UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q


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


                   For The Quarterly Period Ended May 31, 1998

                           Commission File No. 0-3362



                            SI HANDLING SYSTEMS, INC.
--------------------------------------------------------------------------------
             (Exact Name Of Registrant As Specified In Its Charter)



                 Pennsylvania                                    22-1643428
       (State Or Other Jurisdiction Of                        (I.R.S. Employer
        Incorporation Or Organization)                       Identification No.)



         600 Kuebler Road, Easton, PA                              18040
   (Address Of Principal Executive Offices)                      (Zip Code)



Registrant's Telephone Number, Including Area Code:             610-252-7321



Indicate by checkmark 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
                                                                ---        ---
                                                         
                                                                 


Number of shares of common stock, par value $1.00 per share, outstanding
as of May 31, 1998:  3,726,300.
                     ---------



<PAGE>




                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
------   --------------------
SI Handling Systems, Inc.
Balance Sheets
     (In Thousands, Except Share Data)
<TABLE>
<CAPTION>

                                                              May         March
Assets                                                     31, 1998      1, 1998
------                                                     --------     --------
<S>                                                        <C>           <C>
Current assets:
   Cash and cash equivalents, principally
     time deposits                                         $ 2,766          752
   Short-term investments                                        -            -
                                                            ------       ------
       Total cash, cash equivalents, and
         short-term investments                              2,766          752
                                                            ------       ------

   Receivables:
     Trade                                                   6,149        8,830
     Notes and other receivables                               129           51
                                                            ------       ------
       Total receivables                                     6,278        8,881
                                                            ------       ------

   Costs and estimated earnings in excess
     of billings                                             4,759        6,774

   Inventories:
     Raw materials                                             975          920
     Finished goods and work-in-process                      1,743        1,578
                                                            ------       ------
       Total inventories                                     2,718        2,498
                                                            ------       ------

   Deferred income tax benefits                                435          435
   Prepaid expenses and other current assets                   119          162
                                                            ------       ------
       Total current assets                                 17,075       19,502
                                                            ------       ------

Property, plant and equipment, at cost:
   Land                                                         27           27
   Buildings and improvements                                3,387        3,387
   Machinery and equipment                                   4,216        4,180
                                                            ------       ------
                                                             7,630        7,594
   Less:  accumulated depreciation                           6,231        6,131
                                                            ------       ------
       Net property, plant and equipment                     1,399        1,463
                                                            ------       ------

Deferred income tax benefits                                   175          175
Investment in joint venture                                  1,037        1,027
Other assets, at cost less accumulated
   amortization of $80 in 1999 and $78
   in 1998                                                      50           52
                                                            ------       ------
       Total assets                                        $19,736       22,219
                                                            ======       ======
</TABLE>

                 See accompanying notes to financial statements.

                                      - 2 -

<PAGE>




Item 1.  Financial Statements (Continued)
------   --------------------
SI Handling Systems, Inc.
Balance Sheets
     (In Thousands, Except Share Data)
<TABLE>
<CAPTION>

                                                              May         March
Liabilities and Stockholders' Equity                       31, 1998      1, 1998
------------------------------------                       --------     --------
<S>                                                        <C>           <C> 
Current liabilities:
   Revolving credit loan payable to bank                   $     -        1,000
   Current installments of long-term debt                        8            8
   Accounts payable                                          1,872        4,044
   Customers' deposits and billings in excess
     of costs and estimated earnings                         3,715        2,218
   Accrued salaries, wages, and commissions                    615        1,495
   Income taxes payable                                        380          380
   Accrued royalties payable                                   188          432
   Accrued other liabilities                                 1,239          960
                                                            ------       ------

     Total current liabilities                               8,017       10,537
                                                            ------       ------

Long-term liabilities:
   Long-term debt, excluding current installments:
     Mortgage payable                                           25           26
                                                            ------       ------
       Total long-term debt                                     25           26
   Deferred compensation                                       190          190
                                                            ------       ------
       Total long-term liabilities                             215          216
                                                            ------       ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     20,000,000 shares; issued 3,726,300
     shares in 1999 and 3,711,826 shares
     in 1988                                                 3,726        3,712
   Additional paid-in capital                                2,738        2,645
   Retained earnings                                         5,040        5,109
                                                            ------       ------

       Total stockholders' equity                           11,504       11,466
                                                            ------       ------

       Total liabilities and stockholders' equity          $19,736       22,219
                                                            ======       ======
</TABLE>









                 See accompanying notes to financial statements.

                                      - 3 -

<PAGE>




Item 1.  Financial Statements (Continued)
------   --------------------
SI Handling Systems, Inc.
Statements of Operations
     (In Thousands, Except Share And Per Share Data)
<TABLE>
<CAPTION>

                                                          Three Months Ended
                                                      --------------------------
                                                          May            June
                                                       31, 1998         1, 1997
                                                      ----------       -------- 
<S>                                                  <C>                <C>
Net sales                                            $    8,800           9,542
Cost of sales                                             6,487           7,322
                                                      ---------         -------
Gross profit on sales                                     2,313           2,220
                                                      ---------         -------

Selling, general and
   administrative expenses                                1,668           1,487
Product development
   costs                                                    119              82
Interest expense                                              2               2
Interest income                                             (45)            (67)
Equity in income
   of joint venture                                         (10)           (104)
Other income, net                                           (33)            (93)
                                                      ---------       ---------
                                                          1,701           1,307
                                                      ---------       ---------

Earnings before
   income taxes                                             612             913
Income tax expense                                          235             357
                                                      ---------       ---------
Net earnings                                         $      377             556
                                                      =========       =========

Basic earnings per share*                            $      .10             .15
                                                      =========       =========
Diluted earnings per share*                          $      .10             .15
                                                      =========       =========
Cash dividends per share**                           $      .10             .07
                                                      =========       =========

Average shares outstanding                            3,715,445       3,693,740
Dilutive effect of stock options                         35,853          51,831
Dilutive effect of phantom stock units                    9,499           5,573
                                                      ---------       ---------
Average shares outstanding assuming dilution          3,760,797       3,751,144
                                                      =========       =========

<FN>
*    On October 14, 1997, the Board of Directors declared a three-for-two  stock
     split that was  distributed on November 10, 1997 to  shareholders of record
     on October 27, 1997.  Basic  earnings  per share for all periods  presented
     reflect  the  three-for-  two stock  split  and are  based on the  weighted
     average number of shares  outstanding.  Diluted  earnings per share for all
     periods  presented  reflect the three- for-two stock split and are based on
     the weighted  average number of shares  outstanding  and equivalent  shares
     from dilutive stock options and phantom stock units.
**   Dividends  per share for the three months ended June 1, 1997 were  adjusted
     for the three-for-two stock split that was distributed on November 10, 1997
     to shareholders of record on October 27, 1997.
</FN>
</TABLE>

                 See accompanying notes to financial statements.

                                      - 4 -

<PAGE>




Item 1.  Financial Statements (Continued)
------   --------------------
SI Handling Systems, Inc.
Statements of Cash Flows
     (In Thousands, Except Share Data)
<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                        ------------------------ 
                                                           May            June
                                                        31, 1998        1, 1997
                                                        --------        --------  

<S>                                                     <S>             <C>     
Cash flows from operating activities:
   Net earnings                                         $    377            556
   Adjustments to reconcile net earnings
     to net cash provided (used)
     by operating activities:
       Depreciation of plant and equipment                   100             87
       Amortization of intangibles                             2              3
       Equity in income of joint venture                     (10)          (104)
       Change in operating assets and liabilities:
         Receivables                                       2,603            397
         Costs and estimated earnings in
           excess of billings                              2,015         (3,413)
         Inventories                                        (220)          (111)
         Prepaid expenses and other
           current assets                                     43            (35)
         Other noncurrent assets                               -             (4)
         Accounts payable                                 (2,172)           359
         Customers' deposits and billings
           in excess of costs and estimated
           earnings                                        1,497           (236)
         Accrued salaries, wages, and
           commissions                                      (880)          (129)
         Income taxes payable                                  -             96
         Accrued royalties payable                          (244)          (289)
         Accrued other liabilities                           (93)          (294)
         Deferred compensation                                 -              8
                                                          ------         ------
   Net cash provided (used) by
     operating activities                                  3,018         (3,109)
                                                          ------         ------

Cash flows from investing activities:
   Sales of short-term investments                             -          3,741
   Purchase of short-term investments                          -         (1,472)
   Additions to property, plant and equipment                (36)           (75)
                                                          ------         ------
   Net cash provided (used) by
      investing activities                                   (36)         2,194
                                                          ------         ------
</TABLE>


                 See accompanying notes to financial statements.

                                      - 5 -

<PAGE>




Item 1.    Financial Statements (Continued)
SI Handling Systems, Inc.
Statements of Cash Flows (Continued)
     (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                        ------------------------
                                                          May             June
                                                        31, 1998        1, 1997
                                                        --------        -------- 
<S>                                                      <C>             <C>                             
Cash flows from financing activities:
   Sale of common shares in connection with
     employee incentive stock option plan                     33             42
   Repayment of long-term debt                                (1)            (4)
   Dividends paid on common stock                              -           (247)
   Repayment of revolving credit
     loan payable to bank                                 (1,000)             -
                                                          ------         ------
     Net cash used by financing activities                  (968)          (209)
                                                          ------         ------

   Increase (decrease) in cash and
     cash equivalents                                      2,014         (1,124)
   Cash and cash equivalents, beginning
     of period                                               752          1,852
                                                          ------         ------
   Cash and cash equivalents, end of period              $ 2,766            728
                                                          ======         ======

   Supplemental disclosures of cash flow
   information:
     Cash paid during the period for:
       Interest                                          $     3              1
                                                          ======         ======
       Income taxes                                      $   235            261
                                                          ======         ======

   Supplemental disclosures of noncash
   financing activities:
     Cash dividends declared in May but
       payable in June                                   $   372              -
                                                          ======         ======

     Issuance of 14,886 common shares in
       exchange for 5,978 common shares
       delivered to the Company by officers
       in connection with the employee
       incentive stock option plan                       $    74              -
                                                          ======         ======

     Issuance of 8,475 common shares in
       exchange for 3,785 common shares
       delivered to the Company by officers
       in connection with the employee
       incentive stock option plan                       $     -             43
                                                          ======         ======
</TABLE>

                 See accompanying notes to financial statements.

                                      - 6 -

<PAGE>




Item 1.  Financial Statements (Continued)
------   --------------------
SI Handling Systems, Inc.
Notes To Financial Statements
Three Months Ended May 31, 1998 and June 1, 1997

(1)  The  information  contained in this 10-Q report is unaudited and is subject
     to year-end  adjustments and audit.  However, in the opinion of management,
     the interim  financial  statements  furnished  reflect all  adjustments and
     accruals which are necessary to a fair statement of results for the interim
     periods presented.

     SI  Handling   Systems,   Inc.   ("SI"  or  the  "Company")  and  Automated
Prescription  Systems,  Inc.  ("APS") are  co-venturers in a joint venture named
SI/BAKER, INC. ("SI/BAKER" or the "joint venture"). The joint venture draws upon
the automated materials handling systems experience of SI and the automated pill
counting and dispensing  products of APS to provide automated  pharmacy systems.
Each member company contributed $100,000 in capital to fund the joint venture.
     The  joint  venture  designs  and  installs  computer   controlled,   fully
automated,  integrated systems for managed care pharmacy  operations.  The joint
venture's systems are viewed as labor saving devices which address the issues of
improved productivity and cost reduction.  Systems can be expanded as customers'
operations  grow and they may be integrated with a wide variety of components to
meet specific customer needs.
     Schedule  A  contains  the  SI/BAKER,   INC.  financial   statements.   The
information  contained in the SI/BAKER,  INC. financial  statements is unaudited
and is subject to year-end  adjustments  and audit.  However,  in the opinion of
management,  the interim financial  statements furnished reflect all adjustments
and accruals  which are necessary to a fair statement of results for the interim
periods presented.


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

Liquidity And Capital Resources
-------------------------------
     The Company's cash and cash equivalents  increased to $2,766,000 during the
first three months of fiscal 1999 from  $752,000 at the end of fiscal 1998.  The
increase resulted from cash provided by operating activities totaling $3,018,000
and  proceeds of $33,000 from the sale of common  stock in  connection  with the
employee incentive stock option plan.  Partially offsetting the increase in cash
and cash equivalents from these sources were the repayments of long-term debt of
$1,000  and the  revolving  credit  loan  payable  to bank  of  $1,000,000,  and
purchases of capital  equipment of $36,000.  Funds used by operating  activities
during the first three months of fiscal 1998 were $3,109,000.

                                     - 7 -

<PAGE>




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

Liquidity and Capital Resources (Continued)
-------------------------------
     The Company has a $5,000,000  committed  revolving credit facility which is
secured by a lien  position on accounts  receivable,  land,  and  buildings  and
contains  various  restrictive  covenants  relating to additional  indebtedness,
asset acquisitions or dispositions, and maintenance of certain financial ratios.
The Company was in compliance  with all covenants  during the first three months
of fiscal  1999.  Currently,  the  committed  revolving  credit  facility has an
expiration  date of August 31, 2000.  The Company  repaid its  outstanding  debt
under the committed  revolving credit facility on March 2,1998,  and the Company
did not have any  additional  borrowings  under the committed  revolving  credit
facility during the first three months of fiscal 1999.
     On March 4, 1996, SI/BAKER established a $2,500,000 Line of Credit Facility
(the  "Facility")  with its  principal  bank (the  "Bank").  Under  terms of the
Facility,  SI/BAKER's parent companies,  SI Handling Systems, Inc. and Automated
Prescriptions  Systems,  Inc., have each provided a limited guarantee and surety
in an amount not to exceed $1,000,000 for a combined  guarantee of $2,000,000 to
the Bank for the payment and  performance  of the related  note,  including  any
further renewals or modifications of the Facility.  During fiscal 1998, the Bank
increased the borrowing  availability  to $3,000,000 and extended the expiration
date of the Facility.  As of May 31, 1998,  SI/BAKER's  related debt outstanding
under the  Facility  was  $900,000.  SI/BAKER  intends to  satisfy  the note and
thereby  release  the parent  company  guarantees  during the second  quarter of
fiscal 1999. The Facility has an expiration date of August 31, 1998.
     On October 14,  1997,  the Board of  Directors  of the  Company  declared a
three-for-two  stock  split that was  distributed  on  November  10, 1997 to the
shareholders  of record on October 27, 1997.  The purpose of the stock split was
to  increase  the  number  of  outstanding  shares  and  broaden  ownership  and
availability of the Company's common stock.
     The Company  anticipates  that its  financial  resources  consisting of its
current  assets,  anticipated  cash flow,  and the  available  revolving  credit
facility will adequately  finance its operating  requirements in the foreseeable
future.
     The  Company  plans to  consider  expansion  opportunities  as they  arise,
although  ongoing  operating  results  of  the  Company,  the  economics  of the
expansion, and the circumstances justifying the expansion will be key factors in
determining  the  amount  of  resources  the  Company  will  devote  to  further
expansion.  At this  time,  the  Company  does  not have  any  material  capital
commitments.



                                      - 8 -

<PAGE>




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

Results Of Operations
---------------------

Three Months Ended May 31, 1998 versus Three Months Ended June 1,
-----------------------------------------------------------------
1997
----
     The  Company's  net earnings for the first three months of fiscal 1999 were
$377,000  compared to net  earnings of  $556,000  for the first three  months of
fiscal 1998.
     Backlog at the end of the first three months of fiscal 1999 was $25,976,000
with   approximately   81%  of  the  backlog   pertaining  to  Switch-Cart   and
Dispen-SI-matic  contracts.  During the first three months of fiscal  1999,  the
Company received orders totaling  approximately  $12,700,000.  The largest order
received  during  the first  quarter  of  fiscal  1999,  totaling  approximately
$4,500,000,  engages  the  Company to develop an  integrated  order  fulfillment
system to handle  foreign  currency  orders for  international  travelers.  This
project is anticipated to be completed during the second half of fiscal 1999.
     Net sales of $8,800,000 for the first three months of fiscal 1999 decreased
7.8%  compared to net sales of  $9,542,000  for the first three months of fiscal
1998.  The sales decrease in the first three months of fiscal 1999 is attributed
primarily  to a smaller  backlog of orders  entering  fiscal  1999  ($22,092,000
versus a $31,029,000 backlog beginning fiscal 1998). During the first quarter of
fiscal  1999,  Order  Selection  sales  of  approximately   $2,400,000  declined
approximately  $2,900,000 from the prior year comparable period due to delays in
earlier  periods by prospective  customers in signing  contracts often caused by
expanding project scope or contractual  negotiations.  Partially  offsetting the
decline in Order  Selection sales during the first quarter of fiscal 1999 was an
increase  in  sales of  approximately  $2,200,000  across  the  Company's  other
products  lines,  with the  majority  of the  increase  relating to sales of the
Company's Switch-Cart, Cartrac, and Sortation product lines.
     Gross profit as a percentage  of sales was 26.3% for the first three months
of fiscal 1999 compared to 23.3% for the first three months of fiscal 1998.  The
attainment of the higher gross profit  percentage  during the first three months
of fiscal  1999 was  primarily  attributable  to the  favorable  performance  on
several  contracts,  principally  for the Company's  higher  margin  proprietary
products, initiated in the prior fiscal year that were nearing completion during
the first three months of fiscal 1999. The lower gross profit  percentage during
the first three  months of fiscal 1998 was  primarily  attributable  to a higher
content of ancillary  products  with lower margins than  contracts  containing a
higher degree of higher margin proprietary products.
     Selling,  general, and administrative expenses of $1,668,000 were higher by
$181,000 in the first three months of fiscal 1999 than in the comparable  fiscal
1998 period. The increase in selling, general, and administrative

                                      - 9 -

<PAGE>




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

Results Of Operations
---------------------

Three Months Ended May 31, 1998 versus Three Months Ended June 1,
-----------------------------------------------------------------
1997 (Continued)
----
expenses is primarily  attributable to costs  associated with product  promotion
and sales efforts  aimed at expanding  the  Company's  customer base of business
consistent  with the Company's  strategic plan to grow the business as a systems
integrator.
      Product  development costs of $119,000 were higher by $37,000 in the first
three  months  of  fiscal  1999  than  in the  comparable  fiscal  1998  period.
Development  programs  in  the  first  three  months  of  fiscal  1999  included
enhancements to the Company's  product controls and features and improvements to
the Sortation and Order Selection product lines, with particular  emphasis aimed
at the controls platform for Dispen-SI-matic  Systems.  Development  programs in
the first three months of fiscal 1998 included  efforts directed at improvements
across various product lines,  and efforts  associated with the  introduction of
the Henke light-duty overhead transportation product.
     Interest  income of $45,000 was lower by $22,000 in the first three  months
of fiscal  1999 than in the  comparable  fiscal  1998  period.  The  decrease in
interest income is primarily  attributable to the lower level of funds available
for short-term investments during the first three months of fiscal 1999.
     Equity in income of joint venture  represented the Company's  proportionate
share of its  investment  in  SI/BAKER  which is being  accounted  for under the
equity method. The unfavorable variance of $94,000 for the first three months of
fiscal  1999 in the  equity in  income  of joint  venture  was  attributable  to
SI/BAKER's  decline in revenues to  approximately  $2,100,000 as compared to the
comparable fiscal 1998 period of approximately $4,700,000. The sales decrease in
fiscal 1999 was primarily  attributable  to a smaller backlog of orders entering
fiscal 1999 versus a larger  backlog of orders at the  beginning of fiscal 1998.
Fiscal 1998 revenues were favorably impacted by performance on contracts wherein
customer  specifications required systems to be commercially operable by the end
of fiscal 1998.  Partially  offsetting the unfavorable  variance were SI/BAKER's
decreases  of (1)  $105,000  in revenue  based  royalty  costs due to the parent
companies and (2) $57,000 in selling,  general, and administrative  expenses for
those expenses based on revenue and profit performance.
     The  unfavorable  variance of $60,000 in other  income,  net, is  primarily
attributable  to a decrease of $53,000 in royalty income related to the SI/BAKER
joint venture.
     The Company  incurred income tax expense of $235,000 during the first three
months of fiscal  1999  compared  to  income  tax  expense  of  $357,000  in the
comparable  fiscal 1998  period.  Income tax expense was  generally  recorded at
statutory federal and state tax rates expected to apply for each fiscal year.

                                     - 10 -

<PAGE>




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

Year 2000
---------
     The  Year  2000  issue  relates  to  the  inability  of  computer  systems,
microprocessors,  and other electronic  devices to deal appropriately with dates
on or after January 1, 2000.  The Company has assembled a team of internal staff
to oversee the matter and is underway in  completing  its Year 2000  assessment.
The Company has upgraded its internal  business  system to address the Year 2000
issue and has initiated discussions with its suppliers,  financial institutions,
and other  organizations to ensure that those parties have appropriate  plans to
remediate Year 2000 issues where their systems impact the Company's  operations.
The scheduled completion date for the Company's efforts to address the Year 2000
issue is July 1999.  Management presently believes that the Year 2000 issue will
not have a material  impact on the Company's  earnings or its ability to conduct
its  business.  However,  there can be no  assurance  that the  systems of other
organizations  that impact the Company's  operations also will be made compliant
or that any such  failure in  compliance  by another  company  would not have an
adverse effect on the Company's operations.

Cautionary Statement
--------------------
     Certain  statements  contained  herein are not based on historical fact and
are  "forward-looking  statements"  within the meaning of the Private Securities
Litigation  Reform Act of 1995.  Among other  things,  they regard the Company's
earnings, liquidity, financial condition, and certain operational matters. Words
or  phrases  denoting  the  anticipated   results  of  future  events,  such  as
"anticipate,"  "believe,"  "estimate,"  "expect,"  "may,"  "will  likely,"  "are
expected to," "will  continue,"  "project," and similar  expressions that denote
uncertainty,  are  intended to identify  such  forward-looking  statements.  The
Company's actual results,  performance,  or achievements could differ materially
from the results expressed in, or implied by, such "forward-looking statements":
(1) as a result of risks and  uncertainties  identified in connection with those
forward-looking  statements,  including those factors  identified herein, and in
the Company's  other  publicly  filed  reports;  (2) as a result of factors over
which the Company has no control, including the strength of domestic and foreign
economies,  sales growth competition,  and certain cost increases; or (3) if the
factors  on which the  Company's  conclusions  are based do not  conform  to the
Company's expectations.

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

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

     (a) Exhibit 27 - Financial Data Schedule.

     (b) No  reports on Form 8-K were filed  during  the  quarter  ended May 31,
         1998.

                                     - 11 -

<PAGE>




SI Handling Systems, Inc.





                                    SIGNATURE

     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.

                                             SI HANDLING SYSTEMS, INC.

                                             /S/ Barry V. Mack

                                             Barry V. Mack
                                             Vice President - Finance
                                               (Principal Financial Officer)

Dated:   July 14, 1998
         -------------
          


                                     - 12 -

<PAGE>




                                                                      Schedule A











                                 SI/BAKER, INC.

                              Financial Statements
                                  May 31, 1998

















                                     - 13 -

<PAGE>




SI/BAKER, INC.
Balance Sheets
May 31, 1998 and February 28, 1998
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                            May        February
                                                          31, 1998     28, 1998
                                                          --------     --------
<S>                                                       <C>            <C>
Assets
------
Current assets:
   Cash and cash equivalents, principally
     time deposits                                        $   226          388

Receivables:
   Trade                                                    1,545        2,881
   Other receivables                                            -           51
                                                            -----        -----
     Total receivables                                      1,545        2,932
                                                            -----        -----

   Costs and estimated earnings in
     excess of billings                                     3,929        3,263
   Inventories                                                  -          118
   Deferred income tax benefits                               309          309
   Prepaid expenses and other current
     assets                                                   181           18
                                                            -----        -----

       Total current assets                                 6,190        7,028
                                                            -----        -----

   Machinery and equipment, at cost                           150          125
     Less:  accumulated depreciation                           72           64
                                                            -----        -----
   Net machinery and equipment                                 78           61
                                                            -----        -----

   Equipment leased to customer                               487          487
   Less:  accumulated depreciation                            279          249
                                                            -----        -----
     Net equipment leased to customer                         208          238
                                                            -----        -----

   Deferred income tax benefits                                35           35
                                                            -----        -----

   Other assets                                                86           57
                                                            -----        -----

       Total assets                                       $ 6,597        7,419
                                                            =====        =====
</TABLE>



                                     - 14 -

<PAGE>




SI/BAKER, INC.
Balance Sheets
May 31, 1998 and February 28, 1998
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                            May        February
                                                          31, 1998     28, 1998
                                                          --------     --------
<S>                                                       <C>            <C>
Liabilities and Stockholders' Equity
------------------------------------
 Current liabilities:
   Note payable to bank                                   $   900          900
   Accounts payable:
     Trade                                                    806          930
     Affiliated companies                                     248           97
                                                            -----        -----
       Total accounts payable                               1,054        1,027
                                                            -----        -----

   Customers' deposits and billings in
     excess of costs and estimated
     earnings                                               1,259        1,740
   Accrued salaries, wages, and
     commissions                                               52          413
   Income taxes payable                                         -           44
   Accrued royalties payable                                  289          288
   Accrued product warranties                                 823          799
   Accrued other liabilities                                   35           43
                                                            -----        -----
       Total current liabilities                            4,412        5,254
                                                            -----        -----

Deferred compensation                                         111          111
                                                            -----        -----

Stockholders' equity:
   Common stock, $1 par value; authorized
     1,000 shares; issued 200 shares                            -            -
   Additional paid-in capital                                 200          200
   Retained earnings                                        1,874        1,854
                                                            -----        -----
       Total stockholders' equity                           2,074        2,054
                                                            -----        -----

       Total liabilities and stockholders'
         equity                                           $ 6,597        7,419
                                                            =====        =====
</TABLE>



                                     - 15 -

<PAGE>




SI/BAKER, INC.
Statements of Operations
Three Months Ended May 31, 1998 and 1997
  (In Thousands)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                        ------------------------
                                                          May             May
                                                        31, 1998        31, 1997
                                                        --------        --------
<S>                                                     <C>               <C>
Net sales                                               $ 2,074           4,704
Cost of sales                                             1,743           3,896
                                                          -----           -----

Gross profit on sales                                       331             808
                                                          -----           -----

Selling, general and
   administrative
   expenses                                                 204             261
Product development
   costs                                                      -               3
Royalty expense
   to parent companies                                       83             188
Interest income                                              (2)             (7)
Interest expense                                             14              33
Other income, net                                            (2)            (20)
                                                          -----           -----
                                                            297             458
                                                          -----           -----

Earnings before
   income taxes                                              34             350
Income tax expense                                           14             142
                                                          -----           -----

Net earnings                                            $    20             208
                                                          =====           =====
</TABLE>



                                     - 16 -

<PAGE>




SI/BAKER, INC.
Statements of Cash Flows
Three Months Ended May 31, 1998 and 1997
  (In Thousands)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                        ------------------------
                                                          May             May
                                                        31, 1998        31, 1997
                                                        --------        --------
<S>                                                     <C>              <C>

Cash flow from operating activities:
   Net earnings                                         $    20             208
   Adjustments to reconcile net earnings
     to net cash used by
     operating activities:
       Depreciation of machinery and
         equipment and leased equipment                      38              35
       Changes in operating assets and
         liabilities:
           Receivables                                    1,387          (1,749)
           Costs and estimated earnings
              in excess of billings                        (666)         (1,640)
           Inventories                                      118              (8)
           Prepaid expenses and other
              current assets                               (163)             (3)
           Other assets                                     (29)              -
           Accounts payable                                  27             373
           Customers' deposits and
              billings in excess of costs
              and estimated earnings                       (481)          2,380
           Accrued salaries, wages, and
              commissions                                  (361)            (54)
           Income taxes payable                             (44)            107
           Accrued royalties payable                          1              17
           Accrued product warranties                        24              90
           Accrued other liabilities                         (8)            186
                                                          -----           -----
Net cash used
   by operating activities                                 (137)            (58)
                                                          -----           -----

Cash flows used in investing activities:
   Additions to machinery and equipment                     (25)             (8)
                                                          -----           -----
     Net cash used by investing activities                  (25)             (8)
                                                          -----           -----
</TABLE>


                                     - 17 -

<PAGE>




SI/BAKER, INC.
Statements of Cash Flows (Continued)
Three Months Ended May 31, 1998 and 1997
  (In Thousands)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                        ------------------------
                                                          May             May
                                                        31, 1998        31, 1997
                                                        --------        --------
<S>                                                     <C>               <C>
Decrease in cash and cash equivalents                      (162)            (66)
Cash and cash equivalents,
   beginning of period                                      388             484
                                                          -----           -----
Cash and cash equivalents, end of period                $   226             418
                                                          =====           =====

Supplemental disclosure of cash flow information:
     Cash paid during the period for:
       Income taxes                                     $   207              37
                                                          =====           =====
       Interest                                         $    20              30
                                                          =====           =====
</TABLE>
















                                     - 18 -

<PAGE>




                            SI HANDLING SYSTEMS, INC.

                                    FORM 10-Q

                                  EXHIBIT INDEX
                                  -------------



Exhibit No.
----------

27         Financial Data Schedule.


























                                     - 19 -