UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

(Mark One)
|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 1996

                                       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 0-19835
                                DAY RUNNER, INC.
             (Exact name of registrant as specified in its charter)

       DELAWARE                                                 95-3624280
  (State or other jurisdiction                               (I.R.S. Employer
   of incorporation or organization)                     Identification Number)

                               15295 Alton Parkway
                            Irvine, California 92618
              (Address and zip code of principal executive offices)

                                 (714) 680-3500
              (Registrant's telephone number, including area code)

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

                                  Yes |X| No|_|

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of Common Stock, as of the latest practicable date:

      Class                   Number of Shares Outstanding at February  6, 1997
--------------------------    --------------------------------------------------
Common Stock, $0.001 par value                   6,344,297

<PAGE>


                                   DAY RUNNER, INC.

                                      INDEX

<TABLE>
<CAPTION>
<S>                                                                  <C>   
                                                                 Page Reference
COVER PAGE....................................................................1

INDEX.........................................................................2

PART I -- FINANCIAL INFORMATION

         Item 1.     Consolidated Financial Statements

                     Consolidated Balance Sheets
                       December 31, 1996 and June 30, 1996....................3

                     Consolidated Statements of Income
                       Three Months and Six Months Ended
                      December 31, 1996 and 1995..............................4

                     Consolidated Statements of Cash Flows
                       Six Months Ended December 31, 1996 and 1995............5

                     Notes to Consolidated Financial Statements...............6

         Item 2.     Management's Discussion and Analysis of
                     Financial Condition and Results of Operations............8

PART II -- OTHER INFORMATION

         Item 4.     Submission of Matters to a Vote of Security Holders......13

         Item 6.     Exhibits and Reports on Form 8-K.........................13

SIGNATURES....................................................................15
</TABLE>


<PAGE>


PART I -- FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements.
                        DAY RUNNER, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                     ASSETS
                                                                                         December 31,      June 30,
                                                                                            1996            1996
                                                                                         ------------    -----------
                                                                                         (unaudited)      (audited)
<S>                                                                                     <C>              <C>     
Current assets:
     Cash and cash equivalents.......................................................    $  31,711        $  19,765
     Accounts receivable (less allowances for doubtful accounts and sales returns
          and other allowances of $8,247 and $7,374 at December 31, 1996 and
          June 30, 1996, respectively)...............................................       20,185           21,441
     Inventories.....................................................................       18,265           20,040
     Prepaid expenses and other current assets.......................................        1,890            1,710
     Income taxes receivable.........................................................                         1,930
     Deferred income taxes...........................................................        5,200            5,200
                                                                                         ---------        ---------
          Total current assets.......................................................       77,251           70,086
                                                                                         ---------        ---------

Property and equipment -- At cost:
     Machinery and equipment.........................................................        8,075            6,942
     Data processing equipment and software..........................................        5,475            4,707
     Leasehold improvements..........................................................        1,614            1,514
     Vehicles........................................................................          275              202
                                                                                         ---------        ---------
          Total......................................................................       15,439           13,365
     Less accumulated depreciation and amortization..................................        7,334            5,864
                                                                                         ---------        ---------
     Property and equipment -- net...................................................        8,105            7,501
                                                                                         ---------        ---------
Other assets.........................................................................          342              344
                                                                                         ---------        ---------
Total assets.........................................................................    $  85,698        $  77,931
                                                                                         =========        =========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable................................................................     $  5,591        $   8,063
     Accrued expenses................................................................       11,167           10,370
     Current portion of capital lease obligations....................................           16
     Income taxes payable............................................................          482
                                                                                         ---------        ---------
          Total current liabilities..................................................       17,256           18,433
                                                                                         ---------        ---------
Long-term liabilities -
     Capital lease obligations.......................................................           72
                                                                                         ---------
Stockholders' equity:
     Preferred stock (1,000,000 shares authorized, $0.001 par value; no shares issued
         or outstanding).............................................................
     Commonstock (14,000,000 shares authorized,  $0.001 par value; 6,344,140 and
           6,304,771 issued and outstanding at December 31, 1996 and
           June 30, 1996, respectively)..............................................            6                6
     Additional paid-in capital......................................................       23,257           22,869
     Retained earnings...............................................................       44,972           36,620
     Cumulative translation adjustment...............................................          135                3
                                                                                         ---------        ---------
          Total stockholders' equity.................................................       68,370           59,498
                                                                                         ---------        ---------
Total liabilities and stockholders' equity...........................................    $  85,698        $  77,931
                                                                                         =========        =========

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


<PAGE>


                        DAY RUNNER, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                  Three Months Ended            Six Months Ended
                                                                     December 31,                  December 31,
                                                                    1996        1995             1996       1995
                                                                    ----        ----             ----       ----
<S>                                                            <C>          <C>              <C>         <C>    
Sales........................................................   $  35,014   $  40,058         $  68,563   $  72,864
Cost of goods sold...........................................      16,656      19,380            32,748      35,731
                                                                ---------   ---------         ---------   ---------
Gross profit.................................................      18,358      20,678            35,815      37,133
                                                                ---------   ---------         ---------   ---------

Operating expenses:
     Selling, marketing and distribution.....................       7,741       8,372            15,601      15,843
     General and administrative..............................       3,413       4,091             6,807       7,610
                                                                ---------   ---------         ---------   ---------
         Total operating expenses............................      11,154      12,463            22,408      23,453
                                                                ---------   ---------         ---------   ---------

Income from operations.......................................       7,204       8,215            13,407      13,680
Net interest income..........................................         303         104               513         158
                                                                ---------   ---------         ---------   ---------

Income before provision for income taxes.....................       7,507       8,319            13,920      13,838
Provision for income taxes...................................       3,003       3,397             5,568       5,743
                                                                ---------   ---------         ---------   ---------
Net income...................................................   $   4,504   $   4,922         $   8,352   $   8,095
                                                                =========   =========         =========   =========

Earnings per common and common equivalent share..............   $    0.67   $    0.75         $    1.25   $   1.25
                                                                =========   =========         =========   ========

Weighted average number of common and common
         equivalent shares...................................       6,678       6,584             6,692       6,497
                                                                =========   =========         =========   =========




     See accompanying notes to consolidated financial statements.


</TABLE>



















<PAGE>

<TABLE>
<CAPTION>

                        DAY RUNNER, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Dollars in thousands)

                                                                                            Six Months Ended
                                                                                               December 31,
                                                                                             1996        1995
                                                                                              ----        ----
<S>                                                                                      <C>           <C>
    Net income....................................................................        $  8,352     $ 8,095
    Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
       Depreciation and amortization..............................................           1,566         854
       Provision for losses on accounts receivable................................             214         485
       Write-off of barter credits................................................                         220
       Changes in operating assets and liabilities:
          Accounts receivable.....................................................           1,091      (3,700)
          Inventories.............................................................           1,867       7,374
          Prepaid expenses and other current assets...............................            (171)        391
          Income taxes receivable.................................................           1,930
          Accounts payable........................................................          (2,571)     (3,735)
          Accrued expenses........................................................             785       2,524
          Income taxes payable....................................................             482      (1,246)
                                                                                         ---------   ---------
             Net cash provided by operating activities............................          13,545      11,262
                                                                                         ---------   ---------
Cash flows from investing activities:
    Acquisition of property and equipment.........................................          (2,080)     (1,497)
    Other assets..................................................................               2          (6)
                                                                                         ---------   ---------
         Net cash used in investing activities....................................          (2,078)     (1,503)
                                                                                         ----------  ---------
Cash flows from financing activities:
    Repayment of long-term debt...................................................                         (77)
    Repayment of capital lease obligations........................................                          (8)
    Net proceeds from issuance of common stock....................................             388       1,049
                                                                                         ---------   ---------
         Net cash provided by financing activities................................             388         964
                                                                                         ---------   ---------
Effect of exchange rate changes in cash...........................................              91         130
                                                                                         ---------   ---------
Net increase in cash and cash equivalents.........................................          11,946      10,853
Cash and cash equivalents at beginning of period..................................          19,765       4,269
                                                                                         ---------   ---------
Cash and cash equivalents at end of period........................................       $  31,711   $  15,122
                                                                                         =========   =========
     See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>



                        DAY RUNNER, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (Information relating to the three months and six months ended
                    December 31, 1996 and 1995 is unaudited)


1.  BASIS OF PRESENTATION AND ACCOUNTING POLICIES

         The  accompanying  consolidated  balance sheet as of December 31, 1996,
consolidated  statements of income for the  three-month  and  six-month  periods
ended December 31, 1996 and 1995 and  consolidated  statements of cash flows for
the six-month periods ended December 31, 1996 and 1995 are unaudited but, in the
opinion of management,  include all adjustments consisting of normal,  recurring
accruals  necessary for a fair  presentation  of the financial  position and the
results  of  operations  for such  periods.  Certain  information  and  footnote
disclosures  normally  included in financial  statements  prepared in conformity
with generally accepted accounting  principles have been omitted pursuant to the
requirements  of the  Securities and Exchange  Commission,  although the Company
believes  that the  disclosures  included in the financial  statements  included
herein  are  adequate  to make  the  information  therein  not  misleading.  The
financial  statements  included  herein should be read in  conjunction  with the
Company's audited consolidated  financial statements for the year ended June 30,
1996, and the notes thereto,  which are included in the Company's  Annual Report
on Form 10-K.

         The results of  operations  for the three  months and six months  ended
December 31, 1996 and 1995 are not  necessarily  indicative of the results for a
full  year.  The  seasonality  of  the  Company's   financial  results  and  the
unpredictability  of the factors  affecting such  seasonality make the Company's
quarterly  and yearly  financial  results  difficult  to predict  and subject to
significant fluctuation.

2.  LINE OF CREDIT

         Effective  November 1, 1996, the Company  amended its credit  agreement
with a bank.  The amended terms of the agreement  allow the Company to borrow up
to $5,000,000  under a line of credit and open  commercial  letters of credit or
open  standby  letters  of credit up to  $5,000,000  through  November  1, 1997.
However,  in no event may the  aggregate  of  borrowings  and  letters of credit
exceed  $5,000,000.  Commercial  letters of credit and standby letters of credit
shall  be  issued  for a term  not to  exceed  180 days  and  shall  not  expire
subsequent  to February 1, 1998 and May 1, 1998,  respectively.  Borrowings  are
collateralized  by accounts  receivable,  inventories  and certain other assets.
Borrowings  under the line of credit bear  interest  either at the bank's  prime
rate (8.25% at December  31, 1996) or at LIBOR (5.50% at December 31, 1996) plus
1.75%, at the Company's  election.  The credit agreement requires the Company to
maintain  total  debt to  tangible  net  worth of not more  than 1.5 to 1 and to
maintain certain specified  operating  ratios.  The agreement also requires that
the Company obtain the bank's  approval to declare or pay dividends in excess of
$200,000.

3.  STOCKHOLDERS' EQUITY

         During the six months  ended  December  31,  1996,  certain  directors,
officers and employees  exercised  options and warrants to purchase an aggregate
of 39,369 shares of the Company's Common Stock for an aggregate of approximately
$388,000.

4.  OTHER TRANSACTIONS

         During fiscal 1995 and calendar 1993,  the Company  entered into barter
agreements  whereby it delivered $132,000 and $1,098,000,  respectively,  of its
inventory  in  exchange  for future  advertising  credits and other  items.  The
credits,  which expire in October 1998, are valued at the lower of the Company's
cost or market  value of the  inventory  transferred.  The Company has  recorded
barter  credits  of  $36,000 in prepaid  expenses  and other  current  assets at
December 31, 1996 and at June 30, 1996.  At December 31, 1996 and June 30, 1996,
other assets  include  $279,000 of such  credits.  These  credits are charged to
expense as they are used.  During the six months  ended  December  31,  1996 and
1995, no amounts were charged to expense for barter credits used.

         The Company assesses the recoverability of barter credits periodically.
Factors considered in evaluating the recoverability  include  management's plans
with respect to advertising and other  expenditures for which barter credits can
be  used.  Any  impairment   losses  are  charged  to  operations  as  they  are
determinable. During the six months ended December 31, 1995, the Company charged
$220,000 to operations for such  impairment  losses.  No amounts were charged to
operations  during the six months ended  December  31, 1996 for such  impairment
losses.

5.  EARNINGS PER SHARE

         Earnings per share  information is computed using the weighted  average
number of shares of common  stock  outstanding  and dilutive  common  equivalent
shares from stock  options  and  warrants.  For the three  months and six months
ended December 31, 1996 and 1995, the Company used the treasury stock method and
modified treasury stock method, respectively, of computing earnings per share.

 6.   STATEMENTS OF CASH FLOW

         Capital lease obligations totaling  $88,000 were incurred  during the
three  months ended  December  31, 1996 when the Company  entered into leases to
acquire certain vehicles.

                                               Six Months Ended December 31,
                                                  1996             1995
                                               ------------------------------
    Supplemental disclosure of cash flow
      information  (in thousands)-
      Cash paid during the period for:
        Interest                               $     56       $      65
        Income taxes                           $  3,174       $   6,989


<PAGE>



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

         The following  discussion  should be read in  conjunction  with, and is
qualified in its entirety by, the  Consolidated  Financial  Statements and Notes
thereto  included  elsewhere in this Quarterly  Report.  Historical  results and
percentage   relationships  among  any  amounts  included  in  the  Consolidated
Financial  Statements  are not  necessarily  indicative  of trends in  operating
results for any future period.

         Since  the  Company's  introduction  of the  first  Day  Runner  System
organizer in 1982,  the  Company's  revenues  have been  generated by unit sales
primarily of organizers and planners and secondarily of refills. Sales increases
have resulted from higher sales of existing  products,  new products and product
line  extensions.  The  Company  focuses  the  great  majority  of  its  product
development,  sales and marketing efforts on the office products channel,  which
accounted for 58.7% of second  quarter  fiscal 1997 sales and 55.9% of sales for
the six months  ended  December  31, 1996,  and the mass market  channel,  which
accounted for 30.1% of second  quarter  fiscal 1997 sales and 33.6% of sales for
the six months ended December 31, 1996.

RESULTS OF OPERATIONS

         The  following  table  sets  forth,  for  the  periods  indicated,  the
percentages that income statement items bear to sales and the percentage  change
in the dollar amounts of such items.

<TABLE>
<CAPTION>

                                                                                               Percentage Change
                                                                                               -----------------
                                                            Percentage of Sales              Three         Six
                                                            -------------------              Months       Months
                                                       Three                 Six             Ended        Ended
                                                      Months Ended        Months Ended    December 31, December 31,
                                                      December 31,         December 31,       1995           1995
                                                   1996       1995      1996      1995       to 1996      to 1996
                                                   ----       ----      ----      ----       -------      -------
<S>                                               <C>       <C>         <C>      <C>         <C>          <C>

Sales............................................  100.0%    100.0%     100.0%   100.0%       (12.6)%      (5.9)%
Cost of goods sold...............................   47.6      48.4       47.8     49.0        (14.1)       (8.3)
                                                   -----     -----      -----    -----
Gross profit.....................................   52.4      51.6       52.2     51.0        (11.2)       (3.5)
                                                   -----     -----      -----    -----
Operating expenses:
   Selling, marketing and distribution...........   22.1      20.9       22.8     21.7         (7.5)       (1.5)
   General and administrative....................    9.7      10.2        9.9     10.5        (16.6)      (10.6)
                                                   -----     -----      -----    -----
     Total operating expenses....................   31.8      31.1       32.7     32.2        (10.5)       (4.5)
                                                   -----     -----      -----    -----
Income from operations...........................   20.6      20.5       19.5     18.8        (12.3)       (2.0)
Net interest income..............................    0.9       0.3        0.8      0.2          NM           NM
                                                    ----     -----       -----   -----        
Income before provision for income taxes.........   21.5      20.8       20.3     19.0         (9.8)        0.6
Provision for income taxes.......................    8.6       8.5        8.1      7.9        (11.6)       (3.0)
                                                   -----     -----      -----    -----
Net income.......................................   12.9%     12.3%      12.2%    11.1%        (8.5)        3.2
                                                   =====     =====      =====    =====
</TABLE>

<PAGE>


         The  following  tables  set  forth,  for  the  periods  indicated,  the
Company's  approximate sales by product category and distribution channel and as
a percentage of total sales.
<TABLE>
<CAPTION>

Product Category:

                                      Three Months Ended December 31,              Six Months Ended December 31,
                                          1996              1995                  1996                 1995
                                      --------------    ----------------      -----------------    -----------------
                                                            (unaudited; dollars in thousands)
<S>                                 <C>        <C>     <C>         <C>        <C>         <C>     <C>          <C>
Organizers and planners.........    $20,179    57.6%   $ 24,977     62.4%      $41,240     60.1%   $ 45,152     62.0%
Refills.........................     12,981    37.1      14,473     36.1        23,425     34.2      26,373     36.2
Other...........................      1,854     5.3         608      1.5         3,898      5.7       1,339      1.8
                                    -------   ------    -------    -----      --------    -----    --------    ------ 
   Total........................    $35,014   100.0%    $40,058    100.0%     $ 68,563    100.0%   $ 72,864    100.0%
                                    =======   ======    =======    ======     ========    ======   ========    ======
</TABLE>

<TABLE>
<CAPTION>

Distribution Channel:

                                      Three Months Ended December 31,              Six Months Ended December 31,
                                         1996                 1995                  1996                 1995
                                      -------------    -----------------      -----------------   ------------------ 
                                                            (unaudited; dollars in thousands)
<S>                                <C>        <C>      <C>         <C>        <C>          <C>     <C>         <C>

Office products.................    $20,546    58.7%    $25,020     62.4%     $ 38,329     55.9%   $ 41,642     57.1%
Mass market.....................     10,525    30.1      11,813     29.5        23,005     33.6      23,580     32.4
Foreign customers...............      1,754     5.0       1,077      2.7         3,118      4.5       3,259      4.5
Other...........................      2,189     6.2       2,148      5.4         4,111      6.0       4,383      6.0
                                    -------     ----    -------     -----     --------      ----   --------     ----
   Total........................    $35,014   100.0%    $40,058    100.0%     $ 68,563    100.0%   $ 72,864    100.0%
                                    =======   ======    =======    ======     ========    ======   ========    ======
</TABLE>

THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH
THE THREE MONTHS ENDED DECEMBER 31, 1995

         SALES.  Sales consist of revenues  from gross product  shipments net of
allowances  for returns,  rebates and credits.  In the second  quarter of fiscal
1997, sales decreased by $5,044,000, or 12.6%, due primarily to lower unit sales
of  organizers  and  planners.  Sales of  organizers  and  planners  declined by
$4,798,000,  or  19.2%,  and  sales of  refills  (which  include  calendars  and
accessories)  declined by $1,492,000,  or 10.3%.  These decreases were partially
offset by an increase in sales of  miscellaneous  products  grouped  together as
"other" which grew by $1,246,000, or 204.9%. Product sales were primarily to the
office  products  channel and  secondarily  to mass market  customers.  Sales to
office products  customers  declined by $4,474,000,  or 17.9%, and sales to mass
market  customers  declined  by  $1,288,000,  or  10.9%.  These  decreases  were
partially offset by sales to foreign customers which grew by $677,000, or 62.9%;
and sales to miscellaneous  customers  grouped together as "other" which grew by
$41,000, or 1.9%.

         GROSS PROFIT.  Gross profit is sales less cost of goods sold,  which is
comprised of materials,  labor and manufacturing  overhead.  Gross profit may be
affected by, among other  things,  product mix,  production  levels,  changes in
vendor  and  customer  prices and  discounts,  sales  volume  and  growth  rate,
purchasing  and  manufacturing  efficiencies,   tariffs,  duties  and  inventory
carrying  costs.  Gross profit as a percentage of sales  increased from 51.6% in
the second  quarter of fiscal 1996 to 52.4% in the second quarter of fiscal 1997
primarily because of a decrease in the provision for obsolete inventory,  due to
the Company's better  management of its dated goods  inventory,  and secondarily
because of improved purchasing efficiencies.

         OPERATING  EXPENSES.  Total operating expenses decreased by $1,309,000,
or 10.5%,  in the second quarter of fiscal 1997 compared with the second quarter
of fiscal 1996 but, because of the lower sales level,  increased as a percentage
of sales from 31.1% to 31.8%. Due primarily to lower advertising and promotional
expenses and  secondarily  to decreased  freight costs,  selling,  marketing and
distribution  expenses decreased $631,000 but, because of the lower sales level,
increased as a percentage of sales from 20.9% to 22.1%.  Primarily  because of a
decrease  in the  provision  for  losses on  accounts  receivable,  general  and
administrative  expenses  decreased  by  $678,000  and  from  10.2% to 9.7% as a
percentage of sales. During the quarter ended December 31, 1995, the Company had
recorded  an  additional  reserve  for a major  customer  that was  experiencing
financial difficulties.

         NET INTEREST INCOME.  Primarily  because of the Company's higher levels
of cash available for short-term  investment,  net interest income in the second
quarter of fiscal 1997 increased by $199,000 compared with the second quarter of
fiscal 1996 and increased as a percentage of sales from 0.3% to 0.9%.

         INCOME TAXES.  Primarily  because of the improved  financial results of
the Company's  Hong Kong  subsidiary,  the Company's  second quarter fiscal 1997
effective  tax rate was 40.0%,  compared  with  40.8% for the second  quarter of
fiscal 1996.

SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH
THE SIX MONTHS ENDED DECEMBER 31, 1995

         SALES.  In the six months ended December 31, 1996 compared with the six
months ended  December 31, 1995,  sales  decreased by  $4,301,000,  or 5.9%, due
primarily to lower unit sales of  organizers  and planners  and  secondarily  to
lower sales of refills. Sales of organizers and planners declined by $3,912,000,
or 8.7%, and sales of refills declined by $2,948,000,  or 11.2%. These decreases
were partially offset by an increase in sales of miscellaneous  products grouped
together as "other,"  which grew by  $2,559,000,  or 191.1%.  Product sales were
primarily  to the  office  products  channel  and  secondarily  to  mass  market
customers.  Sales to office products customers declined by $3,313,000,  or 8.0%;
sales to mass market customers  declined by $575,000,  or 2.4%; sales to foreign
customers  declined by $141,000,  or 4.3%; and sales to miscellaneous  customers
grouped together as "other" decreased by $272,000, or 6.2%.

         GROSS  PROFIT.  Gross profit as a percentage  of sales  increased  from
51.0% in the first six months of fiscal 1996 to 52.2% in the first six months of
fiscal  1997  primarily   because  of  improved   purchasing   efficiencies  and
secondarily because of a decrease in the provision for obsolete  inventory,  due
to the Company's better management of its inventory.

         OPERATING  EXPENSES.  Total operating expenses decreased by $1,045,000,
or 4.5%,  in the first six  months of fiscal  1997  compared  with the first six
months of fiscal 1996,  but,  because of the lower sales  level,  increased as a
percentage of sales from 32.2% to 32.7%. Due primarily to lower  advertising and
promotional expenses and secondarily to lower freight costs, selling,  marketing
and  distribution  expenses  decreased  $242,000 but, because of the lower sales
level, increased as a percentage of sales from 21.7% to 22.8%. Primarily because
of a decrease in the provision for losses on accounts receivable and secondarily
to lower  legal  and  accounting  costs,  general  and  administrative  expenses
decreased by $803,000 and from 10.5% to 9.9% as a  percentage  of sales.  During
the six months ended  December 31, 1995,  the Company had recorded an additional
reserve for a major customer that was experiencing financial difficulties.

         NET INTEREST INCOME.  Primarily  because of the Company's higher levels
of cash available for short-term  investment,  net interest  income in the first
six months of fiscal  1997  increased  by $355,000  compared  with the first six
months of fiscal 1996 and increased as a percentage of sales from 0.2% to 0.8%.

         INCOME TAXES.  Primarily  because of the improved  financial results of
the  Company's  Hong Kong  subsidiary,  the effective tax rate for the first six
months of fiscal 1997 was 40.0%, compared with 41.5% for the first six months of
fiscal 1996.

SEASONAL FLUCTUATIONS

         The Company  has  historically  experienced  and expects to continue to
experience  significant  seasonal  fluctuations in its sales and other financial
results that it believes  have  resulted and will  continue to result  primarily
from its  customers'  and users'  buying  patterns.  These buying  patterns have
typically  adversely  affected  orders for the  Company's  products in the third
quarter of each fiscal year.

         Although it is  difficult to predict the future  seasonality  of sales,
the Company  believes that future  seasonality  should be influenced at least in
part  by  customer  and  user  buying  patterns   similar  to  those  that  have
historically affected the Company. Quarterly financial results are also affected
by timing and size of orders from large customers, new product introductions and
line extensions,  timing and size of orders for new products, changes in product
mix, customer mix, competition,  large customers' inventory  management,  vendor
and customer  pricing,  general  economic  conditions,  the health of the retail
environment,  production levels,  supply constraints,  manufacturing  delays and
supplier performance. The seasonality of the Company's financial results and the
unpredictability  of the factors  affecting such  seasonality make the Company's
quarterly  and yearly  financial  results  difficult  to predict  and subject to
significant fluctuation.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash and cash  equivalents at December 31, 1996 increased
to  $31,711,000  from  $19,765,000  at June 30,  1996.  In the six months  ended
December 31, 1996,  net cash of $13,545,000  and $388,000  provided by operating
activities and financing activities, respectively, offset net cash of $2,078,000
used in investing  activities.  Of the  $13,545,000  net amount  provided by the
Company's  operating   activities,   $8,352,000  was  provided  by  net  income,
$1,930,000 was provided by a decrease in income taxes receivable, $1,867,000 was
provided  by  a  decrease  in   inventories   and  $1,566,000  was  provided  by
depreciation and amortization, which amounts were partially offset by a decrease
of  $2,571,000  in accounts  payable.  The $388,000  net amount  provided by the
Company's financing activities was provided by the issuance of Common Stock upon
exercise of then-outstanding  stock options and warrants. The $2,078,000 used in
the Company's  investing  activities was used to acquire primarily machinery and
equipment and secondarily computer equipment and software.

         Primarily because of the decrease in sales and the timing of orders and
shipments, accounts receivable (net) at December 31, 1996 decreased by 5.9% from
the fiscal 1996  year-end  amount.  Compared  with the December 31, 1995 amount,
accounts  receivable (net) decreased by 10.6% primarily  because of the decrease
in sales. The average  collection period of accounts  receivable at December 31,
1996 was 47 days,  compared with 43 days at June 30, 1996 and December 31, 1995,
respectively.

         Inventories  at December 31, 1996  decreased by 8.9%  compared with the
fiscal  1996  year-end  amount and by 4.6% from the  December  31,  1995  amount
primarily because of the Company's  improved control and management of inventory
levels.

         The  Company's  bank  line of  credit  allows  for  borrowings  and the
issuance  of  commercial  or  standby  letters of credit up to an  aggregate  of
$5,000,000.  Borrowings  under the line of credit  bear  interest  at either the
bank's prime rate or at LIBOR plus 1.75%, at the Company's election, and are due
and payable in full on November 1, 1997. At December 31, 1996, Day Runner had no
borrowings  under  its bank  line of  credit  but had used the line of credit to
secure outstanding letters of credit of approximately $1,133,000,  which reduced
the availability under the line of credit to approximately $3,867,000. (See Note
2 to Consolidated Financial Statements.)

         The Company has not incurred  significant  losses or gains from foreign
currency exchange rate fluctuations.  The continuing  expansion of the Company's
operations in Hong Kong, Mexico and the United Kingdom could, however, result in
larger gains or losses as a result of fluctuations in foreign currency  exchange
rates as those  subsidiaries  conduct  business  in whole or in part in  foreign
currencies.

         The Company believes that cash flow from operations, vendor credit, its
existing  working  capital  and its bank line of credit  will be  sufficient  to
satisfy the Company's anticipated cash requirements at least through the next 12
months.  Nonetheless,  the  Company  may seek  additional  sources of capital as
necessary or appropriate  to finance  acquisitions  or to otherwise  finance the
Company's  growth or  operations;  however,  there can be no assurance that such
funds if needed will be available on favorable terms, if at all.



<PAGE>


PART II --OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders

                   (a)On  December  4, 1996,  the  Company  held its 1996 Annual
                      Meeting of Stockholders (the "Annual Meeting").

                   (b)At the Annual Meeting, the Company's  stockholders elected
                      the  following  persons as directors  of the Company.  The
                      number  of votes  cast for each  director,  as well as the
                      number  of  votes  withheld,   are  listed  opposite  each
                      director's name.

                                  Name                   Votes
                                   of                  Cast for           Votes
                                Director               Director         Withheld
                                --------               --------         --------

                             James P. Higgins         5,075,010           8,886
                             Jill Tate Higgins        5,074,911           8,985
                             Charles Miller           5,074,610           9,286
                             Alan R. Rachlin          5,076,110           7,786
                             Mark A.  Vidovich        5,076,210           7,686
                             Boyd I. Willat           5,073,794          10,102
                             Felice Willat            5,074,128           9,768

                   (c)At the Annual Meeting,  the  stockholders  approved,  with
                      4,457,752 votes cast in favor, 546,104 votes cast against,
                      23,274   abstentions  and  56,766  broker  nonvotes,   the
                      amendment  to the  Company's  1995  Stock  Option  Plan to
                      increase the  aggregate  number of shares  authorized  for
                      issuance thereunder from 300,000 to 500,000 shares.

                   (d)At the Annual Meeting,  the  stockholders  approved,  with
                      4,621,221 votes cast in favor, 379,248 votes cast against,
                      26,661   abstentions  and  56,766  broker  nonvotes,   the
                      Company's grant to each of its non-employee directors of a
                      warrant to purchase 25,000 shares of the Company's  Common
                      Stock.

                   (e)At the  Annual  Meeting,  with  5,073,229  votes  cast  in
                      favor, 5,317 votes cast against and 5,350 abstentions, the
                      stockholders ratified the appointment of Deloitte & Touche
                      LLP as independent auditors for the Company for the fiscal
                      year ending June 30, 1997.

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  10.1     Amendment No. 1, dated October 21, 1996, to the
                           Company's 1995 Stock Option Plan.(1)

                  10.2     Form of Warrant to purchase shares of the
                           Registrant's Common Stock issued to non-employee
                           directors on December 4, 1996 and schedule of
                           warrantholders.(1)

                  27.1    Financial Data Schedule

         (b)      Reports on Form 8-K

         No reports on Form 8-K were filed by the  Company  during the
quarter ended December 31, 1996.

(1)Incorporated by reference to the Registrant's Registration Statement on Form
   S-8 (Registration No. 333-20247) filed with the Commission on
   January 23, 1997.


<PAGE>



                                   SIGNATURES


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


                                            Date:  February 12, 1997
                                            Day Runner, Inc.
 


                                         By:     /s/ MARK A. VIDOVICH
                                            -----------------------------------
                                                     Mark A. Vidovich
                                                     Chairman of the Board and
                                                     Chief Executive Officer




                                         By:     /s/ DENNIS K. MARQUARDT
                                            -----------------------------------
                                                     Dennis K. Marquardt
                                                     Executive Vice President, 
                                                     Finance & Administration
                                                     and Chief Financial Officer