FORM 10-Q
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
(Mark One)
|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1997

                                    OR

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

For the transition period from                 to                .

                Commission file number 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  Registrant's
classes of Common Stock, as of the latest practicable date:

          Class                    Number of Shares Outstanding at May 9, 1997
-------------------------------    -------------------------------------------
Common Stock, $0.001 par value                        6,347,297

<PAGE>


                                                            



                                DAY RUNNER, INC.

                                      INDEX


                                                                  Page Reference

COVER PAGE....................................................................1

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

PART I -- FINANCIAL INFORMATION

         Item 1.     Consolidated Financial Statements

                     Consolidated Balance Sheets
                       March 31, 1997 and June 30, 1996.......................3

                     Consolidated Statements of Income
                       Three Months and Nine Months Ended
                      March 31, 1997 and 1996.................................4

                     Consolidated Statements of Cash Flows
                       Nine Months Ended March 31, 1997 and 1996..............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 6.     Exhibits and Reports on Form 8-K........................13

SIGNATURES...................................................................14


<PAGE>


PART I -- FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements.
<TABLE>

                        DAY RUNNER, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)
<CAPTION>

                                     ASSETS
                                                                                         March 31,        June 30,
                                                                                          1997              1996
                                                                                        ---------        ----------
                                                                                        (unaudited)      (audited)
<S>                                                                                    <C>              <C>    
Current assets:
     Cash and cash equivalents.......................................................    $  27,838        $  19,765
     Accounts receivable (less allowances for doubtful accounts and sales returns
          and other allowances of $7,123 and $7,374 at March 31, 1997 and
          June 30, 1996, respectively)...............................................        7,611           21,441
     Inventories.....................................................................       23,189           20,040
     Prepaid expenses and other current assets.......................................        2,234            1,710
     Income taxes receivable.........................................................        2,345            1,930
     Deferred income taxes...........................................................        5,200            5,200
                                                                                         ---------        ---------
          Total current assets.......................................................       68,417           70,086
                                                                                         ---------        ---------

Property and equipment -- At cost:
     Machinery and equipment.........................................................        8,846            6,942
     Data processing equipment and software..........................................        5,809            4,707
     Leasehold improvements..........................................................        1,693            1,514
     Vehicles........................................................................          213              202
                                                                                         ---------        ---------
          Total......................................................................       16,561           13,365
     Accumulated depreciation and amortization.......................................       (8,080)          (5,864)
                                                                                         ---------        ---------
     Property and equipment -- net...................................................        8,481            7,501
                                                                                         ---------        ---------
Other assets.........................................................................          338              344
                                                                                         ---------        ---------
Total assets.........................................................................    $  77,236        $  77,931
                                                                                         =========        =========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable................................................................     $  5,726        $   8,063
     Accrued expenses................................................................        8,887           10,370
     Current portion of capital lease obligations....................................           16
                                                                                          --------        ---------
          Total current liabilities..................................................       14,629           18,433
                                                                                         ---------        ---------
Long-term liabilities:
     Capital lease obligations.......................................................           64
                                                                                         ---------
Stockholders' equity:
     Preferred stock (1,000,000 shares authorized, $0.001 par value; no shares issued
         or outstanding).............................................................
     Common stock (14,000,000  shares  authorized,  $0.001 par value;  6,344,297
         issued and 6,119,997  outstanding at March 31, 1997;  6,304,771  issued
         and
         outstanding at June 30, 1996)...............................................            6                6
     Additional paid-in capital......................................................       23,259           22,869
     Retained earnings...............................................................       45,030           36,620
     Cumulative translation adjustment...............................................           10                3
     Treasury stock:  224,300 shares, at cost........................................       (5,762)
                                                                                         ---------        ---------
          Total stockholders' equity.................................................       62,543           59,498
                                                                                         ---------        ---------
Total liabilities and stockholders' equity...........................................    $  77,236        $  77,931
                                                                                         =========        =========

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


<PAGE>
<TABLE>


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

<CAPTION>

                                                                  Three Months Ended            Nine Months Ended
                                                                       March 31,                     March 31,
                                                                    1997        1996              1997        1996
                                                                    ----        ----              ----        ----
<S>                                                            <C>         <C>               <C>          <C>    
Sales........................................................   $  21,020   $  18,106         $  89,583   $  90,970
Cost of goods sold...........................................      10,035       8,601            42,783      44,332
                                                                ---------   ---------         ---------   ---------
Gross profit.................................................      10,985       9,505            46,800      46,638
                                                                ---------   ---------         ---------   ---------

Operating expenses:
     Selling, marketing and distribution.....................       6,273       5,381            21,874      21,224
     General and administrative..............................       3,469       3,103            10,276      10,713
     Costs incurred in pursuing acquisitions.................       1,491                         1,491
                                                                ---------   ---------         ---------   ---------
         Total operating expenses............................      11,233       8,484            33,641      31,937
                                                                ---------   ---------         ---------   ---------

(Loss) income from operations................................        (248)      1,021            13,159      14,701
Net interest income..........................................         345         252               858         410
                                                                ---------   ---------         ---------   ---------

Income before provision for income taxes.....................          97       1,273            14,017      15,111
Provision for income taxes...................................          39         528             5,607       6,271
                                                                ---------   ---------         ---------   ---------
Net income...................................................   $      58   $     745         $   8,410   $   8,840
                                                                =========   =========         =========   =========

Earnings per common and common equivalent share..............   $    0.01   $    0.11         $    1.26   $    1.35
                                                                =========   =========         =========   =========

Weighted average number of common and common
         equivalent shares...................................       6,532       6,657             6,651       6,564
                                                                =========   =========         =========   =========




                See accompanying notes to consolidated financial
                                  statements.

</TABLE>

<PAGE>
<TABLE>


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

                                                                                            Nine Months Ended
                                                                                                 March 31,
                                                                                             1997        1996
                                                                                             ----        ----
<S>                                                                                      <C>          <C>    
Cash flows from operating activities:
    Net income....................................................................        $  8,410     $ 8,840
    Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
       Depreciation and amortization..............................................           2,379       1,333
       Provision for losses on accounts receivable................................             275         557
       Write-off of barter credits................................................                         220
       Changes in operating assets and liabilities:
          Accounts receivable.....................................................          13,571      13,306
          Inventories.............................................................          (3,096)      7,331
          Prepaid expenses and other current assets...............................            (520)        (71)
          Income taxes receivable.................................................            (415)     (1,079)
          Accounts payable........................................................          (2,551)     (5,092)
          Accrued expenses........................................................          (1,552)        136
          Income taxes payable....................................................                      (2,719)
                                                                                         ---------   ---------
             Net cash provided by operating activities............................          16,501      22,762
                                                                                         ---------   ---------
Cash flows from investing activities:
    Acquisition of property and equipment.........................................          (3,269)     (1,914)
    Other assets..................................................................               5          (5)
                                                                                         ---------   ---------
         Net cash used in investing activities....................................          (3,264)     (1,919)
                                                                                         ----------  ---------
Cash flows from financing activities:
    Repayment of long-term debt...................................................                        (115)
    Repayment of capital lease obligations........................................             (10)        (11)
    Net proceeds from issuance of common stock....................................             390       1,192
    Repurchase of common stock....................................................          (5,762)
                                                                                         ----------  ---------
         Net cash (used in) provided by financing activities......................          (5,382)      1,066
                                                                                         ----------  ---------
Effect of exchange rate changes in cash...........................................             218         121
                                                                                         ---------   ---------
Net increase in cash and cash equivalents.........................................           8,073      22,030
Cash and cash equivalents at beginning of period..................................          19,765       4,269
                                                                                         ---------   ---------
Cash and cash equivalents at end of period........................................       $  27,838   $  26,299
                                                                                         =========   =========
                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 nine months ended
                      March 31, 1997 and 1996 is unaudited)

1.  BASIS OF PRESENTATION AND ACCOUNTING POLICIES

         The  accompanying  consolidated  balance  sheet as of March  31,  1997,
consolidated  statements of income for the  three-month  and nine-month  periods
ended March 31, 1997 and 1996 and consolidated  statements of cash flows for the
nine-month  periods  ended  March 31,  1997 and 1996 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 nine months ended
March 31, 1997 and 1996 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.  INVENTORIES

         Inventories consist of the following (in thousands):

                                              March 31,             June 30,
                                                1997                  1996
                                                ----                  ----

         Raw materials...................  $    7,320             $    8,212
         Work in process.................         462                    327
         Finished goods..................      15,407                 11,501
                                           ----------             ----------
                  Total..................  $   23,189             $   20,040
                                           ==========             ==========

3.  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  (8.50% at March 31,  1997) or at LIBOR  (5.6875%  at March 31,  1997) 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.

4.  STOCKHOLDERS' EQUITY

       During  the nine  months  ended  March  31,  1997,  certain  directors,
officers and employees  exercised  options and warrants to purchase an aggregate
of 39,526 shares of the Company's Common Stock for an aggregate of approximately
$390,000.

5.  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 March
31, 1997 and at June 30, 1996. At March 31, 1997 and June 30, 1996, other assets
include  $279,000 of such credits.  These credits are charged to expense as they
are used.  During the nine months ended March 31, 1997 and 1996, 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 nine months ended March 31, 1996, the Company  charged
$220,000 to operations for such  impairment  losses.  No amounts were charged to
operations  during the nine  months  ended  March 31,  1997 for such  impairment
losses.

6.  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.  In computing  earnings per share,  the
Company  used the modified  treasury  stock method for the three and nine months
ended March 31, 1997 and the treasury stock method for the three and nine months
ended March 31, 1996.

7.   STATEMENTS OF CASH FLOW

         During the nine months  ended March 31,  1997,  the Company  incurred a
total of $88,000 in capital  lease  obligations,  comprised of leases on certain
vehicles.

                                           Nine Months Ended March 31,
                                            1997               1996
                                          -----------------------------
 Supplemental disclosure of cash flow
       information  (in thousands)-
       Cash paid during the period for:
               Interest                   $   90             $   22
               Income taxes               $5,958             $9,988


<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/or
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 34.2% of third  quarter  fiscal 1997 sales and 50.8% of sales for
the nine  months  ended  March 31,  1997,  and the mass  market  channel,  which
accounted  for 48.6% of third  quarter  fiscal 1997 sales and 37.1% of sales for
the nine months ended March 31, 1997.

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       Nine
                                                            --------------------             Months     Months
                                                         Three               Nine            Ended       Ended 
                                                      Months Ended        Months Ended       March 31   March 31
                                                       March 31,           March 31,          1996        1996
                                                     1997      1996       1997     1996      to 1997     to 1997 
                                                     ----      ----       ----     ----      -------     ------- 
<S>                                               <C>       <C>        <C>      <C>          <C>          <C>
Sales............................................  100.0%    100.0%     100.0%   100.0%        16.1%       (1.5)%
Cost of goods sold...............................   47.7      47.5       47.8     48.7         16.7        (3.5)
                                                   -----     -----      -----    -----
Gross profit.....................................   52.3      52.5       52.2     51.3         15.6         0.3
                                                   -----     -----      -----    -----
Operating expenses:
   Selling, marketing and distribution...........   29.8      29.7       24.4     23.3         16.6         3.1
   General and administrative....................   16.5      17.2       11.4     11.8         11.8        (4.1)
   Costs incurred in pursuing acquisitions.......    7.1                  1.7                   NM          NM
                                                   -----     ----       -----    ----
     Total operating expenses....................   53.4      46.9       37.5     35.1         32.4         5.3
                                                   -----     -----      -----    -----
(Loss) income from operations....................   (1.1)      5.6       14.7     16.2        (124.3)     (10.5)
Net interest income..............................    1.6       1.4        1.0      0.4          36.9      109.3
                                                    ----     -----       ----    ------
Income before provision for income taxes.........    0.5       7.0       15.7     16.6        (92.4)       (7.2)
Provision for income taxes.......................    0.2       2.9        6.3      6.9        (92.6)      (10.6)
                                                   -----     -----      -----    -----
Net income.......................................    0.3%      4.1%       9.4%     9.7%       (92.2)       (4.9)
                                                   =====     =====      =====    =====
</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 March 31,              Nine Months Ended March 31,
                                          1997               1996                     1997                 1996
                                     --------------    -----------------        ---------------    -----------------
                                                            (unaudited; dollars in thousands)
<S>                                <C>         <C>     <C>         <C>         <C>         <C>      <C>         <C>
Organizers and planners.........    $11,636    55.4%   $10,421     57.5%        $52,876     59.0%   $55,573      61.1%
Refills.........................      7,598    36.1      6,840     37.8          31,023     34.6     33,213      36.5
Other...........................      1,786     8.5        845      4.7           5,684      6.4      2,184       2.4
                                    -------   ------    -------    -----        --------    ------   --------   ------
  Total........................     $21,020   100.0%   $18,106    100.0%        $89,583     100.0%  $90,970     100.0%
                                    =======   ======   ========   ======        ========    ======  =========   ======
</TABLE>

<TABLE>

DISTRIBUTION CHANNEL:
<CAPTION>

                                        Three Months Ended March 31,              Nine Months Ended March 31,
                                         1997                 1996                    1997               1996
                                   -----------------    -----------------       ---------------    -----------------
                                                            (unaudited; dollars in thousands)
<S>                                <C>        <C>       <C>        <C>         <C>         <C>     <C>         <C>

Office products.................    $ 7,181    34.2%    $ 7,491     41.4%       $45,510     50.8%   $ 49,133     54.0%
Mass market.....................     10,224    48.6       6,521     36.0         33,229     37.1      30,101     33.1
Foreign customers...............      1,443     6.9       1,301      7.2          4,561      5.1       4,560      5.0
Other...........................      2,172    10.3       2,793     15.4          6,283      7.0       7,176      7.9
                                    -------   ------    -------    ------        --------  ------   --------    -----
   Total........................    $21,020   100.0%    $18,106    100.0%       $89,583    100.0%   $ 90,970    100.0%
                                    =======   ======    =======    ======       ========   ======   ========    ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH
THE THREE MONTHS ENDED MARCH 31, 1996

         SALES.  Sales consist of revenues  from gross product  shipments net of
allowances  for  returns,  rebates and credits.  In the third  quarter of fiscal
1997,  sales increased by $2,914,000,  or 16.1%,  primarily  because of a higher
average selling price for organizers and planners. (Sales of discontinued items
had  increased  unit sales of  organizers  and  planners and reduced the average
selling  price during the third  quarter of fiscal  1996.) In the quarter  ended
March 31, 1997,  sales of organizers and planners grew by $1,215,000,  or 11.7%;
sales of refills (which include calendars and accessories) grew by $758,000,  or
11.1%; and sales of  miscellaneous  products grouped together as "other" grew by
$941,000,  or 111.4%.  Product sales were primarily to mass market customers and
secondarily to office products customers. Sales to mass market customers grew by
$3,703,000, or 56.8%, and sales to foreign customers grew by $142,000, or 10.9%.
These  increases  were  partially  offset by decreases of $310,000,  or 4.1%, in
sales  to  office  products  customers  and  $621,000,  or  22.2%,  in  sales to
miscellaneous customers grouped together as "other."

         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,  sales
returns,  purchasing  and  manufacturing   efficiencies,   tariffs,  duties  and
inventory  carrying costs.  Gross profit as a percentage of sales decreased from
52.5% in the third  quarter  of fiscal  1996 to 52.3% in the  third  quarter  of
fiscal 1997 primarily because of an increase in the provision for sales returns.

     OPERATING  EXPENSES.  Total operating expenses increased by $2,749,000,  or
32.4%,  in the third  quarter of fiscal 1997  compared with the third quarter of
fiscal 1996 and increased as a percentage of sales from 46.9% to 53.4% primarily
because of $1,491,000 of costs incurred in pursuing  acquisitions.  These costs,
which were incurred in pursuing two significant  acquisitions  that did not come
to fruition,  included  legal,  advisory and accounting  fees and  miscellaneous
expenses.  Without such costs, operating expenses, as a percentage of sales, for
the quarter  ended March 31, 1997 would have been 46.3%  compared with 46.9% for
the same quarter in the prior year.  Primarily  because of higher freight costs,
selling,  marketing  and  distribution  expenses  increased by $892,000 and from
29.7% to 29.8% as a percentage  of sales.  General and  administrative  expenses
increased by $366,000  primarily  because of increased  legal and accounting and
personnel costs, but decreased from 17.2% to 16.5% as a percentage of sales.

         NET INTEREST INCOME.  Primarily  because of the Company's higher levels
of cash available for short-term  investment,  net interest  income in the third
quarter of fiscal 1997  increased by $93,000  compared with the third quarter of
fiscal 1996 and increased as a percentage of sales from 1.4% to 1.6%.

         INCOME TAXES.  Primarily  because of the improved  financial results of
the Company's  Hong Kong  subsidiary,  the Company's  third quarter  fiscal 1997
effective  tax rate was  40.2%,  compared  with  41.5% for the third  quarter of
fiscal 1996.

         NET INCOME.  Net income for the third quarter of fiscal 1997  decreased
by $687,000  and from 4.1% to 0.3% as a percentage  of sales.  Without the costs
incurred in pursuing  acquisitions,  net income would have grown by $208,000 and
increased from 4.1% to 4.5% as a percentage of sales.


NINE MONTHS ENDED MARCH 31, 1997 COMPARED WITH
THE NINE MONTHS ENDED MARCH 31, 1996

         SALES.  In the nine months ended March 31, 1997  compared with the nine
months  ended March 31,  1996,  sales  decreased  by  $1,387,000,  or 1.5%,  due
primarily to lower unit sales of  organizers  and planners  and  secondarily  to
lower sales of refills. Sales of organizers and planners declined by $2,697,000,
or 4.9%, and sales of refills  declined by $2,190,000,  or 6.6%. These decreases
were partially offset by an increase in sales of miscellaneous  products grouped
together as "other,"  which grew by  $3,500,000,  or 160.3%.  Product sales were
primarily  to the office  products  customers  and  secondarily  to mass  market
customers.  Sales to office products customers declined by $3,623,000,  or 7.4%,
and sales to miscellaneous  customers  grouped together as "other"  decreased by
$893,000,  or  12.4%.  These  decreases  were  partially  offset  by  growth  of
$3,128,000, or 10.4%, in sales to mass market customers.

         GROSS  PROFIT.  Gross profit as a percentage  of sales  increased  from
51.3% in the first nine  months of fiscal 1996 to 52.2% in the first nine months
of fiscal 1997 primarily because of improved purchasing efficiencies.

     OPERATING  EXPENSES.  Total  operating  expenses  increased by  $1,704,000,
or5.3%,  in the first nine  months of fiscal 1997  compared  with the first nine
months of fiscal 1996 and increased as a percentage of sales from 35.1% to 37.5%
primarily  because of  $1,491,000  of costs  incurred in pursuing  acquisitions.
These costs,  which were incurred in pursuing two significant  acquisitions that
did not come to  fruition,  included  legal,  advisory and  accounting  fees and
miscellaneous expenses.  Without such costs, operating expenses, as a percentage
of sales,  for the nine  months  ended  March 31,  1997  would  have been  35.8%
compared  with 35.1% for the same period in the prior  year.  Due  primarily  to
increased display costs, selling,  marketing and distribution expenses increased
by $650,000 and from 23.3% to 24.4% as a percentage of sales.  Primarily because
of a decrease in consulting  costs and secondarily  because of a decrease in the
provision for losses on accounts receivable, general and administrative expenses
decreased by $437,000 and from 11.8% to 11.4% as a percentage of sales.

         NET INTEREST INCOME.  Primarily  because of the Company's higher levels
of cash available for short-term  investment,  net interest  income in the first
nine months of fiscal 1997  increased by $448,000  compared  with the first nine
months of fiscal 1996 and increased as a percentage of sales from 0.4% to 1.0%.

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

         NET  INCOME.  Net  income  for the nine  months  ended  March 31,  1997
decreased by $430,000 and from 9.7% to 9.4% as a  percentage  of sales.  Without
the costs  incurred in  pursuing  acquisitions,  net income  would have grown by
$465,000 and from 9.7% to 10.4% as a percentage of sales.


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, corporate finance activities, 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 March 31, 1997 increased to
$27,838,000  from  $19,765,000  at June 30, 1996. In the nine months ended March
31, 1997, net cash of $16,501,000 provided by operating  activities,  offset net
cash of $3,264,000  and  $5,382,000  used in investing  activities and financing
activities,  respectively.  Of  the  $16,501,000  net  amount  provided  by  the
Company's  operating   activities,   $8,410,000  was  provided  by  net  income,
$13,571,000 was provided by a decrease in accounts receivable and $2,379,000 was
provided by depreciation and  amortization,  which amounts were partially offset
by an  increase of  $3,096,000  in  inventories,  a decrease  of  $2,551,000  in
accounts  payable  and  a  decrease  of  $1,552,000  in  accrued  expenses.  The
$3,264,000  used in the  Company's  investing  activities  was  used to  acquire
primarily  machinery  and  equipment  and  secondarily  computer  equipment  and
software.  Of  the  $5,382,000  net  amount  used  in  the  Company's  financing
activities,  $5,762,000  was used to repurchase  224,300  shares of Common Stock
under the Company's stock repurchase program,  which amount was partially offset
by $390,000  which was provided by the issuance of Common Stock upon exercise of
stock options and warrants.

         Because of the Company's seasonal sales patterns,  accounts  receivable
(net) at March 31, 1997 decreased by 64.5% from the fiscal 1996 year-end amount.
Compared with the March 31, 1996 amount,  accounts receivable (net) increased by
38.4% primarily because of the growth in sales. Primarily due to a change in the
payment terms extended to a large  customer,  the average  collection  period of
accounts receivable at March 31, 1997 was 47 days, compared with 43 days at both
June 30 and March 31, 1996.

         Inventories  at March 31, 1997  increased  by 15.7%  compared  with the
fiscal  1996  year-end  amount  and by 21.2%  from the  March  31,  1996  amount
primarily because of a planned  inventory  build-up done in preparation for the
Company's June quarter back-to-school selling season.

         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 March 31,  1997,  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 $1,125,000,  which reduced
the availability under the line of credit to approximately $3,875,000. (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 for acquisitions or corporate finance activities, 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.

FORWARD LOOKING STATEMENTS

     With the  exception  of the actual  reported  financial  results  and other
historical  information,  the statements made in the Management's Discussion and
Analysis of Financial  Condition and Results of Operations  are forward  looking
statements that involve risks and uncertainties  that could affect actual future
results. Such risk and uncertainties include, but are not limited to: timing and
size of orders from large customers,  timing and size of orders of new products,
competition,  large  customers'inventory  management,  sales returns,  corporate
finance  activities,  general  economic  conditions,  the  health of the  retail
environment, supply constraints,  supplier performance and other risks indicated
in the Company's filings with the Securities and Exchange Commission.

<PAGE>


PART II --OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)   Exhibits

          3.1  Certificate of Incorporation of the Registrant, as amended(1)

          3.2  Bylaws of the Registrant, as amended(2)

         10.1  Consulting  Agreement (including   Warrant  to   purchase  shares
               of the Registrant's Common Stock and Confidentiality Agreement)
               effective April 22, 1997 between the Registrant and
               Alan R. Rachlin

         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 March 31, 1997.



 (1) Incorporated by reference to the Registrant's Transition report on Form
     10-K (File No. 0-19835) filed with the Commission on September 27, 1994.
 (2) Incorporated by reference to the Registrant's Current Report on Form 8-K
     (File No. 0-19835) filed with the Commission on August 5, 1993.


<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: May 15, 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