<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                 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

                 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 333-49749

                            YOUNG AMERICA CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  MINNESOTA                              41-1892816
      (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)                 Identification No.)

          717 FAXON ROAD, YOUNG AMERICA, MINNESOTA        55397-9481
          (Address of principal executive office)          (Zip Code)

         Registrant's telephone number, including area code: (612) 467-1102

                          YOUNG AMERICA HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  MINNESOTA                              41-0983697
      (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)                 Identification No.)

          717 FAXON ROAD, YOUNG AMERICA, MINNESOTA        55397-9481
          (Address of principal executive office)         (Zip Code)

         Registrant's telephone number, including area code: (612) 467-1102

Indicate by check mark whether the registrant (1) has filed all reports 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 XX   No

              The number of shares outstanding of the registrant's
                    common stock as of November 16, 1998, was
                                   1,911,960.
<PAGE>   2
                          YOUNG AMERICA HOLDINGS, INC.
                            YOUNG AMERICA CORPORATION

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                      INDEX



PART I.  FINANCIAL INFORMATION                                             PAGE

    Item 1. Financial Statements

         a) Consolidated Statements of Operations for the Three and
            Nine Months Ended September 30, 1998, and 1997...................1

         b) Consolidated Balance Sheets as of September 30, 1998,
            and December 31, 1997............................................2

         c) Consolidated Statements of Cash Flow For the Nine Months
            Ended September 30, 1998, and 1997...............................3

         d) Notes to Consolidated Financial Statements.......................4

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


PART II.   OTHER INFORMATION

    Item 1. Legal Proceedings...............................................14

    Item 2. Changes in Securities & Use of Proceeds.........................14

    Item 3. Defaults Upon Senior Securities.................................14

    Item 4. Submission of Matters to a Vote of Security Holders.............14

    Item 5. Other Information...............................................14

    Item 6. Exhibits and Reports on Form 8-K................................14


SIGNATURES..................................................................15
<PAGE>   3
                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements


                          YOUNG AMERICA HOLDINGS, INC.
                      Consolidated Statements of Operations
                            (in thousands, unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended          Nine Months Ended
                                                         September 30,              September 30,
                                                   -----------------------     -----------------------
                                                      1998          1997          1998          1997
                                                   ---------     ---------     ---------     ---------
<S>                                                <C>           <C>           <C>           <C>
Revenues                                           $  53,640     $  43,026     $ 162,400     $ 135,433
Cost of revenues:
   Rebates, postage and freight                       38,142        26,073       115,603        83,975
   Processing and servicing                           12,559        11,036        35,941        29,387
                                                   ---------     ---------     ---------     ---------
     Gross profit                                      2,939         5,917        10,856        22,071
Operating expenses:
   Selling                                             1,535         1,402         4,455         4,014
   General and administrative                          1,286         2,150         3,848         7,146
                                                   ---------     ---------     ---------     ---------
                                                       2,821         3,552         8,303        11,160
                                                   ---------     ---------     ---------     ---------
     Operating income                                    118         2,365         2,553        10,911
Other income (expense):
   Interest expense                                   (2,379)           (4)       (7,123)           (4)
   Amortization of deferred financing costs              (99)         --          (3,523)         --
   Other income, net                                     101            39           313           530
                                                   ---------     ---------     ---------     ---------
                                                      (2,377)           35       (10,333)          526
                                                   ---------     ---------     ---------     ---------
Income (loss) before provision for income taxes       (2,259)        2,400        (7,780)       11,437
Benefit from income taxes                               (836)         --          (2,869)         --
                                                   ---------     ---------     ---------     ---------
     Net income (loss)                             $  (1,423)    $   2,400     $  (4,911)    $  11,437
                                                   =========     =========     =========     =========

Unaudited pro forma net income:
   Income before provision for income taxes                      $   2,400                   $  11,437
   Pro forma income tax expense                                        888                       4,232
                                                                 ---------                   ---------
     Pro forma net income                                        $   1,512                   $   7,205
                                                                 ---------                   ---------
</TABLE>


                                       1
<PAGE>   4
                          YOUNG AMERICA HOLDINGS, INC.
                      Consolidated Statements of Cash Flows
                            (in thousands, unaudited)

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                 September 30,
                                                             ---------------------
                                                               1998         1997
                                                             --------     --------
<S>                                                          <C>          <C>
Operating Activities:
   Net (loss) income                                         $ (4,911)    $ 11,437
   Adjustments to reconcile net (loss) income to net cash
   (used in) provided by operating activities:
      Depreciation and amortization                             1,496        1,043
      Amortization of deferred financing costs                  3,523         --
      Deferred income taxes                                    (2,878)        --
      Changes in operating assets and liabilities:
    Trade receivables                                          (4,214)      (2,506)
    Supplies inventory                                            (24)         642
    Prepaid expenses                                             (341)        (357)
    Non-cleared rebate items                                    5,914        2,636
    Accounts payable                                             (335)       1,113
    Collections due to and advances from clients                2,377       (3,669)
    Accrued expenses                                           (3,835)       2,219
                                                             --------     --------
    Net cash (used in) provided by operating activities        (3,228)      12,558
                                                             --------     --------

Investing Activities
   Purchases of property and equipment                         (2,378)      (1,964)
                                                             --------     --------
    Net cash used in investing activities                      (2,378)      (1,964)
                                                             --------     --------

Financing Activities:
   Repayment of Bridge Facility                               (80,000)        --
   Net Proceeds from senior subordinated debt                  76,539         --
   Proceeds from stock subscriptions                               24         --
   Redemption of common stock                                    (709)
   Distributions paid to stockholders                            --         (6,812)
                                                             --------     --------
    Net cash used in financing activities                      (4,146)      (6,812)
                                                             --------     --------
    Change in cash and cash equivalents                        (9,752)       3,782
Cash and Cash Equivalents:
   Beginning of period                                         17,940       20,573
                                                             --------     --------
   End of period                                             $  8,188     $ 24,355
                                                             ========     ========

Supplemental Disclosures of Cash Flow Information:
   Cash payment for interest                                 $  4,484     $   --
                                                             --------     --------
</TABLE>


                                       2
<PAGE>   5
                          YOUNG AMERICA HOLDINGS, INC.
                           Consolidated Balance Sheets
                (in thousands, except for share data, unaudited)


<TABLE>
<CAPTION>
                                                                                     September 30   December 31
                                                                                          1998         1997
                                                                                     ------------   -----------
<S>                                                                                  <C>             <C>
                                     ASSETS
Current Assets:
   Cash and cash equivalents                                                           $   8,188     $  17,940
   Trade receivables, net                                                                 15,696        11,482
   Supplies inventory                                                                        639           615
   Prepaid expenses                                                                          859           518
                                                                                       ---------     ---------
                                      Total current assets                                25,382        30,555
Property and Equipment, at cost:                                                          19,846        17,556
   Less accumulated depreciation                                                         (11,070)       (9,661)
                                                                                       ---------     ---------
                                                                                           8,776         7,895
Deferred Financing Costs                                                                   3,231         3,292
Deferred Income Taxes                                                                      2,869          --
                                                                                       ---------     ---------
                                      TOTAL ASSETS                                     $  40,258     $  41,742
                                                                                       =========     =========


                      LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
   Noncleared rebate items                                                             $  10,440     $   4,526
   Accounts payable                                                                        1,996         2,331
   Collections due to and advances from clients                                            5,925         3,548
   Deferred income taxes                                                                     408           417
   Accrued expenses
          Compensation                                                                      --           5,860
          Other                                                                            4,762         2,737
                                                                                       ---------     ---------
                                      Total current liabilities                           23,531        19,419
Bridge Facility                                                                             --          80,000
Senior Subordinated Notes                                                                 80,000          --

Commitments and Contingencies (Note 3)
Redeemable Class A Common Stock, 45,718 and 339,096 shares issued and
   outstanding                                                                               995         7,380
Stockholders' (Deficit) Equity:
   Class A common stock, par value $1 per share; 3,000,000 shares authorized,
      964,834 shares issued and outstanding (1,255,455 shares issued and                   1,255           965
      outstanding on a pro forma basis - see Note 1)
   Class B common stock, par value $1 per share; 1,500,000 shares authorized,
      and 442,884 shares issued and outstanding                                              443           443
   Class C common stock, par value $1 per share; 1,500,000 shares authorized,
      and 172,727 shares issued and outstanding                                              173           173
   Additional paid-in capital                                                             36,082        30,024
   Retained deficit                                                                     (102,221)      (96,662)
                                                                                       ---------     ---------
                                                                                         (64,268)      (65,057)
                                                                                       ---------     ---------

                                      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT      $  40,258     $  41,742
                                                                                       =========     =========
</TABLE>


                                       3
<PAGE>   6
YOUNG AMERICA HOLDINGS, INC.
Notes to Consolidated Financial Statements
(in thousands, except share data - unaudited)
--------------------------------------------------------------------------------

1.  BASIS OF PRESENTATION - PRINCIPLES OF CONSOLIDATION

    The accompanying consolidated financial statements have been prepared by the
    Company and include the accounts of Young America Holdings, Inc.
    ("Holdings"), and its wholly-owned subsidiary, Young America Corporation
    ("YAC"), collectively, the "Company." All significant intercompany items
    have been eliminated. In the opinion of management, all adjustments (which
    include reclassifications and normal recurring adjustments) necessary to
    present fairly the financial position, results of operations, and cash flows
    at September 30, 1998, and for all periods presented, have been made.

    Certain information and footnote disclosures normally included in the
    financial statements prepared in accordance with generally accepted
    accounting principles have been condensed or omitted. It is suggested that
    the information included in this Form 10-Q be read in conjunction with
    Management's Discussion and Analysis and the financial statements and notes
    thereto included in the Young America Holdings, Inc., Form S-4 Registration
    Statement.


2.  DEBT

    On February 23, 1998, the Company's subsidiary, Young America Corporation
    ("YAC"), issued $80,000 of 11 5/8% Senior Subordinated Notes, due 2006 (the
    "Notes"). Interest on the Notes is payable semiannually in arrears on
    February 15 and August 15 of each year, beginning August 15, 1998. The net
    proceeds of the offering of the Notes, along with $5,391 in cash, were used
    to repay, in full, amounts outstanding under the Bridge Facility. In
    connection with the repayment of the Bridge Facility, the Company wrote off
    $3,292 of the deferred financing costs reflected on the December 31, 1997,
    balance sheet.

    The Notes are unconditionally guaranteed, on an unsecured senior
    subordinated basis, by Holdings. The guarantee, which is full and
    unconditional and which is being provided on a joint and several basis with
    any future subsidiaries of YAC that become guarantors, is a general
    unsecured obligation of Holdings. Separate financial statements of YAC have
    not been presented as management has determined that they would not be
    material to investors given that (i) YAC is a wholly-owned subsidiary of
    Holdings, (ii) YAC holds and represents substantially all of the assets,
    liabilities, and operations of the consolidated entity, and (iii) Holdings
    has provided a full and unconditional guarantee of the Notes. The Notes are
    not redeemable prior to February 15, 2002, except as provided below. On or
    after such date, the Notes are redeemable, in whole or in part, at the
    option of YAC at the following redemption prices set forth herein, plus
    accrued and unpaid interest to the date of redemption set forth below:

                 2002........................105.813%
                 2003........................103.875
                 2004........................101.938
                 2005 and thereafter.........100.000%


                                       4
<PAGE>   7
YOUNG AMERICA HOLDINGS, INC.
Notes to Consolidated Financial Statements - (Continued)
(in thousands, except share data - unaudited)
--------------------------------------------------------------------------------

    In addition, at any time on or prior to February 15, 2001, YAC, at its
    option, may redeem, with the net cash proceeds of one or more equity
    offerings, up to 35% of the aggregate principal amount of the Notes at a
    redemption price equal to 111.625% of the principal amount thereof, plus
    accrued and unpaid interest thereon, if any, to the date of redemption;
    provided that at least 65% of the aggregate principal amount of the Notes
    remains outstanding immediately following such redemption. Additionally,
    upon a change of control (as defined), each holder of Notes will have the
    right to require YAC to repurchase such holder's Notes at a price equal to
    101% of the principal amount thereof, plus accrued and unpaid interest, if
    any, to the repurchase date.

    The Notes are not subject to sinking-fund requirements. The Notes are
    general unsecured obligations of the Company and are subordinated in right
    of payment to all existing and future senior indebtedness of the Company,
    including obligations under the New Credit Facility referred to hereinafter.

    The indenture, under which the Notes were issued, contains certain covenants
    with respect to YAC and any future subsidiaries that restrict, among other
    things, the incurrence of additional indebtedness, the payment of dividends
    and other restricted payments, the creation of certain liens, the use of
    proceeds from sales of assets and subsidiary stock, and transactions with
    affiliates. The indenture also restricts the Company's ability to
    consolidate or merge with or into, or to transfer all or substantially all
    of its assets to another entity.

    The Company has a revolving credit facility ("New Credit Facility") with
    Norwest Bank Minnesota, N.A. ("Norwest"), which provides for borrowings of
    up to $10.0 million, based on a borrowing base formula equal to 85% of
    Eligible Receivables less Noncleared Rebate Items net of cash and cash
    equivalents (as defined in the New Credit Facility), and has a final
    maturity date of March 31, 2001. The New Credit Facility does not have any
    commitment reductions scheduled before maturity. Borrowings under the New
    Credit Facility will accrue interest at Norwest's base rate to 2.0%. The New
    Credit Facility is secured by a first-priority interest in accounts
    receivable and related general intangibles of YAC.

    The New Credit Facility was amended on November 16, 1998 (the "Amendment")
    to waive compliance with certain financial covenants set forth in the
    original agreement (the "Agreement"). The Agreement requires that YAC
    maintain a minimum interest coverage ratio of 1.5 (the "Interest Coverage
    Ratio") and a ratio of current assets to current liabilities of 1.10 (the
    "Current Ratio"). Pursuant to the terms of the Amendment, compliance with
    the Interest Coverage Ratio has been waived through the quarter ending
    September 30, 1999 and the Current Ratio has been waived through the quarter
    ending March 31, 1999. The Amendment also provides that YAC must maintain
    minimum cumulative EBITDA targets through the quarter ending September 30,
    1999. For the three month period commencing October 1, 1998 and ending
    December 31, 1998, YAC must attain a minimum cumulative EBITDA of $.8
    million. For the nine month period commencing January 1, 1999 and ending
    September 30, 1999, YAC must attain a minimum cumulative EBITDA of $9.5
    million. The Amendment limits YAC's ability to make capital expenditures 
    through March 31, 1999.




3.  CONTINGENCIES

    Leases

    The Company has operating leases for warehouse space and equipment. The
    future minimum payments under these obligations are as follows:

<TABLE>
<CAPTION>
                   Years ending December 31:
<S>                                          <C>
                    1998 ....................$5,064
                    1999 ....................$5,462
                    2000 ....................$4,617
                    2001 ....................$2,083
                    2002 ....................$760
</TABLE>


                                       5
<PAGE>   8
YOUNG AMERICA HOLDINGS, INC.
Notes to Consolidated Financial Statements - (Continued)
(in thousands, except share data - unaudited)
--------------------------------------------------------------------------------


    Guarantees

    Sweepstakes performance bonds are guaranteed for certain clients based on
    certain financial criteria. The Company had guaranteed approximately $10,400
    and $6,200 in performance bonds for various clients, as of September 30,
    1998, and December 31, 1997, respectively. The Company also obtains an
    indemnity agreement from these clients indemnifying the Company from
    obligations under the performance bonds.

4.  RECAPITALIZATION

    Prior to November 25, 1997, all of the capital stock of Holdings (formerly
    known as Young America Corporation) was owned by Jay F. Ecklund, its then
    Chairman and Chief Executive Officer, and certain trusts for the benefit of
    members of his family (the "Selling Shareholders"). On that date, Holdings
    effected a recapitalization (the "Recapitalization"), pursuant to a
    recapitalization agreement (the "Recapitalization Agreement") under which
    substantially all of Holdings' assets and business were transferred to a
    newly formed subsidiary, Young America Corporation, and Holdings changed its
    name to Young America Holdings, Inc. The following table presents summarized
    Statement of Operation information for Holdings and YAC for the nine months
    ended September 30, 1998, and on a pro forma basis for the nine months ended
    September 30, 1997, as if the guarantee structure had been in effect for
    such period; and summarized Balance Sheet information as of September 30,
    1998, and December 31, 1997. The only substantial asset retained by Holdings
    in the Recapitalization was certain real property, which is leased to YAC,
    at cost, for use in its operations.

<TABLE>
<CAPTION>
                                    Three Months Ended         Nine Months Ended
                                       September 30               September 30
                                    1998          1997         1998          1997
                                  ---------     ---------    ---------     ---------
<S>                               <C>           <C>          <C>           <C>
REVENUES:
      Holdings                    $      39     $    --      $  72,503     $    --
      YAC                            53,640        43,026      162,400       135,433
      Intercompany elimination          (39)         --        (72,503)         --
                                  ---------     ---------    ---------     ---------
         Consolidated             $  53,640     $  43,026    $ 162,400     $ 135,433
                                  =========     =========    =========     =========

GROSS PROFIT:
      Holdings                    $    --       $    --      $    --       $    --
      YAC                             2,900         5,917       10,739        22,071
      Intercompany elimination           39          --            117          --
                                  ---------     ---------    ---------     ---------
         Consolidated             $   2,939     $   5,917    $  10,856     $  22,071
                                  =========     =========    =========     =========

Net (loss) Income:
      Holdings                    $       4     $    --      $      12     $    --
      YAC                            (1,427)        2,400       (4,923)       11,437
                                  ---------     ---------    ---------     ---------
         Consolidated             $  (1,423)    $   2,400    $  (4,911)    $  11,437
                                  =========     =========    =========     =========
</TABLE>


                                       6
<PAGE>   9
YOUNG AMERICA HOLDINGS, INC.
Notes to Consolidated Financial Statements - (Continued)
(in thousands, except share data - unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                   September 30       December 31
                                                       1998              1997
                                                   ------------       -----------
<S>                                                <C>                <C>
Current Assets:
      Holdings                                       $    370          $    357
      YAC                                              25,012            30,198
                                                     --------          --------
         Consolidated                                $ 25,382          $ 30,555
                                                     ========          ========

Noncurrent Assets:
      Holdings                                       $ 17,452          $  2,667
      YAC                                              12,324             8,520
      Intercompany elimination                        (14,900)             --
                                                     --------          --------
         Consolidated                                $ 14,876          $ 11,187
                                                     ========          ========

Current Liabilities:
      Holdings                                       $   --            $   --
      YAC                                              23,531            19,419
                                                     --------          --------
         Consolidated                                $ 23,531          $ 19,419
                                                     ========          ========

Noncurrent Liabilities:
      Holdings                                       $   --            $ 60,728
      YAC                                              94,900            80,138
      Intercompany elimination                        (14,900)          (60,866)
                                                     --------          --------
         Consolidated                                $ 80,000          $ 80,000
                                                     ========          ========
</TABLE>


Pursuant to the terms of the Recapitalization Agreement, Holdings made an
additional payment of approximately $692 to the Selling Shareholders and certain
employees of the Company during the second quarter of 1998. Such payment was
based upon the final determination of total stockholders' equity (as defined
therein) of Holdings as of October 31, 1997, and Holdings profits or losses (as
defined) for the period ended on the date of Recapitalization. Also, in
connection with the Recapitalization, Holdings is obligated to make additional
payments to the former majority shareholders, subject to Holdings achieving
certain targets defined in the Recapitalization Agreement. To the extent
cumulative excess free cash flow (as defined in the Recapitalization Agreement)
of the Company for the four-year period ending December 31, 2001, exceeds
$93,000, Holdings is required to make an additional purchase price payment equal
to 20% of such excess, subject to a maximum amount payable of $15,000. Under
separate agreements with certain employees of the Company and the former
majority shareholders, a portion of this additional purchase price payment will
be payable to such individuals. Any payments made to management will result in
compensation charges in the period the amount becomes determinable.

In connection with the Recapitalization, Holdings, BT Capital Partners, Inc.
("BTCP"), Ontario Teachers' Pension Plan Board ("OTPPB"), and Mr. Ecklund
entered into an equity registration rights agreement (the "Equity Registration
Rights Agreement"). The Equity Registration Rights Agreement grants the
Stockholders' party thereto demand and incidental registration rights, with
respect to shares of capital stock held by them, which rights will be
exercisable at any time after an initial public offering of Holdings' Common
Stock. In addition, BTCP may cause Holdings to conduct an initial public
offering at any time following the sixth anniversary of the Recapitalization.
The Equity Registration Rights Agreement contains customary terms and provisions
with respect to the registration rights contained therein.


                                       7
<PAGE>   10
YOUNG AMERICA HOLDINGS, INC.
Notes to Consolidated Financial Statements - (Continued)
(in thousands, except share data - unaudited)
--------------------------------------------------------------------------------

On November 25, 1997, the Company and Mr. Ecklund entered into a Put Option
Agreement (the "Put Agreement"), whereby Mr. Ecklund was granted the right, at
any time after the fifth anniversary of the date of the Put Agreement, to cause
Holdings to redeem at fair market value all or any portion of Mr. Ecklunds'
shares in Holdings (134,400 shares having a value of $2,925 at September 30,
1998). Under the Put Agreement, Holdings was not obligated to redeem Mr.
Ecklund's shares if Holdings was then in default of a payment obligation under
any of Holdings' indebtedness for borrowed money or if such redemption would
result in a default under any such indebtedness. Since the Company could be
required to redeem these shares in the future, and since such redemption would
be outside Holdings' control, these outstanding shares are reported at fair
market value in the accompanying consolidated balance sheet at December 31, 1997
as Redeemable Class A Common Stock. At December 31, 1997, these shares were
valued at the same per share value determined at the date of the
Recapitalization in November 1997. Future changes in per share value would cause
the amount classified as Redeemable Common Stock to increase or decrease, with a
corresponding change in Shareholders' Deficit.

In July 1998, Holdings and Mr. Ecklund terminated the Put Agreement and Holdings
and Mr. Weil terminated the rights of Mr. Weil under his Employee Stock
Agreement to cause Holdings to purchase his shares if a termination event (as
defined in the agreement) shall have occurred with respect to Mr. Weil. Certain
stockholders of Holdings (including Mr. Ecklund and Mr. Weil) have entered into
an amended and restated Equity Registration Rights Agreement that grants Mr.
Ecklund new demand registration rights commencing after the fifth anniversary of
the Recapitalization and grants Mr. Weil new demand registration rights if a
termination event (as defined in the agreement) shall occur with respect to Mr.
Weil. Under the amended and restated Equity Registration Rights Agreement, if
Mr. Ecklund or Weil exercises his demand right with respect to all of his shares
of Common Stock and any underwriter selected by Mr. Ecklund or Mr. Weil, as the
case may be, advises Holdings that such underwriter cannot sell all such shares
in such offering because such offering would not be large enough then Mr.
Ecklund and Mr. Weil, as applicable, shall each have the right to require
Holdings to sell in such offering newly issued shares of common stock
representing up to 30% of its shares in any underwritten offering, as the case
may be. In addition, if any underwriter advises Holdings that an offering of all
of Mr. Ecklund's or Mr. Weil's shares, as the case may be, in addition to any
other shares that are proposed to be registered under such registration
statement (including shares to be offered and sold by Holdings), can not be
consummated given the then current market conditions, then Mr. Ecklund's shares
would be entitled to be sold before any shares sold by Holdings or by any other
shareholder (including Mr. Weil) and Mr. Weil's shares would be entitled to be
sold before any shares sold by Holdings or by any other shareholder (other than
Mr. Ecklund). If Mr. Ecklund or Mr. Weil exercises a demand registration right
at any time, certain shareholders of Holdings would have the right to purchase
Mr. Ecklund's and/or Mr. Weil's shares, as the case may be, for their fair
market value. As amended and restated, neither Mr. Ecklund nor Mr. Weil have any
put rights with respect to shares of Holdings held by them.

Accordingly, at the date the new arrangements became operative, the amount
previously classified as Redeemable Class A Common Stock was reclassified to
Stockholders' Deficit. At December 31, 1997, the aggregate value ascribed to the
Redeemable Class A Common Stock for these shares was $6,325. This amount has
been reclassified to Shareholders' Deficit in the accompanying consolidated
balance sheet at September 30, 1998.

Redeemable Class A Common Stock

Redeemable Class A Common Stock has been valued at the same per share price as
the per share valuation at the date of the Recapitalization in November 1997. In
the opinion of management, there has not been any change in the per share
valuation since such date.

In August and October 1998 two members of the Company's management and
shareholders resigned.


                                       8
<PAGE>   11

YOUNG AMERICA HOLDINGS, INC.
Notes to Consolidated Financial Statements - (Continued)
(in thousands, except share data - unaudited)
--------------------------------------------------------------------------------

Such individuals' stock was redeemed at cost in October 1998.

5.  RECENT ACCOUNTING PRONOUNCEMENTS

    Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," issued in March 1998, is
effective for fiscal year, beginning after December 15, 1998. This statement
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. The Company is currently analyzing the implementation
of SOP 98-1 and does not believe it will have a material impact on the Company's
financial condition or results of operations when the Company adopts it in the
first quarter of 1999.

     During June 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", effective for fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for reporting and display in the
financial statements of total net income and the components of all other
nonowner changes in equity, referred to as comprehensive income. The Company
adopted SFAS No. 130 in the first quarter of 1998; comprehensive income (loss)
is the same as reported net income (loss).

     During June 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures About
Segments of an Enterprise and Related Information," effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires disclosure of business
and geographic segments in the consolidated financial statements of the Company.
The Company adopted SFAS No. 131 in the first quarter of 1998 and the impact on
the disclosures in its financial statements was not significant.


                                       9
<PAGE>   12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

      Revenues. Revenues were $53.6 million in the third quarter of 1998, an
increase of 24.7% over the comparable quarter of 1997. For the nine months ended
September 30, 1998, revenues were $162.4 million, 19.9% greater than the
comparable period of the prior year. The increase in revenues in the third
quarter was a result of an increase in rebate revenues of $14.5 million. The
increase in rebate revenues continues to result from the addition of new clients
that conduct high-dollar value rebate programs funded through the Company. The
increase of rebate revenues was offset in part by a decrease in postage and
freight revenues ("PFR") of $2.4 million and a decrease in servicing revenues of
$1.5 million. The reduction in PFR revenues reflects the absence in 1998 of two
large client premium programs that ran in 1997 which required the shipment of
high volumes of premium items. While that same client continues to place
business with the Company, it did not run a similar program in 1998. Servicing
revenues were also impacted by the absence of that client program. The client
ran a large premium program in 1996 that required the Company's services into
the second quarter of 1997, and then ran a similar program in 1997 which
resulted in large volumes of consumer orders processed by the Company in the
third and fourth quarters of 1997. Although the client did not run a similar
program in 1998, the Company has replaced most of the servicing revenue from
that client with programs from other existing and new clients. Servicing revenue
from all other clients increased 34.2% to $37.3 million in the first three
quarters of 1998 from $27.8 million in the first three quarters of 1997. The
Company has experienced a large increase in the number of calls received in the
Company's call centers. The third quarter 1998 volume of calls in the call
center reached record numbers, exceeding third quarter 1997 by 110.6%. The
increase in call volumes is, in part, a result of the increased complexity of
the client promotions. Many of the calls received are initiated by consumers
before they send in the offer for processing.

      Gross Profit. The Company's gross profit declined to $2.94 million or 5.5%
of revenues for the third quarter of 1998 as compared to $5.9 million, or 13.8%
of revenues for the third quarter of 1997. Gross profits were $10.9 million or
6.7% of revenues in the nine months of 1998 as compared to $22.1 million or
16.3% of revenues for the same period in 1997. The reduction in gross profit as
a percentage of revenues was the result of (i) a change in the mix of revenues
as lower margin rebate revenues increased while the higher margin servicing
revenues and postage & freight revenues have decreased and (ii) a continuation
of increased expenses associated with increased capacities and capabilities in
anticipation of market changes and requirements by existing and potential
clients for technology-based services. The Company has taken measures to reduce
expenses as certain client programs had lower than anticipated levels of
consumer participation and the mix of the expected servicing revenue growth over
the next 12 months will not require the current levels of capacity in some areas
of the Company. In the third quarter of 1998, the Company closed an outbound
processing facility in Belle Plaine, Minnesota and the inbound processing
facility in Albert Lea, Minnesota. As a result of the Company's strategy to
enter into short-term leases, the Company will not incur ongoing or termination
expenses under either lease, as it was able to terminate the Belle Plaine lease
on August 31, 1998 and the Albert Lea lease on September 30, 1998. The
operations of these facilities were consolidated into the Company's other
existing facilities during the third quarter of 1998. In addition, an
organizational restructuring was also completed in the beginning of the third
quarter of 1998 that consolidated the majority of the call center functions from
the Young America, Minnesota call center to the Mankato, Minnesota and Oklahoma
City, Oklahoma call centers. The Company has retained a small amount of call
center capacity in Young America, Minnesota to handle small client jobs and call
volume overflow from the Company's other call center facilities. The Company is
reviewing its existing capacities and future requirements and the costs
associated therewith.

      Operating Income. Operating income for the third quarter 1998 decreased by
$2.3 million to $.1 million from $2.4 million for the same period in 1997. As a
percentage of revenues, operating income was .2% for the quarter ended September
30, 1998 compared with 5.5% for the same period of 1997. Year to date operating
income was $2.6 million or 1.6% of revenues as compared to $10.9 million or 8.1%
of revenues for the first nine months of 1997. The reduction in operating income
was due to the decrease in gross profit only partially offset by a decrease in
selling, general and administrative expenses. On a comparative basis, excluding
$3.7 million of profit sharing and management bonuses expensed in the third
quarter of 1997, selling, general and administrative expenses in the third
quarter of 1998 increased by $.1 million from the same period in 1997. No profit
sharing or management bonuses were accrued in the first three quarters of 1998.
Year to date selling, general and administrative expenses, excluding profit
sharing and management bonuses, increased $.9 million from the same period in
1997. Much of the increase


                                       10
<PAGE>   13
relates to increased sales and administrative support staff to service the
requirements of the new and more complex client programs.

      Other Expense. Other expense of $.2 million year to date consists
primarily of expenses in the second quarter of 1998 attributable to the
investigation of a potential acquisition which is no longer being pursued.

      Interest Expense. The third quarter interest expense of $2.4 million is
principally accrued interest on the Company's Senior Subordinated Notes (the
"Notes") due 2006 with a small cost resulting from fees associated with
non-usage of its bank credit facility. Year-to-date interest of $7.1 million is
principally interest on a senior bridge credit facility ("Bridge Facility")
through the date of issuance of the Notes and on the Notes thereafter.
Amortization of deferred financing costs of $.1 million in the second quarter of
1998 includes amortization of costs associated with the issuance of the Notes.
Year-to-date amortization includes $3.4 million of costs associated with
obtaining the Bridge Facility, which costs were fully amortized upon repayment
of the Bridge Facility with proceeds of the Notes, and $.1 million of costs
associated with the issuance of the Notes. With no interest bearing debt in the
third quarter of 1997, the Company had no interest expense.

       Income Taxes. The Company recorded an income tax benefit of $.8 million
for the second quarter of 1998, and $2.9 million year-to-date. Prior to the
Recapitalization, the Company was an S corporation for income tax purposes.
Accordingly, the Company did not accrue income tax expense on its historical
financial statements. The statement of income for the period ended September 30,
1997 includes proforma net income information reflecting a pro forma provision
for taxes of $.9 million for the third quarter of 1997 and $4.2 million for the
first three quarters of 1997, calculated at an assumed combined federal and
state tax rate of 37% as if the termination of Holdings' status as an S
corporation had occurred as of the beginning of 1997.


LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1998, no amounts were outstanding under the Company's $10
million credit facility (the "New Credit Facility") with Norwest Bank Minnesota,
N.A. ("Norwest"), and the Company had a stockholders' deficit of $64.3 million,
indebtedness of $80.0 million and net working capital of $1.8 million. In August
1998, the Company and YAC filed with the SEC a registration statement relating
to an offer to exchange YAC's 11 5/8% Senior Subordinated Notes due 2006 for an
equal aggregate principal amount of YAC's 11 5/8% Series B Senior Subordinated
Notes due 2006 which are also guaranteed by the Company on a senior subordinated
basis. The registration statement became effective August 6, 1998. The exchange
offer was completed on September 4, 1998. For additional information with
respect to the Notes, see Note 2 of the Unaudited Consolidated Financial
Statements.

The Company historically financed its operations and capital expenditures
principally through the retention of cash flow from operations after payment of
distributions to shareholders primarily to permit them to meet tax obligations
as a result of the Company being an S corporation prior to the Recapitalization.
The Company had also maintained a working capital facility collateralized by
accounts receivable and other assets. This line of credit was not utilized since
mid-1996 and was terminated by the Company in connection with the
Recapitalization. In April 1998 the Company finalized the New Credit Facility.
The Company has never borrowed under the New Credit Facility. The Company also
operates facilities and technology-related equipment under operating leases with
third parties. See Note 3 for a summary of Company commitments under such
operating lease agreements.

For the nine-month period ended September 30, 1998 the Company's operations used
cash of $3.2 million. For the nine-month period ended September 30, 1997, the
Company's operations generated cash flow of $12.6 million. The Company's future
cash flow from operations will continue to be reduced by (i) income taxes that
the Company will be required to pay as a C corporation and (ii) interest that
will be incurred on outstanding indebtedness, including the Notes. There were no
distributions to shareholders in the first three quarters of 1998. Distributions
of $6.8 million were made in the first three quarters of 1997.

The New Credit Facility provides for borrowings of up to $10.0 million, based on
a borrowing base formula equal to 85% of Eligible Receivables less Noncleared
Rebate Items net of cash and cash equivalents (as defined in the New Credit
Facility), and has a final maturity date of March 31, 2001. The


                                       11
<PAGE>   14
New Credit Facility does not have any commitment reductions scheduled before
maturity. Borrowings under the New Credit Facility will accrue interest at an
amount equal to Norwest's publicly announced base rate (prime rate) plus 2.0%.
There is a non-usage fee of .5% per annum of the unused Commitment Amount (as
defined in the New Credit Facility). The New Credit Facility is secured by a
first-priority interest in accounts receivable and related general intangibles
of YAC.

The New Credit Facility was amended on November 16, 1998 (the "Amendment") to
waive compliance with certain financial covenants set forth in the original
agreement (the "Original Agreement") due to the Company's inability to satisfy
such covenants in the third and fourth quarters of 1998. The Original Agreement
had required that YAC maintain a ratio of EBITDA, during the four successive
calendar quarters, to interest expense of 1.5 (the "Interest Coverage Ratio")
and a ratio of current assets to current liabilities of 1.10 (the "Current
Ratio"). Pursuant to the terms of the Amendment, compliance with the Interest
Coverage Ratio has been waived through the quarter ending September 30, 1999 and
compliance with the Current Ratio has been waived through the quarter ending
March 31, 1999. The Amendment also provides that YAC must maintain minimum
cumulative EBITDA targets through the quarter ending September 30, 1999. For the
three month period commencing October 1, 1998 and ending December 31, 1998, YAC
must attain a minimum cumulative EBITDA of $.8 million. For the nine month
period commencing January 1, 1999 and ending September 30, 1999, YAC must attain
a minimum cumulative EBITDA of $9.5 million. Based on current projections, the
Company believes that it will be able to satisfy such targets. The Amendment
limits YAC's ability to make capital expenditures through March 31, 1999.

Capital expenditures for the nine months ended September 30, 1998 and 1997 were
$2.4 million and $2.0 million, respectively. Capital expenditures principally
relate to purchases of leasehold improvements and warehousing and packaging
equipment related to fulfillment services provided by the Company. The Company's
capital expenditure budget for 1998 totals $2.6 million. The Company does not
anticipate exceeding this budget during 1998.

Prior to the Recapitalization, all of the capital stock of the Company was owned
by J.F. Ecklund, its then Chairman and Chief Executive Officer, and certain
trusts for the benefit of members of his family. Pursuant to the terms of the
agreements relating to the Recapitalization, the Company made a payment of
approximately $0.7 million to Mr. Ecklund, such trusts, and certain employees of
the Company in June 1998. In addition, following December 31, 2001, the Company
is obligated to make additional payments, not to exceed $15 million, to Mr.
Ecklund, such trusts and certain employees of the Company, subject to the
Company achieving certain performance targets.

In compliance with certain state laws, the Company obtains performance bonds in
connection with sweepstakes programs it manages on behalf of its clients. The
Company is indemnified by its clients for any obligations on those performance
bonds, and the cost to the Company of obtaining the performance bonds plus a
markup is billed to the clients.

The Company will rely mainly on internally generated funds, and to the extent
necessary, borrowings under the New Credit Facility, to meet its liquidity
needs. The Company also expects to continue to utilize operating leases to
finance its needs for facilities and certain equipment. The Company believes
that the cash flow from operations together with existing cash and cash
equivalents and available borrowings under the New Credit Facility will be
adequate to meet its liquidity requirements, including interest payments with
respect to the Notes, for the next 12 months.

The Company's ability to pay principal and interest on the Senior Subordinated
Notes and to satisfy its other debt obligations will depend upon its future
operating performance, which performance will be affected by prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the control of the Company. The Company's ability to pay principal and
interest on the Senior Subordinated Notes and to satisfy its other debt
obligations will also depend upon the future availability of revolving credit
borrowings under the New Credit Facility or any successor facility. Such
availability is or may depend on, among other things, the Company meeting
certain specified covenants and borrowing base prerequisites. The Company
expects that, based on current and expected levels of operations, its operating
cash flow, together with borrowings under the New Credit Facility, should be
sufficient to meet its operating expenses, to make necessary capital
expenditures and to service its debt requirements as they become due. If the
Company is unable to service its indebtedness, it will be forced to take actions
such as reducing operating expenses, reducing or delaying acquisitions and/or
capital expenditures, selling assets, 


                                       12
<PAGE>   15
restructuring or refinancing its indebtedness (which could include the Senior
Subordinated Notes), or seeking additional equity capital. There is no assurance
that any of these remedies can be effected on satisfactory terms, if at all.

YEAR 2000 ISSUES

Many computer systems used today may be unable to interpret data correctly after
December 31, 1999 because they allow only two digits to indicate the year in a
date. The Company has been assessing this Year 2000 issue as it relates to its
business, including interactions with vendors, clients, and others. The Company
has formed a Year 2000 committee to coordinate and oversee the project. Until
such time as the committee has completed its investigation, the Company does not
know if it will be subject to any significant costs to modify or replace
existing software or hardware to address Year 2000 issues.




                                       13
<PAGE>   16
                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Not applicable.


ITEM 2.  CHANGES IN SECURITIES & USE OF PROCEEDS

         Not applicable.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.


ITEM 5.  OTHER INFORMATION

         Effective December 4, 1998 L. Joseph Kulas, the Company's Vice
President of Finance, Chief Financial Officer, Secretary & Treasurer amicably
resigned.

         Effective October 1, 1998, Keith Adams, the Company's Director of
Information Systems, amicably resigned.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits as follows.

<TABLE>
<CAPTION>
                  Exhibit  
                  Number   Description
                  ------   -----------
<S>                        <C>  
                  10.1     First Amendment to Credit Agreement dated November
                           16, 1998 between Young America Corporation and
                           Norwest Bank Minnesota, National Association.

                  
</TABLE>




                                       14
<PAGE>   17
                                   Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.


                                        Young America Corporation


         Date:  November 16, 1998       By:    /s/ CHARLES D. WEIL   
                                               ---------------------
                                        Name:      Charles D. Weil
                                        Title:     President




                                        Young America Holdings, Inc.


         Date:  November 16, 1998       By:    /s/ CHARLES D. WEIL   
                                               ---------------------
                                        Name:      Charles D. Weil
                                        Title:     President




                                       15