATION:

     F.Y.I. Incorporated (the "Company" or "F.Y.I.") was founded in September
1994 to create a national, single source provider of document management
services to three primary client segments: healthcare institutions, professional
services firms and financial institutions. In January 1996, F.Y.I. acquired (the
"Acquisitions"), simultaneously with the closing of its initial public offering
(the "IPO") on January 23, 1996, seven document management services businesses
(the "Founding Companies"). The consideration for the Founding Companies
consisted of a combination of cash and common stock (the "Common Stock") of
F.Y.I.

     Between September 1994 and the consummation of the IPO and the
Acquisitions, F.Y.I. did not conduct any significant operations. For accounting
purposes and for the purposes of the presentation of the financial statements
herein, January 31, 1996 has been used as the effective date of the
Acquisitions.  Accordingly, the actual operating results of the Company
included in the Statement of Operations for the nine months ended September 30,
1996 represent the eight months of operations subsequent to the consummation
of the Acquisitions.  Supplemental Statement of Operations Data for the nine
months ended September 30, 1996 are presented in Note 2 herein.

     In the opinion of F.Y.I.'s management, the accompanying consolidated
financial statements include the accounts of the Company and all adjustments
necessary to present fairly the Company's financial position at September 30,
1996, its results of operations for the three and nine months ended September
30, 1995 and 1996, and its cash flows for the nine months ended September 30,
1995 and 1996.  All significant intercompany accounts have been eliminated.
Although the Company believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission").  These consolidated financial statements should
be read in conjunction with the combined financial statements of the Founding
Companies and the related notes thereto in F.Y.I.'s Annual Report on Form 10-K
filed with the Commission on April 10, 1996, as amended by F.Y.I.'s Annual
Report on Form 10-K/A filed with the Commission on April 29, 1996, and the
Company's Current Report on Form 8-K filed on September 9, 1996. The results of
operations for the interim periods ended September 30, 1996 and 1995 will not
be indicative of the results for the full year because the Company only had 
operations for eight of the nine months and the impact of acquisitions recorded 
as purchases, whose results are only included subsequent to the purchase date.


                                       7


<PAGE>   8


2.   INITIAL PUBLIC OFFERING OF COMMON STOCK AND THE ACQUISITIONS

Initial Public Offering

     On January 26, 1996, the Company completed the IPO of 2,185,000 shares of
Common Stock (including the exercise of the underwriters' over-allotment
option) at $13.00 per share.  Proceeds from the IPO, net of underwriting
discount and IPO costs, were approximately $22.9 million.  Of these net
proceeds, approximately $7.1 million was used to pay a portion of the
consideration for the Acquisitions, approximately $7.7 million was used to
retire certain indebtedness of the Founding Companies, approximately $8.0
million was used for acquisitions subsequent to the IPO, and $0.1 million was
used as working capital.

     Upon the closing of the IPO, the Company converted the 9,000 shares of
Series A Preferred Stock then outstanding into 542,557 shares of Common Stock.


Acquisitions of the Founding Companies

     Simultaneously with the closing of the IPO, the Company acquired the
Founding Companies.  The aggregate consideration paid by F.Y.I. to acquire the
Founding Companies was approximately $35 million, consisting of:  (i)
$7,059,000 in cash; (ii) 1,878,933 shares of Common Stock; (iii) the assumption
and repayment of approximately $191,000 of indebtedness owed by a Founding
Company stockholder; and (iv) the distribution of cash and certain receivables
to certain stockholders of Founding Companies that were S corporations in the 
amount of $3,450,000, representing the undistributed retained earnings of such 
S corporations, upon which taxes have been paid by the stockholders.

     The Acquisitions have been accounted for in accordance with generally
accepted accounting principles ("GAAP") as a combination of F.Y.I. and the
Founding Companies at historical cost, because: (i) the Founding Companies'
stockholders transferred assets to F.Y.I. in exchange for Common Stock and cash
simultaneously with the IPO; (ii) the nature of future operations of the
Company will be substantially identical to the combined operations of the
Founding Companies; and (iii) no former stockholder group of any of the
Founding Companies obtained a majority of the outstanding voting shares of the
Company.

Supplemental Data

     Statement of Operations - Supplemental Data

     The Statement of Operations Data for the nine months ended September 30,
1995 represent the unaudited combined statement of operations of the Founding
Companies for the period adjusted to give effect to: (i) compensation levels the
officers and owners have agreed to receive subsequent to the IPO; and (ii)
provision for income taxes as if all entities had been subject to federal and
state income taxes for the period. The Supplemental Statement of Operations Data
for the nine months ended September 30, 1996 represent a combination of: (i) the
audited results of the combined Founding Companies for the one month of
operations prior to the consummation of the Acquisitions adjusted for the
compensation and tax adjustments discussed above; and (ii) the audited results 
of F.Y.I.  Incorporated and Subsidiaries for the

                                       8


<PAGE>   9

eight months subsequent to the consummation of the Acquisitions (which include
acquisitions subsequent to the IPO from the date of their respective
acquisition).  The Supplemental Data are provided for information purposes only
and do not purport to present the results of operations of the Company had the
transactions assumed therein occurred on or as of the dates indicated, nor are
they necessarily indicative of the results of operations which may be achieved
in the future.


<TABLE>
<CAPTION>
                                                                   SUPPLEMENTAL DATA
                                                         NINE MONTHS               NINE MONTHS
                                                            ENDED                      ENDED
                                                        SEPTEMBER 30,              SEPTEMBER 30,
                                                            1995                       1996
                                                     -------------------        -------------------
                                                     (UNAUDITED IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>                        <C>
STATEMENT OF OPERATIONS DATA:
   Service revenue                                         $ 29,997                   $ 44,749      
   Product revenue                                            4,815                      4,606      
   Other revenue                                                674                        532      
                                                           --------                   --------      
                Total revenue                                35,486                     49,887      
   Cost of services                                          19,064                     28,216      
   Cost of products sold                                      3,890                      3,532      
   Depreciation                                                 898                      1,113      
                                                           --------                   --------      
                Gross profit                                 11,634                     17,026      
   Selling, general and administrative expenses (a)           7,657                     11,705      
   Amortization                                                  48                        296      
                                                           --------                   --------      
                Operating income                              3,929                      5,025      
   Interest and other expenses, net                             159                        187      
                                                           --------                   --------      
   Income before income taxes                                 3,770                      4,838      
   Provision for income taxes (b)                             1,399                      1,950      
                                                           --------                   --------      
   Net income                                              $  2,371                   $  2,888      
                                                           ========                   ========      
                                                                                               
   Net income per share                                                               $   0.53      
                                                                                      ========      
                                                                                               
   Weighted average shares outstanding                                                   5,450      
</TABLE>                                                        


(a) Adjusted for Founding Company pro forma Compensation Differential of $1,532
    for 1995 and $683 for 1996.
(b) Adjusted for pro forma provision for taxes of $1,411 for 1995 and $351 for
    1996.



                                       9


<PAGE>   10


Weighted Average Shares Outstanding

     The number of shares (in thousands) used in calculating net income per
share was determined as follows:


<TABLE>
<CAPTION>
                                                              THREE MONTHS    NINE MONTHS
                                                                  ENDED          ENDED
                                                              SEPTEMBER 30,  SEPTEMBER 30,
                                                                  1996           1996
                                                              -------------  -------------
<S>                                                           <C>            <C>

Outstanding F.Y.I. shares after the IPO and the acquisitions
   of the Operating Companies (as defined below)                 5,768           5,434
Warrants to purchase stock under the treasury stock method          16              16
                                                                 -----           -----
         Number of shares used in net income                                    
            per share calculation                                5,784           5,450
                                                                 =====           =====
</TABLE>                                                                        


3. BUSINESS COMBINATIONS

     Since the IPO, the Company has acquired 13 additional businesses (together
with the Founding Companies, the "Operating Companies") which provide document
management services.  All of the acquisitions are accounted for under the
purchase method of accounting.

In May 1996, the Company acquired the stock of B&B Information and Image
Management, Inc. ("B&B") and Premier Document Management, Inc. and PDM Services,
Inc. ("Premier"). In June 1996, the Company acquired all of the non-cash assets
of Robert A. Cook and Staff, Inc. and RAC Services, Inc. ("Cook").  In August
1996, the Company acquired C.M.R.S. Inc. ("CMRS"), Minnesota Medical Record
Service, Inc. ("Minnesota Medical Record") and Texas Medical Record Service,
Inc. ("Texas Medical Record") (collectively "Medical Record"). Also, as of
August 1996, the Company acquired ZIA Information Analysis Group ("ZIA").  B&B,
Premier, Cook, Medical Record and ZIA are considered significant subsidiaries
of the Company.  The aggregate consideration paid for B&B, Premier, Cook,
Medical Record and ZIA consisted of $20,129,000 in cash and 585,589 shares of
Common Stock. The preliminary allocation of the purchase price is set forth
below:


<TABLE>
              <S>                                      <C>
              Consideration Paid                       $28,123,000
              Estimated Fair Value of Tangible Assets   10,758,000
              Estimated Fair Value of Liabilities        7,527,000
              Goodwill                                  24,892,000
</TABLE>


The fair market value of the shares of Common Stock used in calculating the
consideration paid was $13.65, which represents a 35% discount from the average
trading price of the Common Stock based on the length and type of restrictions
in the purchase agreements.

The Company acquired substantially all of the assets of Sacramento Valley
Records Management Co. ("Sacramento") and Microfilm Associates, Ltd.
("Microfilm) in February 1996; Octo, Incorporated ("Octo") in June 1996 and
Domor Data Processing ("Domor"), Rushmore Legal Support ("Rushmore"), and Index
Record Management ("Index") in July 1996.  The aggregate consideration paid for
Sacramento, Microfilm, Octo, Domor, Rushmore and Index consisted of $3,017,000
in cash. The preliminary allocation of the purchase price is set forth below:

                                       10


<PAGE>   11




<TABLE>
              <S>                                      <C>
              Consideration Paid                       $3,017,000
              Estimated Fair Value of Tangible Assets     720,000
              Estimated Fair Value of Liabilities         433,000
              Goodwill                                  2,730,000
</TABLE>


The estimated fair market values reflected above are based on preliminary
estimates and assumptions and are subject to revision.  In management's
opinion, the preliminary allocation is not expected to be materially different
than the final allocation.

All intangibles are considered enterprise goodwill.  Based on the historical
profitability of the purchased companies and trends in the legal, healthcare
and other industries to outsource document management functions in the
foreseeable future, the enterprise goodwill will be amortized over a period of
30 years.  Management continually evaluates whether events and circumstances
indicate that the remaining estimated useful life of intangible assets may
warrant revisions or that the remaining balance of intangibles or other
long-lived assets may not be recoverable.  To make this evaluation, management
uses an estimate of undiscounted net income over the remaining life of the
intangibles or other long-lived assets. The goodwill associated with the B&B,
Premier, Medical Record and ZIA acquisitions is not deductible for income tax
purposes.

Set forth below is a pro forma income statement for the nine months ended
September 30, 1996 and for the year ended December 31, 1995.  The unaudited pro
forma data give effect to: (i) the acquisitions of B&B, Premier, Cook, Medical
Record and ZIA; (ii) the acquisitions of the Founding Companies; and (iii)
compensation and tax adjustments for all transactions as if the transactions
had occurred on January 1, 1995. The acquisitions of Sacramento, Microfilm,
Octo, Domor, Rushmore and Index have not been included in the pro forma
financial statements for periods prior to their acquisition date as the effect
is immaterial.

<TABLE>
<CAPTION>
                                          Pro Forma          Pro Forma
                                         Year Ended      Nine Months Ended
                                      December 31, 1995  September 30, 1996
                                      -----------------  ------------------
                                            (Unaudited In Thousands,
                                             Except Per Share Data)
<S>                                       <C>                  <C>    
Revenue                                   $ 78,160             $64,964
Income before income taxes                   8,270               6,986
Net income                                   5,098               4,178
Net income per common share               $   0.87             $  0.71
Average shares outstanding                   5,872               5,872
                                          ========             =======
</TABLE>



4. CREDIT FACILITY

     In April 1996, the Company and its subsidiaries entered into a credit
agreement, as amended (the "Line of Credit"), with Banque Paribas, as agent,
and the lenders named therein.  Under the Line of Credit, the Company and its
subsidiaries may borrow, on a revolving credit basis, loans in an aggregate
outstanding principal amount up to $35.0 million from time to time

                                       11


<PAGE>   12

under the secured revolving credit and acquisition facility, subject to certain
customary borrowing capacity requirements. The Company and its subsidiaries may
borrow up to an aggregate $30.0 million of term loans under the Credit
Agreement for acquisitions under prescribed conditions. The Company and its
subsidiaries may borrow revolving credit loans up to an aggregate $5.0 million
under the Credit Agreement for working capital and general corporate purposes.
The commitment to fund revolving credit loans expires April 14, 2001.  The
commitment to fund term loans expires October 15, 1997.  The annual interest
rate applicable to borrowings under this facility is, at the option of the
Company, (i) 1.50% plus the prime rate or (ii) 3.00% plus the Eurodollar rate.

     The Credit Agreement requires mandatory prepayments in certain
circumstances. The outstanding principal balance of term loans as of October
15, 1997 shall thereafter be due and payable in 14 equal quarterly payments
beginning January 15, 1998, and ending April 15, 2001.  The outstanding
principal balance of revolving credit loans will be due and payable on April
15, 2001.  As of September 30, 1996, the Company had $3.5 million in borrowings
outstanding under this facility for working capital and corporate purposes, and
$14.1 million in borrowings outstanding under the term loans for acquisitions.

                                       12


<PAGE>   13




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

     The following discussion should be read in conjunction with the financial
statements of the Company and the related notes thereto appearing elsewhere in 
this Report on Form 10-Q. Additional information concerning factors that could 
cause results to differ materially from those in the forward-looking statements 
is contained under the section "Risk Factors."
 
  Introduction
 
     F.Y.I. was founded in September 1994 to create a national, single source
provider of document management services. In January 1996, F.Y.I. acquired,
simultaneously with the closing of the IPO, the Founding Companies. The
Acquisitions have been accounted for in accordance with GAAP as a combination of
the Founding Companies at historical cost, and January 31, 1996 has been used as
the effective date of the Acquisitions. Between September 1994 and the
consummation of the IPO, F.Y.I. did not conduct any operations. Accordingly, the
actual operating results of the Company included in the Statement of Operations
for the nine months ended September 30, 1996 represent only the eight months of
operations subsequent to the consummation of the Acquisitions and the IPO.
During the period prior to the IPO, F.Y.I. incurred various legal, accounting,
marketing, travel and other costs in connection with the Acquisitions and the
IPO which were funded by the issuance of equity securities. Additional costs
associated with the Acquisitions and the IPO were paid with proceeds of the IPO.
 
     Subsequent to the IPO and through September 30, 1996, the Company acquired
13 additional document management businesses. All of these Subsequent
Acquisitions have been accounted for using the purchase method of accounting.
The results of operations for these Subsequent Acquisitions are reflected in the
Company's financial statements based upon their individual acquisition dates.
 
     Supplemental Statement of Operations Data represent the combined results
of: (i) the Founding Companies for the one month of operations prior to the
consummation of the Acquisitions and the IPO and (ii) F.Y.I. Incorporated and
Subsidiaries for the eight months of operations subsequent to the consummation
of the Acquisitions and the IPO. Such data are presented and discussed herein
in order to present the results of the Company since the consummation of the IPO
compared to the results of the combined Founding Companies for periods prior to
the IPO. The Supplemental Data are provided for information purposes only and do
not purport to present the results of operations of the Company had the
transactions assumed therein occurred on or as of the dates indicated. The
Founding Companies were not under common control or management. Accordingly,
such historical combined results may not be comparable to, or indicative of,
future performance.
 
     The Company's revenue is classified as service revenue, product revenue and
other revenue. Service revenue relates to: (i) document and data conversion
services; (ii) records management services; (iii) database management and
related services; (iv) medical records release of information services; and (v)
litigation support services. Product revenue represents sales of micrographic
and business imaging supplies and equipment, primarily in conjunction with film
processing and other micrographic services. Other revenue consists of
commissions on the sales of imaging systems and equipment and franchising fees.
 
     Cost of services consists primarily of compensation and benefits to
non-administrative employees, occupancy costs, equipment costs and supplies and
also includes the costs associated with other revenue discussed above. Cost of
products sold relates to micrographics and business imaging supplies and
equipment.
 
     Selling, general and administrative expenses ("SG&A") consist primarily of
compensation and related benefits to the sales and marketing, executive
management, accounting, human resources and other administrative employees of
the Company, other sales and marketing costs, communications costs, insurance
costs and legal and accounting professional fees. SG&A subsequent to the IPO
include the costs of being a public company and the Company's executive
management team.




                                      13
<PAGE>   14
The Company

     The Company had conducted no significant operations from its inception
through the IPO and the Acquisitions.  For accounting purposes and the
presentation of the actual financial results herein, January 31, 1996 has been
used as the effective date of the Acquisitions.

        THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED 
        SEPTEMBER 30, 1995 -- F.Y.I. INCORPORATED

     For the three months ended September 30, 1996, revenue was $21.3 million,
gross profit was $7.3 million, operating income was $2.3 million, and net
income was $1.2 million.  As previously mentioned, F.Y.I. had no operations
until February 1996.

        NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED 
        SEPTEMBER 30, 1995 -- F.Y.I. INCORPORATED

     For the nine months ended September 30, 1996, revenue was $46.0 million,
gross profit was $15.7 million, operating income was $4.5 million, and net
income was $2.6 million.  As previously mentioned, F.Y.I. had no operations
until February 1996.  For further discussion of supplemental operations for the
nine months ended September 30, 1996 and 1995, see "-- Supplemental."

     Liquidity and Capital Resources

     As of September 30, 1996, the Company had $5.0 million of working capital
and $3.3 million of cash.  Cash flows provided by operating activities for the
nine months ended September 30, 1996 were $1.4 million.  Cash used for investing
activities was $29.7 million, as the Company paid $27.4 million for
acquisitions, net of cash acquired.  Cash provided by financing activities was
$31.6 million.  The Company raised $22.9 million in the IPO, net of underwriting
discount and other costs associated with the IPO.  The Company assumed $8.5
million of debt in the acquisition of the Founding Companies and subsequently
retired all of this debt with the proceeds of the IPO, with the exception of
approximately $0.4 million of debt with favorable interest rates and capital
lease obligations of approximately $0.4 million.  In April 1996, the Company
negotiated a $35.0 million Line of Credit (see Note 4 of Notes to Consolidated
Financial Statements of F.Y.I. Incorporated and Subsidiaries).  The Company paid
$1.6 million in costs to secure this financing.  As of September 30, 1996, the
Company had borrowed $17.6 million under the Line of Credit to help fund the
acquisition program. The Company assumed $2.9 million of debt in the Subsequent
Acquisitions and retired $0.4 million of such debt.  The assumed debt remaining
has interest rates more favorable than the Company's credit facility.

     In the nine months ended September 30, 1995, the Company raised an
additional $0.1 million through the sale of Preferred Stock. During this period
the Company spent $0.3 million in activities related to the IPO and Acquisition
and ended the period with $0.5 million in cash.  The Company had no other
operations during this period.

     The Company anticipates that cash from operations, additional bank
financing available under the Line of Credit, the net proceeds of the proposed
Offering (the "Offering"), of 2,000,000 Company shares of Common Stock filed on
a Form S-1 Registration Statement on November 13, 1996 with the Securities and
Exchange Commission (the "Commission") and shares of Common Stock available 
under the Acquisition Shelf (as defined below) will provide sufficient liquidity
to execute the Company's acquisition and internal growth plans for approximately
the next 12 months.  The availability under the Line of Credit as of September
30, 1996 was $1.5 million for working capital and general corporate purposes,
and approximately $13.5 million for acquisitions.  Should the Company accelerate
its acquisition program, the Company may need to seek additional financing
through the public or private sale of equity or debt securities.  There can be
no assurance that the Company could secure such financing if and when it is
needed or on terms the Company deems acceptable.  The Company has filed an
acquisition shelf Registration Statement on Form S-1 (Registration No. 333-108)
registering 2,000,000 shares of Common Stock for issuance in its acquisition
program (the "Acquisition Shelf"), of which 1,377,741 shares were available at
September 30, 1996.  The Company expects to renegotiate the Line of Credit upon
consummation of the Offering in order to increase its flexibility in executing
acquisition strategy.
        



                                      14
<PAGE>   15
Supplemental

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995 -- F.Y.I. INCORPORATED COMBINED WITH FOUNDING COMPANIES

Revenue

     Total revenue.  Total revenue increased 40.6% from $35.5 million for the
nine months ended September 30, 1995 to $49.9 million for the nine months
ended September 30, 1996. This increase was comprised of a  49.2% increase in
service revenue and was offset by a 6.0% decrease in product and other revenue.
     
     Service revenue.  Service revenue increased $14.8 million from $30.0 
million for the nine months ended  September 30, 1995 to $44.8 million for the
nine months ended September 30, 1996. This increase was largely  due to: (i) the
Subsequent Acquisitions and (ii) internal growth in service revenue at the
Founding Companies of 9.0%. This  internal growth was primarily attributable to
(i) an increase in medical records release revenue at Recordex and  Permanent of
$1.5 million primarily attributable to the expansion into 32 additional
healthcare institutions in  the Eastern U.S. and Texas during 1995 and 1996;
(ii) an increase in litigation support revenue at Researchers of $700,000
primarily due to increased overnight document production and increased medical
records subpoena and service of process requests; and (iii) an increase in
micrographics and electronic imaging revenue at Imagent of $323,000 attributable
to an overall increase in microfilming, scanning and coding projects, offset by
the reduction in microfilm processing revenue due to the loss of a customer in
early 1996.
     
     Product and other revenue.  Product and other revenue decreased
approximately $351,000 from $5.5 million for the nine months ended September 30,
1995 to $5.1 million for the nine months ended September 30, 1996. The decrease
in product revenue primarily resulted from a decline in sales to governmental
and related entities during the federal government shutdown in late 1995. This
decline in product revenue  was offset by increased product revenue associated
with the purchase of B&B in May 1996. The decrease in other revenue was
attributable to decreased sales of micrographics equipment in 1996.
     
Gross profit

     Gross profit increased 46.3% from $11.6 million for the nine months ended
September 30, 1995 to  $17.0 million for the nine months ended September 30,
1996, largely due to the increases in revenue  discussed above. Gross profit as
a percentage of revenue increased from 32.8% for the nine months ended
September 30, 1995 to 34.1% for the nine months ended September 30, 1996,
primarily due to the higher margin mix of revenue associated with the Subsequent
Acquisitions.
    
Selling, general and administrative expenses

     SG&A increased 52.9%, from $7.7 million for the nine months ended
September 30, 1995 to  $11.7 million for the nine months ended September 30,
1996, primarily due to: (i) the establishment of  corporate overhead required to
execute the acquisition program and to manage the consolidated group of
companies; and (ii) SG&A associated with the Subsequent Acquisitions. SG&A as a
percentage  of revenue (excluding corporate overhead) decreased from 21.7% for
the nine months ended September 30, 1995 to 20.7% for the nine months ended
September 30, 1996. This decrease was a result of: (i) a decrease in  SG&A as a
percentage of revenue at the Founding Companies from 21.7% for the nine months
ended  September 30, 1995 to 21.4% for the nine months ended September 30, 1996 
primarily due to spreading the Company's fixed cost over a larger revenue base;
and (ii) lower average SG&A as a  percentage of revenue associated with the 
Subsequent Acquisitions relative to the Founding Companies.
    
Income before income taxes and net income

    Income before income taxes increased 28.3% from $3.8 million for the nine
months ended September 30,  1995 to $4.8 million for the nine months ended
September 30, 1996, and net income increased 21.8%, from  $2.4 million for the
nine months ended September 30, 1995 to $2.9 million for the nine months ended 
September 30, 1996, largely attributable to the factors discussed above. Net
income for the nine months ended  September 30, 1996 was impacted by a higher
effective tax rate attributable to the elimination of graduated  tax rates as
the Founding Companies are now taxed on a consolidated basis and due to the
impact of  nondeductible goodwill associated with certain of the Subsequent
Acquisitions.


    


                                       15
<PAGE>   16
PART II.  OTHER INFORMATION

ITEM 5.  OTHER INFORMATION

      Since September 30, 1996, the Company has acquired two additional
      businesses. First, as of October 1996, the Company acquired
      Carton-Hodgson, Inc. and CH Direct, Inc., direct mail and fulfillment
      businesses.
        
      Second, in November 1996, the Company acquired Data Input Services
      Corporation, Inc., a data input business.

      The Company has contemporaneously with the filing of this Form 10-Q filed
      with the Commission a Registration Statement on Form S-1 registering
      2,783,000 shares of Common Stock in connection with the Offering. The
      shares being registered include 2,000,000 shares to be sold by the 
      Company, 420,000 shares to be sold by selling stockholders and 363,000 
      shares subject to an over-allotment option granted by the Company to the
      underwriters.

                                 RISK FACTORS
 
      LIMITED OPERATING HISTORY; RISKS OF INTEGRATION; ABILITY TO MANAGE GROWTH
        
           F.Y.I. was founded in September 1994 and conducted no operations 
      prior to the consummation of the IPO. F.Y.I. acquired the Founding
      Companies simultaneously with the closing of the IPO and has acquired 15
      additional companies since that time (together with the Founding
      Companies, the "Operating Companies"). Prior to their acquisition, these
      companies operated as separate independent entities. Currently, the
      Company has a decentralized financial reporting system and relies on the
      existing reporting systems of the Operating Companies. The success of the
      Company will depend, in part, on the Company's ability to integrate the
      operations of the Operating Companies, including centralizing certain
      functions to achieve cost savings and developing programs and processes
      that will promote cooperation and the sharing of opportunities and
      resources. F.Y.I.'s management group has been assembled recently and had
      no previous experience in the document management services industry.
      There can be no assurance that the management group will effectively be
      able to oversee the combined entity and implement the Company's operating
      or growth strategies. Further, to the extent that the Company is able to
      implement fully its acquisition strategy, the resulting growth of the
      Company will place significant demands on management and on the Company's
      internal systems and controls. There can be no assurance that the
      recently assembled management group will effectively be able to direct
      the Company through a period of significant growth. In addition, no
      assurance can be given that the Company's current systems will be
      adequate for its future needs or that the Company will be successful in
      implementing new systems. 
        
           A number of the Operating Companies offer different services, utilize
      different capabilities and technologies and target different geographic
      markets and client segments. While the Company believes that there are
      substantial opportunities in integrating these businesses, these
      differences increase the risk inherent in successfully completing such
      integration. Further, there can be no assurance that the Company's
      strategy to establish a single source provider for document management
      services will be successful, or that the Company's target client segments
      will accept the Company as a provider of such services. In addition,
      there can be no assurance that the operating results of the Company will
      match or exceed the combined individual operating results achieved by the
      Operating Companies prior to their acquisition.
        
      ACQUISITION STRATEGY
 
           The Company's primary growth strategy is the acquisition of 
      additional document management services businesses that will complement
      its existing businesses. There can be no assurance that the Company will
      be able to identify or reach mutually agreeable terms with acquisition
      candidates and their owners, or that the Company will be able to
      profitably manage additional businesses or successfully integrate such
      additional businesses into the Company without substantial costs, delays
      or other problems. Acquisitions may involve a number of special risks
      including: (i) adverse short-term effects on the Company's reported
      operating results; (ii) diversion of management's attention; (iii)
      dependence on retention, hiring and training of key personnel; (iv) risks
      associated with unanticipated problems or legal liabilities; and (v)
      amortization of acquired intangible assets. Some or all of these risks
      could have a material adverse effect on the Company's operations and
      financial performance. In addition, to the extent that consolidation
      becomes more prevalent in the industry, the prices for attractive
      acquisition candidates may be bid up to higher levels. In any event,
      there can be no assurance that businesses acquired in the future will
      achieve sales and profitability that justify the investment therein. 
        
           The Company is regularly in discussions with additional acquisition 
      candidates and may from time to time enter into letters of intent with
      respect to the acquisition of such businesses. No assurance can be given,
      however, that the Company will acquire any additional businesses.
      
        




                                       16
<PAGE>   17
      NEED FOR ADDITIONAL FINANCING TO CONTINUE ACQUISITION STRATEGY
 
           The Company currently intends to finance future acquisitions by 
      using cash and its Common Stock for all or a portion of the consideration
      to be paid. The Company filed the Acquisition Shelf with the Commission
      relating to the separate offering of up to 2,000,000 shares of Common
      Stock to be used as consideration for acquisitions effected by the
      Company, of which 1,143,265 shares of Common Stock were available as of
      November 12, 1996. In the event that the Company's Common Stock does not
      maintain sufficient value, or potential acquisition candidates are
      unwilling to accept the Company's Common Stock as consideration for the
      sale of their businesses, the Company may be required to utilize more of
      its cash resources, if available, in order to continue its acquisition
      program. If the Company does not have sufficient cash resources, its
      growth could be limited unless it is able to obtain capital through
      additional debt or equity financings. In April 1996, the Company and its
      subsidiaries entered into the Line of Credit, with Banque Paribas, as
      agent, and the lenders named therein. Under the Line of Credit, the
      Company and its subsidiaries may borrow, on a revolving credit basis,
      loans in an aggregate outstanding principal amount of $5.0 million for
      working capital and general corporate purposes and term loans in an
      aggregate principal amount of $30.0 million for acquisitions, subject to
      certain restrictions in the Line of Credit. As of November 12, 1996, the
      availability under the Line of Credit was $2.5 million for working capital
      and $8.8 million for acquisitions. There can be no assurance, however,
      that funds available under the Line of Credit will be sufficient for the
      Company's needs. 
        
      EFFECT OF POTENTIAL FLUCTUATIONS IN OPERATING RESULTS ON PRICE OF COMMON
      STOCK; VOLATILITY OF STOCK PRICE
        
           Results for any quarter are not necessarily indicative of the 
      results that the Company may achieve for any subsequent quarter or a full
      fiscal year. Quarterly results may vary materially as a result of the
      timing and structure of acquisitions, the timing and magnitude of costs
      related to such acquisitions, the gain or loss of material client
      relationships and variations in the prices charged by the Company for the
      services it provides. In addition, since a significant portion of the
      Company's revenue is generated on a project-by-project basis, the timing
      or completion of material projects could result in fluctuations in the
      Company's results of operations for particular quarterly periods. Such
      fluctuations in operating results may adversely affect the market price
      of the Company's Common Stock. The market price for the Company's shares
      may also fluctuate in response to material announcements by the Company
      or significant clients or competitors of the Company, changes in the
      economic or other conditions impacting the Company's targeted client
      segments or general economic conditions outside of the Company. Further,
      the securities markets have experienced significant price and volume
      fluctuations from time to time that have often been unrelated or
      disproportionate to the operating performance of particular companies.
      These broad fluctuations may adversely affect the market price of the
      Common Stock. 
        
      DEPENDENCE ON CERTAIN CLIENT SEGMENTS AND TECHNOLOGY
 
           The Company derives its revenue primarily from its three targeted 
      client segments: healthcare institutions, professional services firms and
      financial institutions. Fundamental changes in the business practices of
      any of these client segments, whether due to regulatory, technological or
      other developments, could cause a material reduction in demand by such
      clients for the services offered by the Company. Any such reduction in
      demand would have a material adverse effect on the results of operations
      of the Company. The document management services industry is characterized
      by technological change, evolving customer needs and emerging technical
      standards. Although the Company believes that it will be able to continue
      to offer services based on the newest technologies, there can be no
      assurance that the Company will be able to obtain the rights to use any
      such technologies, that it will be able to effectively implement such
      technologies on a cost-effective or timely basis or that such technologies
      will not render obsolete the Company's role as a third party provider of
      document management services. 
        
      COMPETITION
 
           The document management services businesses in which the Company 
      competes and expects to compete are highly competitive. A significant
      source of competition is the in-house document handling capability of the
      Company's targeted client base. There can be no assurance that these
      businesses will outsource more of their document management needs or that
      such businesses will not bring in-house services that they currently
      outsource. In addition, certain of the Company's competitors are larger
      businesses and have greater financial resources than the Company. Certain
      of these competitors operate in broader geographic areas than the
      Company, and others may choose to enter the Company's areas of operation
      in the future. In addition, the Company intends to enter new geographic
      areas through internal growth and acquisitions and expects to encounter
      significant competition from established competitors in each of such new
      areas. As a result of this highly competitive environment, the Company
      may lose customers or have difficulty in acquiring new customers and new
      companies, and its results of operations may be adversely affected. 
        

                                       17
<PAGE>   18
      RELIANCE ON KEY PERSONNEL
 
           The Company's operations are dependent on the continued efforts of 
      its executive officers and on senior management of the Operating
      Companies. Furthermore, the Company will also be dependent on the senior
      management of businesses acquired in the future. If any of these people
      is unable or unwilling to continue in his or her present role, or if the
      Company is unable to attract and retain other skilled employees, the
      Company's business could be adversely affected. The Company does not
      intend to obtain key person life insurance covering any of its executive
      officers or other members of senior management. 
        
      POTENTIAL LIABILITY FOR BREACH OF CONFIDENTIALITY
 
           A substantial portion of the Company's business involves the handling
      of documents containing confidential and other sensitive information.
      Although the Company has established procedures intended to eliminate any
      unauthorized disclosure of confidential information and, in some cases,
      has contractually limited its potential liability for unauthorized
      disclosure of such information, there can be no assurance that
      unauthorized disclosures will not result in material liability to the
      Company.
        
      INCREASE IN MINIMUM WAGE
 
           As of October 1, 1996, the federal minimum wage increased to $4.75 
      an hour. The second phase of the increase will be implemented on September
      1, 1997, bringing the federal minimum wage to $5.15 an hour. In addition,
      California and other states have increased or may increase their minimum
      wage above the federal minimum. A significant number of the Company's
      employees earn slightly above the minimum wage and, therefore, the Company
      may have to increase salaries to remain competitive. Accordingly, the
      Company's results of operations may be adversely affected.
        
      CONTROL BY MANAGEMENT
 
           Following the completion of the Offering, the directors and 
      executive officers of the Company will beneficially own approximately
      20.4% of the then outstanding shares of Common Stock (19.5% if the
      Underwriters' over-allotment option is exercised in full) and exercise
      substantial control over the Company's affairs. These stockholders acting
      together would likely be able to elect a sufficient number of directors to
      control the Board of Directors and to approve or disapprove any matter
      submitted to a vote of stockholders. 
        
      POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON 
      STOCK
 
           The market price of the Common Stock of the Company could be
      adversely affected by the sale of substantial amounts of Common Stock of
      the Company in the public market. After the completion of the Offering,
      there will be 8,165,450 shares of Common Stock outstanding. The 2,420,000
      shares offered in the Offering will be, and the 2,185,000 shares sold in
      the IPO are, freely tradable without restriction unless acquired by
      affiliates of the Company. Of such 8,165,450 shares, 2,664,615 shares,
      together with 165,000 shares of Common Stock currently issuable upon
      exercise of outstanding warrants, have not been registered under the
      Securities Act of 1933, as amended (the "Securities Act"), which means
      that they may be resold publicly only upon registration under the
      Securities Act or in compliance with an exemption from the registration
      requirements of the Securities Act, including the exemption provided by
      Rule 144 under the Securities Act. Holders of all such unregistered
      shares, however, have certain registration rights with respect to such
      shares.
        
           The Company has agreed not to sell or otherwise dispose of any shares
      of Common Stock for a period of 90 days from the date of the Offering
      without the prior written consent of Montgomery Securities, except that
      the Company may issue Common Stock in connection with acquisitions or upon
      the exercise of options. In addition, the former owners of the Founding
      Companies and the initial stockholders of the Company (which together 
      include the Selling Stockholders) have agreed with the Company that they
      will not sell any of their shares for a period of two years after January
      26, 1996 (other than certain sales registered under the Securities Act and
      a limited ability to pledge such shares as collateral). The Company has
      agreed not to waive such restriction for a period of 90 days from the date
      of the Offering without the prior written consent of Montgomery
      Securities. Directors of the Company who are not subject to these
      contractual restrictions have agreed not to contract to sell or otherwise
      sell or dispose of any of their Common Stock for a period of 90 days after
      the date of the Offering without the prior written consent of Montgomery
      Securities.
        
           The Company issued 856,735 shares of Common Stock as partial
      consideration for acquisitions completed since the IPO. Such 856,735
      shares were registered under the Acquisition Shelf and are freely tradable
      (except for 36,670 shares held by a wholly-owned subsidiary of the
      Company) unless acquired by parties to the acquisition or affiliates of
      such parties, in which case they may be sold pursuant to Rule 145 under
      the Securities Act. In addition, these shares are subject to contractual
      restrictions on resale which generally expire two years from the date of
      issuance.
        
           The Company has reserved for issuance under its 1995 Stock Option
      Plan (the "Plan") an aggregate of 650,000 shares of Common Stock, or 12%
      of the aggregate number of shares of the Common Stock outstanding,
      whichever is greater. The Company has registered the shares issuable upon
      exercise of options granted under the Plan, and such shares will be
      eligible for resale in the public market. As of November 12, 1996, the
      Company had options to purchase 635,300 shares of Common Stock outstanding
      under the Plan. 
        

                                       18
<PAGE>   19
      EFFECT OF CERTAIN CHARTER PROVISIONS
 
           The Board of Directors of the Company is empowered to issue preferred
      stock without stockholder action. The existence of this "blank-check"
      preferred could render more difficult or discourage an attempt to obtain
      control of the Company by means of a tender offer, merger, proxy contest
      or otherwise. 
        
      RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
 
           This filing contains certain forward-looking statements within the
      meaning of Section 27A of the Securities Act and Section 21E of the
      Securities Exchange Act of 1934, as amended, which are intended to be
      covered by the safe harbors created thereby. Investors are cautioned that
      all forward-looking statements involve risks and uncertainty, including
      without limitation, the sufficiency of the Company's working capital and
      the ability of the Company to realize benefits from consolidating certain
      general and administrative functions, to continue its aggressive
      acquisition program, to retain management, to implement its focused
      business strategy to expand its document management services
      geographically, to attract customers from other businesses, to increase
      revenue by cross-selling services and to successfully defend itself in
      ongoing and future litigation. Although the Company believes that the
      assumptions underlying the forward looking statements contained herein are
      reasonable, any of the assumptions could be inaccurate, and, therefore,
      there can be no assurance that the forward-looking statements included in
      this filing will prove to be accurate. In light of the significant
      uncertainties inherent in the forward-looking statements included herein,
      the inclusion of such information should not be regarded as a
      representation by the Company or any other person that the objectives and
      plans of the Company will be achieved.
        
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

Exhibit Number                 Description          
--------------                 -----------
  10.23           --  Second Amendment to Credit Agreement, dated as of August
                      30, 1996, by and  among F.Y.I. Incorporated and its
                      subsidiaries and Banque Paribas, IBJ Schroder Bank &
                      Trust, and First Source Financial LLP

  21              --  List of subsidiaries of F.Y.I. Incorporated

  27              --  Financial Data Schedule

(b)  Reports on Form 8-K

     The Company filed a Current Report on Form 8-K with the Commission on
September 9, 1996, reporting under Items 2, 5 and 7 thereto the acquisitions 
by the Company of Medical Record and ZIA and including the following historical
restated and pro forma financial information of the Company reflecting recently
completed significant acquisitions:


                                       19
<PAGE>   20


                              FINANCIAL STATEMENTS

                                NEW ACQUISITIONS

<TABLE>
<S>                                                                                                        <C>
C.M.R.S. INCORPORATED
         Report of Independent Public Accountants
         Balance Sheets
         Statements of Operations
         Statements of Shareholder's Equity 
         Statements of Cash Flows
         Notes to Financial Statements
MINNESOTA MEDICAL RECORD SERVICE, INC.
         Report of Independent Public Accountants
         Balance Sheets
         Statements of Operations
         Statements of Stockholder's Equity
         Statements of Cash Flows
         Notes to Financial Statements
TEXAS MEDICAL RECORD SERVICE INC.
         Report of Independent Public Accountants
         Balance Sheets
         Statements of Operations
         Statements of Shareholders' Equity
         Statements of Cash Flows
         Notes to Financial Statements
ZIA INFORMATION ANALYSIS GROUP
         Report of Independent Public Accountants
         Balance Sheets
         Statements of Operations
         Statements of Shareholders' Equity
         Statements of Cash Flows
         Notes to Financial Statements

                         PRO FORMA FINANCIAL STATEMENTS

F.Y.I. Incorporated and Subsidiaries
        Pro Forma Balance Sheet - June 30, 1996 (unaudited)
        Pro Forma Statement of Operations for the Year Ended December 31, 1995
          (unaudited)
        Pro Forma Statement of Operations for the Six Months Ended June 30, 1996 
          (unaudited)
        Notes to Pro Forma Financial Statements (unaudited)
</TABLE>

                                       20


<PAGE>   21


                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized.


                                      F.Y.I. Incorporated



Date:  November 12, 1996              By: /s/ Ed H. Bowman, Jr.
                                          --------------------------
                                      Ed H. Bowman, Jr.
                                      Chief Executive Officer


Date:  November 12, 1996              By: /s/ David Lowenstein
                                          --------------------------
                                      David Lowenstein
                                      Chief Financial Officer
                                      (Principal Financial Officer)


Date:  November 12, 1996              By: /s/ Timothy J. Barker
                                          --------------------------
                                      Timothy J. Barker
                                      Chief Accounting Officer
                                      (Principal Accounting Officer)


                                       21


<PAGE>   22


                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
Exhibit
Number                            Description
-------                           -----------
<S>               <C>

  10.23           Second Amendment to Credit Agreement, dated as of August
                  30, 1996, by and  among F.Y.I. Incorporated and its
                  subsidiaries and Banque Paribas, IBJ Schroder  Bank &
                  Trust, and First Source Financial LLP
                  
  21              List of subsidiaries of F.Y.I. Incorporated
                  
                  
  27              Financial Data Schedule
</TABLE>