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 September 30, 1998

                                       OR

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

For the transition period from                 to                .

                         Commission file number 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  November 9, 1998
-----------------------------  -------------------------------------------------
Common Stock, $0.001 par value              11,880,098

<PAGE>
<TABLE>





<CAPTION>

                                DAY RUNNER, INC.

                                      INDEX


                                                                                                            Page Reference

<S>                                                                                                           <C>
COVER PAGE.......................................................................................             1

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

PART I -- FINANCIAL INFORMATION

         Item 1.     Consolidated Financial Statements

                     Consolidated Balance Sheets
                       September 30, 1998 and June 30, 1998......................................             3

                     Consolidated Statements of Income
                       Three Months Ended September 30, 1998 and 1997............................             4

                     Consolidated Statements of Cash Flows
                       Three Months Ended September 30, 1998 and 1997............................             5

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

         Item 2.     Management's Discussion and Analysis of
                     Financial Condition and Results of Operations...............................            10

PART II -- OTHER INFORMATION

         Item 6.     Exhibits and Reports on Form 8-K............................................            15

SIGNATURES.......................................................................................            17
</TABLE>


<PAGE>



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

                        DAY RUNNER, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                             (Dollars in thousands)


                                     ASSETS
                                                                                        September 30,      June 30,
                                                                                           1998            1998
                                                                                        -------------    ------------
Current assets:
<S>                                                                                      <C>              <C>      
     Cash and cash equivalents.......................................................    $   1,449        $   2,923
     Accounts receivable (net of allowances for doubtful accounts and sales returns
          and other allowances of $8,098 and $9,942 at September 30, 1998 and
          June 30, 1998, respectively)...............................................       34,373           32,542
     Inventories.....................................................................       41,665           37,610
     Prepaid expenses and other current assets.......................................        3,418            1,670
     Income taxes receivable.........................................................                         2,606
     Deferred income taxes...........................................................        7,218            7,218
                                                                                         ---------        ---------
          Total current assets.......................................................       88,123           84,569
Property and equipment -- net........................................................       13,857           11,888
Investment in Filofax................................................................        4,794
Other assets (net of accumulated amortization of $286 and $196 at September 30,
     1998 and June 30, 1998, respectively)...........................................        4,826            4,722
                                                                                         ---------        ---------
Total assets.........................................................................    $ 111,600        $ 101,179
                                                                                         =========        =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Lines of credit.................................................................     $  1,943        $   2,716
     Accounts payable................................................................       11,913            9,969
     Accrued expenses................................................................       18,804           13,876
     Income taxes payable............................................................          355
     Current portion of capital lease obligations and long-term debt.................           24               33
                                                                                         ---------        ---------
          Total current liabilities..................................................       33,039           26,594
                                                                                         ---------        ---------
Long-term liabilities:
     Capital lease obligations.......................................................            6               53
                                                                                         ---------        ---------
Stockholders' equity:
     Preferred stock (1,000,000 shares authorized, $0.001 par value; no shares issued
         or outstanding).............................................................
     Common stock (29,000,000  shares authorized,  $0.001 par value;  13,677,886
         and 13,677,386 issued and 11,880,098 and 11,955,598  outstanding at
         September 30, 1998 and June 30, 1998, respectively).........................           14               14
     Additional paid-in capital......................................................       34,448           34,445
     Retained earnings...............................................................       70,096           65,076
     Cumulative translation adjustment...............................................          376              102
     Treasury stock: at cost (1,797,788 and 1,721,788 shares at September 30, 1998
         and June 30, 1998, respectively)............................................      (26,379)         (25,105)
                                                                                         ---------        ----------
          Total stockholders' equity.................................................       78,555           74,532
                                                                                         ---------        ---------
Total liabilities and stockholders' equity...........................................    $ 111,600        $ 101,179
                                                                                         =========        =========



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



<PAGE>
<TABLE>
<CAPTION>



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


                                                                                               Three Months Ended
                                                                                                   September 30,
                                                                                                 1998       1997
                                                                                              ---------   ---------

<S>                                                                                           <C>         <C>      
Net sales...............................................................................      $  47,731   $  38,138
Cost of goods sold......................................................................         22,680      18,032
                                                                                              ---------   ---------
Gross profit............................................................................         25,051      20,106
                                                                                              ---------   ---------

Operating expenses:
     Selling, marketing and distribution................................................         12,265       9,302
     General and administrative.........................................................          4,657       3,764
                                                                                              ---------   ---------
       Total operating expenses.........................................................         16,922      13,066
                                                                                              ---------   ---------

Income from operations..................................................................          8,129       7,040
Net interest expense (income)...........................................................             33         (95)
                                                                                              ---------   ----------

Income before provision for income taxes................................................          8,096       7,135
Provision for income taxes..............................................................          3,076       2,783
                                                                                              ---------   ---------
Net income..............................................................................      $   5,020   $   4,352
                                                                                              =========   =========

Earnings per common share:
     Basic..............................................................................      $   0.42    $   0.38
                                                                                              ========    ========
     Diluted............................................................................      $   0.40    $   0.35
                                                                                              ========    ========

Weighted average number of common shares outstanding:
     Basic..............................................................................         11,931      11,513
                                                                                              =========   =========
     Diluted............................................................................         12,656      12,511
                                                                                              =========   =========
</TABLE>
























                See accompanying notes to consolidated financial statements.




<PAGE>

<TABLE>
<CAPTION>


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

                                                                                           Three Months Ended
                                                                                               September 30,
                                                                                             1998        1997
                                                                                          ---------   ----------
Cash flows from operating activities:
<S>                                                                                       <C>          <C>    
    Net income....................................................................        $  5,020     $ 4,352
    Adjustments to reconcile net income to net cash provided by (used in)
      operating activities:
       Depreciation and amortization..............................................           1,733       1,074
       Changes in operating assets and liabilities:
          Accounts receivable.....................................................          (1,897)     (1,931)
          Inventories.............................................................          (4,197)     (4,160)
          Prepaid expenses and other current assets...............................          (1,748)         40
          Income taxes receivable.................................................           2,850
          Accounts payable........................................................           2,255       2,063
          Accrued expenses........................................................             (50)      1,938
          Income taxes payable....................................................             110       1,719
                                                                                         ---------   ---------
Net cash provided by operating activities.........................................           4,076       5,095
                                                                                         ---------   ---------
Cash flows from investing activities:
    Purchase of business..........................................................                        (318)
    Acquisition of property and equipment.........................................          (3,656)       (897)
    Other assets..................................................................                         (38)
                                                                                         ---------   ----------
         Net cash used in investing activities....................................          (3,656)     (1,253)
                                                                                         ----------  ----------
Cash flows from financing activities:
    Net repayment under lines of credit...........................................            (708)       (888)
    Repayment of capital lease obligations........................................             (56)        (33)
    Net proceeds from issuance of common stock....................................               3       1,178
    Repurchase of common stock....................................................          (1,274)    (11,565)
                                                                                         ----------  ----------
         Net cash used in financing activities....................................          (2,035)    (11,308)
                                                                                         ----------  ----------
Effect of exchange rate changes in cash...........................................             141          (4)
                                                                                         ---------   ----------
Net decrease in cash and cash equivalents.........................................          (1,474)     (7,470)
Cash and cash equivalents at beginning of period..................................           2,923      15,550
                                                                                         ---------   ---------
Cash and cash equivalents at end of period........................................       $   1,449   $   8,080
                                                                                         =========   =========



          See accompanying notes to consolidated financial statements.

</TABLE>


<PAGE>




                        DAY RUNNER, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (Three months ended September 30, 1998 and 1997)


1.  BASIS OF PRESENTATION AND ACCOUNTING POLICIES

         The accompanying  consolidated  balance sheet as of September 30, 1998,
consolidated  statements  of income and cash flows for the  three-month  periods
ended  September  30,  1998  and 1997  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, 1998,  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 ended September 30, 1998
and 1997 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):

                                            September 30,           June 30,
                                                1998                  1998

         Raw materials...................  $    9,707             $   14,087
         Work in process.................         593                    831
         Finished goods..................      31,365                 22,692
                                           ----------             ----------
                  Total..................  $   41,665             $   37,610
                                           ==========             ==========

3.  LINES OF CREDIT

          On September  23,  1998,  the Company  entered  into a Revolving  Loan
Agreement (the "Loan  Agreement")  with Wells Fargo Bank,  National  Association
("Wells Fargo").  The Loan Agreement  provides for borrowings  through September
30, 2005 (the "Maturity  Date").  Borrowings  will bear interest either at fixed
rates based on the higher of the bank's  prime rate and the  Federal  Funds Rate
published  by  the  Federal  Reserve  Bank  of New  York  or at  floating  rates
calculated by reference to the interest rates at which the bank offers  deposits
in U.S.  dollars in amounts  approximately  equal to the amount of the  relevant
Loan and for a period of time comparable to the number of days the relevant Loan
will remain outstanding,  together with a margin. The maximum amount that may be
outstanding under the Loan Agreement is $160,000,000  through December 31, 2000.
Thereafter,  the maximum amount of borrowings that may be outstanding  under the
Loan  Agreement  is  reduced  by  $20,000,000  in  calendar  year  2001  and  by
$10,000,000  in each of the following  calendar  years up to the Maturity  Date.
Under  the  terms of the Loan  Agreement,  the  Company  will  pay  Wells  Fargo
$1,200,000 plus an unused  commitment fee during the term of the Loan Agreement.
The  Company  will also pay legal,  accounting  and other fees and  expenses  in
connection  with the Loan  Agreement.  At September  30,  1998,  the Company had
$160,000 outstanding under this line of credit.

          The Loan Agreement  requires the Company to maintain certain financial
covenants,  including:  (i) a fixed charge  coverage  ratio of less than 2.00 to
1.00; (ii) a funded debt ratio declining over the term from 3.75 to 1.00 to 2.50
to 1.00; (iii) annual capital  expenditures limited to specified amounts between
$11,000,000 and $17,000,000 over the seven year term; (iv) stockholders' equity,
on a  quarterly  basis,  of not less than (a) 50% of net income  plus 75% of net
cash proceeds from any stock  issuances  plus (b) the greater of  $67,000,000 or
80% of stockholders' equity as of March 31, 1999.

          The  Company's  Canadian  subsidiary  has a  credit  agreement  with a
Canadian bank. The borrowings under this line of credit,  which is guaranteed by
the  Company  is used for  working  capital  by the  subsidiary,  may not exceed
Canadian $3,000,000  (approximately US $1,961,000),  bear interest at the bank's
prime rate (7.25% at September  30, 1998) and are due and payable on demand.  At
September  30,  1998,   approximately  Canadian  $2,730,000   (approximately  US
$1,783,000) was  outstanding  under this line of credit.  These  borrowings were
collateralized by substantially  all of the Canadian  subsidiary's  assets.  The
borrowings  under this credit agreement were repaid in full on October 22, 1998,
and the Canadian  subsidiary  will now borrow funds as a  co-borrower  under the
Wells Fargo Loan Agreement.

4.  STOCKHOLDERS' EQUITY

         During the three months ended  September  30, 1998,  certain  employees
exercised options to purchase an aggregate of 500 shares of the Company's Common
Stock for an aggregate of approximately $3,000.

         During  the  three  months  ended   September  30,  1998,  the  Company
repurchased  76,000  shares of its Common Stock at an average cost of $16.76 per
share for an aggregate of approximately $1,274,000.

5.  EARNINGS PER SHARE

         Effective  December  1997, the Company  adopted  Statement of Financial
Accounting  Standards  ("SFAS") No. 128, Earnings Per Share,  which requires the
Company  to  present  basic and  diluted  earnings  per share on the face of the
income statement. Basic earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding for the period. Diluted
earnings per share is computed by dividing net income by the sum of the weighted
average  number of common  shares  outstanding  for the period  plus the assumed
exercise of all dilutive securities.  The following reconciles the numerator and
denominator of the basic and diluted per share  computations  for net income (in
thousands, except per share amounts):


                                                Three Months Ended September 30,
                                                    1998                1997
                                                  -----------       ----------
Net Income                                        $    5,020          $  4,352
                                                  ===========       ==========

Basic Weighted Average Shares              
   Weighted average number of
     common shares outstanding                        11,931            11,513

Effect of Dilutive Securities
   Additional shares from the assumed
     exercise of options and warrants                  2,866             3,118
Shares assumed to be repurchased
     under the treasury stock method                  (2,141)           (2,120)
                                                 -----------          ----------

Diluted Weighted Average Shares
   Weighted average number of
     common shares outstanding and
     common share equivalents                         12,656            12,511
                                                 ===========          ==========

Basic                                            $      0.42          $   0.38
                                                 ===========          ==========

Diluted                                          $      0.40          $   0.35
                                                 ===========          ==========

7.   COMPREHENSIVE INCOME

          In June 1997, the Financial Accounting Standards Board issued SFAS No.
130 Reporting  Comprehensive  Income.  The statement  establishes  standards for
reporting and displaying  comprehensive  income and its components in a full set
of general-purpose  financial statements.  Comprehensive income is summarized as
follows:

                                                Three Months Ended September 30,
                                                   1998                1997
                                                -------------      ------------
     Net income                                  $   5,020           $   4,352
     Foreign currency translation adjustment           274                 (52)
                                                -------------      -------------
         Comprehensive income                    $   5,294           $    4,300
                                                =============      =============
<PAGE>

8.   ACQUISITION

         On September 24, 1998,  the Company  announced a cash offer for Filofax
Group plc  ("Filofax"),  a UK-based company traded on the London Stock Exchange.
The offer was for (pound)2.00  (approximately  US $3.40) per share pursuant to a
tender offer for all of the outstanding ordinary shares of stock of Filofax. The
offer was not  recommended  by Filofax's  Board of  Directors.  On September 25,
1998, the Company announced it had reached agreement with the Board of Directors
of Filofax on the terms of a  recommended  cash tender  offer (the  "Recommended
Offer"). The Recommended Offer was for (pound)2.10  (approximately US $3.57) per
share for all of the outstanding ordinary shares of Filofax for a total purchase
price of approximately  (pound)50,300,000  (approximately US $85,500,000). As of
September 30, 1998, the Company had purchased  1,400,000 shares of Filofax stock
on  the  open  market  for  approximately  (pound)2,821,000   (approximately  US
$4,794,000).  Such amount is included in  Investment in Filofax in the Company's
consolidated  financial  statements.  In  this  discussion,  all  exchange  rate
conversions  between the U.S.  dollar and the UK pound sterling were based on an
exchange rate of 1.6994, which was the exchange rate on September 30, 1998.


         On  October  30,  1998,  the  Company  announced  that it  owned or had
received valid acceptances of the Recommended Offer for approximately 87% of the
outstanding shares of Filofax and had assumed control of Filofax. All conditions
of the Recommended Offer, including regulatory approval,  have been satisfied or
waived and the Company has declared the Recommended  Offer  unconditional in all
respects.  Filofax  will operate as a  subsidiary  of the  Company.  The Company
expects to acquire the remaining outstanding shares of Filofax before the end of
1998.  The  acquisition  of Filofax will be funded by bank debt  pursuant to the
Loan Agreement.

     In  connection  with the  acquisition  of Filofax,  the  Company  currently
estimates  that the aggregate  fees and expenses of the  transaction,  including
investment banking,  legal,  accounting and other fees and expenses,  will be in
the range of $4,000,000 to $6,000,000. Actual total fees and expenses may differ
from  this  estimate  and are  subject  to  future  contingencies.  The fees and
expenses,  as well  as  payments  for  the  Filofax  shares,  will be paid  with
available cash and with borrowings under the Loan Agreement.

9.   FINANCIAL INSTRUMENTS

     On September 29, 1998,  the Company  entered into a call option in order to
manage its foreign  exchange risk on the purchase of Filofax shares and does not
use the instrument for trading purposes.  The Company's  objective is to protect
itself  from the risk that the  purchase  price of the  Filofax  shares  will be
adversely  affected by changes in exchange  rates.  At September  30, 1998,  the
Company had $775,000 in a call option which is included in prepaid  expenses and
other current assets in the consolidated financial statements.

10.   STATEMENTS OF CASH FLOW


         Supplemental disclosure of cash flow information (in thousands):

                                                Three Months Ended September 30,
                                                     1998             1997
                                                ------------      ------------

             Cash paid during the period for:
               Interest                           $    36           $   52
               Income taxes                       $    44           $1,007


         Supplemental disclosure of noncash investing and financing activities:

          As of September 30, 1998, the Company had purchased  1,400,000  shares
of  Filofax  stock  for   approximately   (pound)2,821,000   (approximately   US
$4,794,000).  This transaction was settled on October 1, 1998 and is included in
Investment in Filofax and accrued liabilities in the consolidated balance sheet.

<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 sales primarily
of  organizers  and planners and  secondarily  of refills.  Since fiscal 1995, a
majority of the Company's  growth has resulted from sales of related  organizing
products, virtually all of which have been introduced since January 1, 1995. The
Company  focuses  the  great  majority  of its  product  development,  sales and
marketing  efforts on the office  products  and the mass  market  channels.  The
office  products  channel and the mass market  channel  accounted  for 45.4% and
41.1%, respectively, of net sales for the three months ended September 30, 1998.

RESULTS OF OPERATIONS

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

                                                                                                 Percentage
                                                                              Percentage           Change
                                                                               of Sales             Three
                                                                          Three Months Ended    Months Ended
                                                                           September 30,        September 30,
                                                                           1997       1998      1997 to 1998
                                                                          ------     ------     -------------
<S>                                                                       <C>        <C>           <C>  
Net sales..............................................................   100.0%     100.0%        25.2%
Cost of goods sold.....................................................    47.5       47.3         25.8
                                                                          -----      -----
Gross profit...........................................................    52.5       52.7         24.6
                                                                          -----      -----
Operating expenses:
    Selling, marketing and distribution................................    25.7       24.4         31.9
    General and administrative.........................................     9.8        9.9         23.7
                                                                          -----      -----        -----
       Total operating expenses........................................    35.5       34.3         29.5
                                                                          -----      -----
Income from operations.................................................    17.0       18.4         15.5
Net interest expense (income)..........................................     0.0       (0.3)      (134.7)
                                                                           ----      -----        -----
Income before provision for income taxes...............................    17.0       18.7         13.5
Provision for income taxes.............................................     6.5        7.3         10.5
                                                                           ----      -----
Net income.............................................................    10.5%      11.4%        15.3
                                                                           ====      =====
</TABLE>



<PAGE>




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


 Product Category:                                             Three Months Ended September 30,
                                                                  1998              1997
                                                                --------          --------
                                                              (unaudited; dollars in thousands)
<S>                                                       <C>          <C>      <C>          <C>  
Organizers and planners..............................     $ 17,068     35.8%    $ 21,188     55.6%
Refills..............................................       17,048     35.7       10,875     28.5
Related organizing products..........................       13,615     28.5        6,075     15.9
                                                          --------    ------    --------    ------
  Total............................................       $ 47,731    100.0%    $ 38,138    100.0%
                                                          ========    ======    ========    ======
</TABLE>

<TABLE>
<CAPTION>

Distribution:                                                Three Months Ended September 30,
                                                                  1998              1997
                                                                --------          ---------
                                                              (unaudited; dollars in thousands)
<S>                                                      <C>          <C>       <C>          <C>  
Office products......................................    $ 21,660     45.4%     $ 17,924     47.0%
Mass market..........................................      19,648     41.1        15,750     41.3
Foreign customers....................................       4,232      8.9         2,415      6.3
Other................................................       2,191      4.6         2,049      5.4
                                                        ----------    -----     ---------   ------
    Total............................................   $  47,731    100.0%     $ 38,138    100.0%
                                                        ==========    =====     =========   ======
</TABLE>


THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH
THE THREE MONTHS ENDED SEPTEMBER 30, 1997

         Net Sales.  Net sales consist of revenues from gross product  shipments
net of  allowances  for returns,  rebates and credits.  In the first  quarter of
fiscal 1999, net sales increased by $9,593,000,  or 25.2%,  because of increased
sales primarily of related  organizing  products and secondarily of refills.  In
the quarter ended September 30, 1998, sales of related organizing  products grew
by  $7,540,000,  or  124.1%;  sales of  refills  (which  include  calendars  and
accessories) grew by $6,173,000,  or 56.8%; and sales of organizers and planners
decreased  by  $4,120,000,  or 19.4%.  Product  sales were  primarily  to office
products  customers  and  secondarily  to mass market  customers.  Sales to mass
market  customers  grew by  $3,898,000,  or  24.7%;  sales  to  office  products
customers  grew by  $3,736,000,  or 20.8%;  sales to foreign  customers  grew by
$1,817,000,  or 75.2%; and sales to miscellaneous  customers grouped together as
"other" increased by $142,000, or 6.9%.

         Gross Profit.  Gross profit is net 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
slightly  from 52.7% in the first  quarter of fiscal  1998 to 52.5% in the first
quarter of fiscal 1999  primarily  because the gross profit levels of certain of
the Company's  subsidiaries are lower as a percentage of sales than those of the
parent company.

         Operating  Expenses.  Total operating expenses increased by $3,856,000,
or 29.5%, in the first quarter of fiscal 1999 compared with the first quarter of
fiscal  1998 and  increased  as a  percentage  of  sales  from  34.3% to  35.5%.
Primarily because of costs associated with the placement of promotional displays
with major customers  during the quarter,  selling,  marketing and  distribution
expenses  increased by  $2,963,000  and from 24.4% to 25.7% as a  percentage  of
sales. General and administrative  expenses increased by $893,000, but decreased
slightly  from 9.9% to 9.8% as a percentage  of sales  primarily  because of the
Company's increased ability to absorb fixed costs as a result of higher sales.

         Net Interest Expense  (Income).  Primarily because of a decrease in the
Company's cash available for short-term  investment resulting primarily from the
Company's repurchase of common stock, net interest expense for the first quarter
of fiscal 1999 was $33,000  compared with net interest income of $95,000 for the
first quarter of fiscal 1998.

         Income  Taxes.  Primarily  as  a  result  of  state  tax  planning  and
secondarily  because  of  the  continued  growth  of  the  Company's  Hong  Kong
subsidiary,  the  Company's  first  quarter  fiscal 1999  effective tax rate was
38.0%, compared with 39.0% for the first quarter of fiscal 1998.

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 new product  introductions  and line extensions,  the timing of large orders,
changes  in  product  sales  or  customer  mix,  vendor  and  customer  pricing,
production levels,  supply and manufacturing  delays, large customers' inventory
management and general industry and economic conditions.  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  September  30,  1998
decreased to $1,449,000  from  $2,923,000  at June 30, 1998.  During the quarter
ended  September  30,  1998,  net  cash  of  $4,076,000  provided  by  operating
activities was offset by net cash of $3,656,000 and $2,035,000 used in investing
activities and financing activities, respectively.

         Of the  $4,076,000  net  amount  provided  by the  Company's  operating
activities,  $5,020,000 was provided by net income, $2,850,000 was provided by a
decrease in income taxes  receivable,  $2,255,000 was provided by an increase in
accounts payable and $1,733,000 was provided by depreciation  and  amortization.
These amounts were partially offset by an increase of $4,197,000 in inventories,
an increase of $1,897,000 in accounts  receivable  and an increase of $1,748,000
in prepaid expenses and other current assets.

         Accounts  receivable (net) at September 30, 1998 increased by 5.6% from
the fiscal 1998 year-end amount primarily because of a decrease in the allowance
for sales returns based upon  improvement in the Company's  actual sales returns
experience  during the prior twelve months (which decrease was partially  offset
by lower  sales in the first  quarter of fiscal  1999  compared  with the fourth
quarter of fiscal 1998).  Compared with the September 30, 1997 amount,  accounts
receivable (net) increased by 39.5% primarily because of the growth in sales for
the quarter ended  September 30, 1998 compared with the quarter ended  September
30, 1997 and  secondarily  because of the  decrease in the  allowance  for sales
returns.  The average collection period of accounts  receivable at September 30,
1998 was 44 days,  compared  with 45 and 47 days at June 30, 1998 and  September
30, 1997, respectively.

         Inventories  at September  30, 1998  increased by 10.8% from the fiscal
1998  year-end  amount and by 44.4%  compared with the September 30, 1997 amount
primarily because of the inventories of the companies Day Runner acquired during
fiscal 1998 and its new Australian subsidiary and secondarily because of new and
recently introduced products.

         The  $3,656,000 net amount used in the Company's  investing  activities
was used to acquire  primarily  machinery  and equipment  and  secondarily  data
processing equipment and software.

         Of  the  $2,035,000   net  amount  used  in  the  Company's   financing
activities,  $1,274,000 was used to repurchase 76,000 shares of its Common Stock
and $708,000 was used as net repayment on the lines of credit.

         At September 30, 1998,  Day Runner had $160,000  outstanding  under its
primary  $160,000,000  bank line of credit.  Borrowings  bear interest either at
fixed rates based on the higher of the bank's  prime rate and the Federal  Funds
Rate  published  by the Federal  Reserve  Bank of New York or at floating  rates
calculated by reference to the interest rates at which the bank offers  deposits
in U.S.  dollars in amounts  approximately  equal to the amount of the  relevant
Loan and for a period of time comparable to the number of days the relevant Loan
will remain outstanding,  together with a margin. The maximum amount that may be
outstanding under the Loan Agreement is $160,000,000  through December 31, 2000.
Thereafter,  the maximum amount of borrowings that may be outstanding  under the
Loan  Agreement is reduced by $20,000,000 in calendar 2001 and by $10,000,000 in
each of the following  calendar  years up to September 30, 2005.  (See Note 3 to
Consolidated Financial Statements.)

         The Canadian  line of credit  allowed for  aggregate  borrowings by the
Company's  Canadian  subsidiary of up to Canadian  $3,000,000  (approximately US
$1,961,000). Borrowings bore interest at the Canadian bank's prime rate and were
due and  payable  on demand.  At  September  30,  1998,  approximately  Canadian
$2,730,000  (approximately  US  $1,783,000)  was  outstanding  under the line of
credit.  This line of credit  was repaid in full on October  22,  1998,  and the
Canadian subsidiary will now borrow funds as a co-borrower under the Wells Fargo
Loan Agreement. (See Note 3 to Consolidated Financial Statements.)

         In September  1998, the Company  announced a cash offer for Filofax,  a
UK-based company traded on the London Stock Exchange. The offer, as amended, was
for  (pound)2.10  (approximately  US $3.57) per share for all of the outstanding
ordinary  shares  of  Filofax  for  a  total  purchase  price  of  approximately
(pound)50,300,000  (approximately  US  $85,500,000).  On October 30,  1998,  the
Company  announced that it owned or had received valid  acceptances of the offer
for  approximately  87% of the  outstanding  shares of Filofax  and had  assumed
control of Filofax.  The Company  expects to acquire the  remaining  outstanding
shares of Filofax before the end of 1998. In connection  with the acquisition of
Filofax, the Company currently estimates that the aggregate fees and expenses of
the transaction,  including investment banking, legal, accounting and other fees
and expenses,  will be in the range of $4,000,000  to  $6,000,000.  Actual total
fees and  expenses  may  differ  from this  estimate  and are  subject to future
contingencies.  The fees  and  expenses,  as well as  payments  for the  Filofax
shares,  will be paid with  available  cash and with  borrowings  under the Loan
Agreement.  In this discussion,  all exchange rate conversions  between the U.S.
dollar and the UK pound sterling were based on an exchange rate of 1.6994, which
was the  exchange  rate on  September  30,  1998.  (See  Note 8 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
international  operations 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's
exposure to the impact of interest  changes  and foreign  currency  fluctuations
will increase as a result of its  acquisition of Filofax because the acquisition
will significantly expand the Company's  international  operations and because a
portion of the debt incurred to fund the acquisition is in pound  sterling.  The
Company has entered  into a call option with  respect to the purchase of Filofax
shares in the tender  offer to limit the effect of exchange  rate  fluctuations.
The  Company may in the future  enter into  additional  call  options or foreign
currency exchange contracts,  swap agreements or other financial  instruments as
hedges to moderate the impact of foreign currency fluctuations. The Company does
not trade in financial  instruments,  nor does it enter into such  contracts for
speculation purposes.

         A  single  currency  called  the euro  will be  introduced  in  certain
countries in Europe on January 1, 1999,  but will not be  introduced in England.
The use of a single  currency  may  affect  the  ability of Day Runner and other
companies to price their products  differently in various European markets.  The
Company has not yet evaluated the impact of the single currency.

         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.

          The "Year  2000" issue  refers to the  inability  of certain  computer
systems,  as well as certain  hardware and equipment  containing  date-sensitive
data, to recognize accurately dates commencing on or after January 1, 2000. This
has the  potential  to affect  the  operation  of these  systems  adversely  and
materially.  Day Runner has identified  four phases in its Year 2000  compliance
efforts:   discovery,   assessment,   remediation  and  applicable  testing  and
verification.   The  Company  has  substantially  completed  the  discovery  and
assessment  phases for its own systems and  applications  and  believes  that by
modifying  existing software and converting to new software for certain tasks it
can  prevent  the  Year  2000  transition  from  posing   significant   internal
operational problems.

         The Company  plans to complete  the  remediation  phase by December 31,
1998 and complete the  applicable  testing and  verification  phase by March 31,
1999. Day Runner currently  estimates that total  incremental cash  requirements
related to the Year 2000 issue will be approximately $750,000 to $1,200,000,  of
which approximately  $650,000 was incurred as of September 30, 1998. The Company
does not anticipate that the costs of these  modifications  and conversions will
be material to its  financial  position  or results of  operations  in any given
year.  Expenditures  will be expensed or  capitalized as  appropriate.  The cash
requirements described above do not include any estimates for costs of Year 2000
remediation or compliance that may be incurred by, or on behalf of, Filofax, the
Company's recently acquired subsidiary.  The Company has not evaluated Filofax's
Year 2000 compliance efforts at this time.

          Day Runner is surveying  its vendors,  customers and others on whom it
relies to assure that their  systems will be Year 2000  compliant  and that they
will be able to continue their business with the Company  without  interruption.
However,  there can be no assurance  that the systems of other  parties on which
the  Company's  systems  rely will also be  compliant  or that any failure to be
compliant in this area by another party would not have an adverse  effect on the
Company's systems. Furthermore, no assurance can be given that any or all of the
Company's  systems are or will be Year 2000  compliant,  that the ultimate costs
required to address  the Year 2000 issue will not exceed the  amounts  indicated
above,  or that the  impact of any  failure  to  achieve  substantial  Year 2000
compliance  will not have a material  adverse effect on the Company's  financial
condition.

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 and elsewhere in this
annual   report  are  forward   looking   statements   that  involve  risks  and
uncertainties   that  could  affect  actual  future  results.   Such  risks  and
uncertainties  include,  but are not limited to:  timing and size of orders from
large customers, timing and size of orders for new products,  competition, large
customers' inventory management,  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.

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(2)

                  10.1     First Amendment to Officer Severance Plan effective
                           as of August 17, 1998(3)

                  10.2     Revolving  Loan  Agreement  dated  September 23, 1998
                           among the Registrant,  Ultima  Distribution Inc., Day
                           Runner  UK  plc  and  Wells  Fargo   Bank,   National
                           Association,   including  Revolving  Line  of  Credit
                           Note(4)

                  10.3     1999 Officer Bonus Plan(3)

                  27.1     Financial Data Schedule

         (b)      Reports on Form 8-K

                  (1)      On September 24, 1998, the Company filed with the
                           Commission a Current Report  on Form 8-K reporting
                           the Company's cash tender offer for Filofax and its
                           entering  into  a  related  Revolving  Loan Agreement
                           with Wells Fargo Bank, National Association.

                  (2)      On  September  25, 1998,  the Company  filed with the
                           Commission  a Current  Report  on Form 8-K  reporting
                           that the Company had reached agreement with the Board
                           of  Directors of Filofax  regarding  the terms of the
                           Company's cash tender offer for Filofax.




(1)  Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
     (File No. 0-19835) filed with the Commission on May 15, 1998.
(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.
(3)  Incorporated  by reference to the  Registrant's  Annual Report on Form 10-K
     (File No. 0-19835) filed with the Commission on October 1, 1998.
(4)  Incorporated  by reference to the  Registrant's  Current Report on Form 8-K
     (File No. 0-19835) filed with the Commission on September 24, 1998.



<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:  November 12, 1998

                                             DAY RUNNER, INC.



                                        By:  /s/ JAMES E. FREEMAN, JR.
                                             ----------------------------------
                                                 James E. Freeman, Jr.
                                                   Chief Executive Officer




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