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 30, 1999


                           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 30, 1999:  3,708,412.
               ---------



<PAGE>




                         PART I - FINANCIAL INFORMATION
                         ------------------------------


Item 1.   Financial Statements
-------   --------------------

SI Handling Systems, Inc.
Balance Sheets (Unaudited)
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                         May           February
                                                       30, 1999        28, 1999
                                                      ----------      ----------

<S>                                                   <C>               <C>
Assets
------

Current assets:
   Cash and cash equivalents, principally
     time deposits                                    $  2,118           1,829
                                                        ------          ------

   Receivables:
     Trade                                               7,382           7,603
     Notes and other receivables                           141              51
                                                        ------          ------
       Total receivables                                 7,523           7,654
                                                        ------          ------

   Costs and estimated earnings in excess
     of billings                                         3,709           7,709

   Inventories:
     Raw materials                                       1,129           1,002
     Finished goods and work-in-process                  2,270           1,613
                                                        ------          ------
       Total inventories                                 3,399           2,615
                                                        ------          ------

   Deferred income tax benefits                            613             600
   Prepaid expenses and other current assets               262             199
                                                        ------          ------
       Total current assets                             17,624          20,606
                                                        ------          ------

Property, plant and equipment, at cost:
   Land                                                     27              27
   Buildings and improvements                            3,485           3,485
   Machinery and equipment                               4,714           4,544
                                                        ------          ------
                                                         8,226           8,056
   Less:  accumulated depreciation                       6,658           6,426
                                                        ------          ------
       Net property, plant and equipment                 1,568           1,630
                                                        ------          ------

Deferred income tax benefits                               276             175
Investment in joint venture                              1,069           1,041
Other assets, at cost less accumulated
   amortization of $101 in 2000 and $90
   in 1999                                                 572             128
                                                        ------          ------
       Total assets                                   $ 21,109          23,580
                                                        ======          ======
</TABLE>



                 See accompanying notes to financial statements.


                                      - 2 -

<PAGE>




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

<TABLE>
<CAPTION>
                                                         May           February
                                                       30, 1999        28, 1999
                                                      ----------      ----------

<S>                                                   <C>               <C>
Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
   Current installments of long-term debt             $      9               9
   Accounts payable                                      3,191           4,079
   Customers' deposits and billings in excess
     of costs and estimated earnings                     3,152           4,173
   Accrued salaries, wages, and commissions                532             761
   Income taxes payable                                    120             410
   Accrued royalties payable                               207             357
   Accrued other liabilities                             1,537           1,416
                                                        ------          ------

     Total current liabilities                           8,748          11,205
                                                        ------          ------

Long-term liabilities:
   Long-term debt, excluding current installments:
     Mortgage payable                                       14              16
                                                        ------          ------
     Total long-term debt                                   14              16
   Deferred compensation                                   451             212
                                                        ------          ------
       Total long-term liabilities                         465             228
                                                        ------          ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     20,000,000 shares; issued 3,708,412
     shares in 2000 and 3,705,048 shares
     in 1999                                             3,708           3,705
   Additional paid-in capital                            2,780           2,767
   Retained earnings                                     5,408           5,675
                                                        ------          ------

       Total stockholders' equity                       11,896          12,147
                                                        ------          ------

       Total liabilities and stockholders' equity     $ 21,109          23,580
                                                        ======          ======
</TABLE>











                 See accompanying notes to financial statements.

                                      - 3 -

<PAGE>




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

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                     ---------------------------
                                                         May             May
                                                      30, 1999        31, 1998
                                                     -----------      ----------

<S>                                                  <C>              <C>
Net sales                                            $    9,952           8,800
Cost of sales                                             8,115           6,487
                                                      ---------       ---------
Gross profit on sales                                     1,837           2,313
                                                      ---------       ---------

Selling, general and
   administrative expenses                                1,614           1,668
Product development costs                                   153             119
Interest expense                                              2               2
Interest income                                             (29)            (45)
Equity in income
   of joint venture                                         (28)            (10)
Other income, net                                           (43)            (33)
                                                      ---------       ---------
                                                          1,669           1,701
                                                      ---------       ---------
Earnings before
   income taxes                                             168             612
Income tax expense                                           64             235
                                                      ---------       ---------
Net earnings                                         $      104             377
                                                      =========       =========

Basic earnings
   per share                                         $      .03             .10
                                                      =========       =========
Diluted earnings
   per share                                         $      .03             .10
                                                      =========       =========
Cash dividends
   per share                                         $      .10             .10
                                                      =========       =========

Average shares
   outstanding                                        3,706,636       3,715,445
Dilutive effect of
   stock options                                         16,161          35,853
Dilutive effect of
   phantom stock units                                   14,135           9,499
                                                      ---------       ---------
Average shares
   outstanding
   assuming dilution                                  3,736,932       3,760,797
                                                      =========       =========
</TABLE>








                 See accompanying notes to financial statements.

                                      - 4 -

<PAGE>




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

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                       ------------------------
                                                           May            May
                                                        30, 1999       31, 1998
                                                       ----------     ---------

<S>                                                     <C>             <C>
Cash flows from operating activities:
   Net earnings                                         $   104            377
   Adjustments to reconcile net earnings
     to net cash provided
     by operating activities:
       Depreciation of plant and equipment                   93            100
       Amortization of intangibles                           11              2
       Gain on disposition of equipment                      (2)             -
       Equity in income of joint venture                    (28)           (10)
       Change in operating assets and liabilities,
         net of effects of the acquisition of
         Modular Automation Corp.:
           Receivables                                      177          2,603
           Costs and estimated earnings in
              excess of billings                          4,349          2,015
           Inventories                                     (615)          (220)
           Prepaid expenses and other
              current assets                                (63)            43
           Other noncurrent assets                           39              -
           Accounts payable                                (888)        (2,172)
           Customers' deposits and billings
              in excess of costs and estimated
              earnings                                   (1,021)         1,497
           Accrued salaries, wages, and
              commissions                                  (229)          (880)
           Income taxes payable                            (290)             -
           Accrued royalties payable                       (150)          (244)
           Accrued other liabilities                       (250)           (93)
           Deferred compensation                            (15)             -
                                                          -----          -----
   Net cash provided by
     operating activities                                 1,222          3,018
                                                          -----          -----

Cash flows from investing activities:
   Proceeds from the disposition of
     equipment                                                2              -
   Acquisition of Modular Automation Corp.,
     net of cash acquired                                  (919)             -
   Additions to property, plant and equipment               (30)           (36)
                                                          -----          -----
   Net cash used by
      investing activities                                 (947)           (36)
                                                          -----          -----
</TABLE>


                 See accompanying notes to financial statements.

                                      - 5 -

<PAGE>




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

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                       ------------------------
                                                           May            May
                                                        30, 1999       31, 1998
                                                       ----------     ---------

<S>                                                     <C>             <C>
Cash flows from financing activities:
   Sale of common shares in connection
     with employee incentive stock
     option plan                                             16             33
   Repayment of long-term debt                               (2)            (1)
   Repayment of revolving credit
     loan payable to bank                                     -         (1,000)
                                                          -----          -----
     Net cash provided (used) by
       financing activities                                  14           (968)
                                                          -----          -----

   Increase in cash and
     cash equivalents                                       289          2,014
   Cash and cash equivalents, beginning
     of period                                            1,829            752
                                                          -----          -----
   Cash and cash equivalents, end of period             $ 2,118          2,766
                                                          =====          =====

   Supplemental disclosures of cash flow
   information:
     Cash paid during the period for:
       Interest                                         $     1              3
                                                          =====          =====
       Income taxes                                     $   354            235
                                                          =====          =====

   Supplemental disclosures of
   noncash financing activities:
     Cash dividends declared in May but
       payable in June                                  $   371            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                      $     -             84
                                                          =====          =====
</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 30, 1999 and May 31, 1998

(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.   Results  for  interim  periods  are  not  necessarily
     indicative of results  expected for the fiscal year. Refer to the Company's
     10-K for the year  ended  February  28,  1999 for more  complete  financial
     information.

(2)  SI Handling  Systems,  Inc. ("SI" or the "Company") and McKesson  Automated
     Prescription  Systems,  Inc. ("McKesson APS"),  formerly known as Automated
     Prescription  Systems,  Inc.,  are  co-venturers  in a joint  venture named
     SI/BAKER,  INC. ("SI/BAKER" or the "joint venture"). On September 29, 1998,
     McKesson  Corporation  [NYSE:MCK],  a healthcare supply management company,
     announced  the  completion  of its  acquisition  of Automated  Prescription
     Systems,  Inc. Automated  Prescription  Systems,  Inc. was renamed McKesson
     Automated  Prescription Systems, Inc. The SI/BAKER joint venture draws upon
     the automated materials handling systems experience of SI and the automated
     pill counting and dispensing  products of McKesson 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 $2,118,000 during the
first three months of fiscal 2000 from $1,829,000 at the end of fiscal 1999. The
increase resulted from cash provided by operating activities totaling $1,222,000
and  proceeds of $16,000 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 repayment of long-term debt of
$2,000,  the purchases of capital  equipment of $30,000,  and the acquisition of
Modular  Automation Corp., net of cash acquired for $919,000.  Funds provided by
operating  activities  during  the  first  three  months  of  fiscal  1999  were
$3,018,000.

                                      - 7 -

<PAGE>




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

Liquidity and Capital Resources (Continued)
-------------------------------
     On April 13,  1999,  the Company  acquired all of the  outstanding  capital
stock of Modular  Automation Corp.  ("MAC") of Greene,  New York for $1,957,000.
The purchase price of the acquisition was allocated to the assets acquired based
on fair value with the remainder representing  goodwill.  Since its formation in
1981, MAC was a respected  supplier of Automated Guided Vehicle ("AGV") Systems.
The acquisition of the AGV technology  complements and expands the Company's AGV
product offerings.  The acquired AGV products and personnel have been integrated
into the Company's existing Easton, Pennsylvania facility.
     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  2000.  Currently,  the  committed  revolving  credit  facility has an
expiration  date of August 31,  2000.  The Company  did not have any  borrowings
under the committed  revolving  credit facility during the first three months of
fiscal 2000.
     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 and McKesson APS, 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.  On March 18, 1999,
SI/BAKER repaid its outstanding  debt under the Facility of $500,000.  As of May
31, 1999 SI/BAKER did not have any borrowings  under the Facility.  The Facility
has an expiration date of August 31, 1999.
     On October 14,  1998,  the Board of  Directors  of the  Company  authorized
management to purchase up to $400,000 of the Company's common stock through open
market  transactions  or  negotiated   transactions  at  prices  not  to  exceed
prevailing  market  prices.  During fiscal 1999,  the Company spent  $399,000 on
purchases of its common stock  through open market  transactions  as part of the
stock purchase program.
     The Company believes that its financial resources consisting of its current
assets,  anticipated cash flow, and the available revolving credit facility will
adequately finance its operating requirements for 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 (Continued)
          ---------------------

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

Three Months Ended May 30, 1999 Versus Three Months Ended May 31, 1998
----------------------------------------------------------------------
     The  Company's  net earnings for the first three months of fiscal 2000 were
$104,000  compared to net  earnings of  $377,000  for the first three  months of
fiscal 1999.
     Backlog  at  the  end  of  the  first  three  months  of  fiscal  2000  was
$28,254,000.  During the first three months of fiscal 2000, the Company received
orders totaling approximately  $18,300,000.  Two orders,  totaling approximately
$10,200,000,  engage the  Company  to  modernize  and  expand  two  distribution
facilities  for  a  major  government  agency.  These  contracts,  won  under  a
competitive bidding process, are scheduled to be completed by the second half of
fiscal 2001.
     Net sales of $9,952,000 for the first three months of fiscal 2000 increased
13.1%  compared to net sales of $8,800,000  for the first three months of fiscal
1999.  The  largest  increases  in sales  occurred  in the Order  Selection  and
Switch-Cart  product lines.  During the first three months of fiscal 2000, Order
Selection sales of approximately  $4,825,000 rose approximately  $2,450,000 when
compared to the first quarter of fiscal 1999 due primarily to progress made on a
systems  integration  contract aimed at expanding the distribution  process at a
major  health and beauty aids  company.  During the first three months of fiscal
2000, Switch-Cart sales of approximately  $3,330,000 rose approximately $425,000
when compared to the first quarter of fiscal 1999 due primarily to progress made
on a contract with a major government agency.  Partially offsetting the increase
in Order Selection and Switch-Cart sales during the first three months of fiscal
2000 was a decrease in sales of  approximately  $1,725,000  across the Company's
other products lines, with the majority of the decrease relating to sales of the
Company's Cartrac, Sortation, and Automated Guided Vehicle product lines.
     Gross profit as a percentage  of sales was 18.5% for the first three months
of fiscal 2000 compared to 26.3% for the first three months of fiscal 1999.  The
decrease in the gross  profit  percentage  for the first three  months of fiscal
2000  was  primarily  attributable  to  competitive  pressures  as  well  as  to
first-time  design  inefficiencies  associated  with the development of enhanced
products related to contracts in process.  Also contributing to the higher gross
profit  percentage  in the first three  months of fiscal 1999 was 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 quarter of fiscal 1999.
     Selling,  general and  administrative  expenses of $1,614,000 were lower by
$54,000 in the first nine  months of fiscal 2000 than in the  comparable  fiscal
1999 period. The decrease in selling,  general, and administrative  expenses was
primarily  attributable to the fiscal 1999 comparable period containing a larger
amount of costs  associated  with product  promotion  and sales efforts aimed at
expanding the Company's customer base of business.
     Product  development  costs of $153,000 were higher by $34,000 in the first
three  months  of  fiscal  2000  than  in the  comparable  fiscal  1999  period.
Development  programs  in  the  first  three  months  of  fiscal  2000  included
enhancements to the  Switch-Cart and Order Selection  product lines with efforts
directed  towards unit  picking  techniques.  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

                                      - 9 -

<PAGE>




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

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

Three Months Ended May 30, 1999 Versus Three Months Ended May 31, 1998
----------------------------------------------------------------------
(Continued)
emphasis  aimed at the controls  platform for  Dispen-SI-matic  Systems and unit
picking techniques.
     Interest  income of $29,000 was lower by $16,000 in the first three  months
of fiscal  2000 than in the  comparable  fiscal  1999  period.  The  decrease in
interest income was primarily attributable to the lower level of funds available
for short-term investments during the first three months of fiscal 2000.
     Equity in income of joint venture  represents  the Company's  proportionate
share of its  investment  in  SI/BAKER  which is being  accounted  for under the
equity method.  The favorable  variance of $18,000 for the first three months of
fiscal  2000 in the  equity in  income  of joint  venture  was  attributable  to
SI/BAKER's  increase in sales to  approximately  $2,972,000,  as compared to the
comparable  fiscal 1999  period of  approximately  $2,074,000  and growth in the
gross profit  percentage to 21%, as compared to the comparable fiscal 1999 gross
profit  percentage  of 16%.  The sales  increase  in fiscal  2000 was  primarily
attributable to a larger backlog of orders entering fiscal 2000 versus a smaller
backlog of orders at the beginning of fiscal 1999. The favorable variance in the
gross profit percentage was primarily attributable the fiscal 1999 first quarter
gross profit percentage being unfavorably  impacted by difficulties in executing
and concluding  several  contracts as additional  costs became necessary to meet
contractual throughput requirements. Partially offsetting the favorable variance
were SI/BAKER's  increases of (1) $36,000 in revenue-based  royalty costs due to
the parent companies,  (2) $96,000 in product development  expenses for software
and controls  capabilities for various new products  addressing  changing market
requirements,  and (3) $107,000 in selling, general and administrative expenses.
The  increase in selling,  general and  administrative  expenses  was  primarily
attributable  to an increase of $36,000 of expenses  based on revenue and profit
performance  and an  increase  of  $55,000  in costs  associated  with sales and
administrative efforts aimed at expanding SI/BAKER's customer base of business.
     The  favorable  variance of $10,000 in other  income,  net,  was  primarily
attributable to an increase in the  revenue-based  royalty income related to the
SI/BAKER joint venture.
     The Company  incurred  income tax expense of $64,000 during the first three
months of fiscal  2000  compared  to  income  tax  expense  of  $235,000  in the
comparable  fiscal 1999  period.  Income tax expense was  generally  recorded at
statutory federal and state tax rates expected to apply for each fiscal year.

Year 2000
---------
     The  Year  2000  issue   relates  to  the  ability  of  computer   systems,
microprocessors,  and other electronic  devices to deal appropriately with dates
on or after  January  1,  2000 and other  dates  used for  special  programmatic
functions (i.e.  9999).  The effect of the Year 2000 issue may include  computer
failures and business interruption.
     The  Company has  assembled a team of internal  staff to oversee the matter
and is underway in completing its Year 2000 assessment.  Internally, the Company
has upgraded its business system to address the Year 2000 issue. Externally, the
Company has and will continue to survey its suppliers,  financial  institutions,
and other  organizations to ensure that those parties have appropriate  plans to
remediate Year

                                     - 10 -

<PAGE>




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

Year 2000 (Continued)
---------
2000 issues where their systems or business  activities may impact the Company's
operations.  However,  based on the response of its survey to date,  the Company
cannot presently  estimate the impact of the failure of third parties to be Year
2000 compliant. Also, customers may utilize the services, on a fee basis, of the
Company's  customer support group to assess and upgrade their materials handling
systems  purchased from the Company for Year 2000 compliance.  Costs incurred to
date and estimated costs to complete the Company's Year 2000 compliance  efforts
are not expected to be material.
     The outline of the general  phases of the Company's Year 2000 project is as
follows:  (1) Year 2000  methodology and compliance  training for key personnel;
(2)  inventorying  Year 2000 items,  internally  and  externally;  (3) assigning
priorities to identified Year 2000 items; (4) assessing the Year 2000 compliance
of items determined to be material to the Company;  (5) remediating or replacing
material items that are determined  not to be Year 2000  compliant;  (6) testing
material  items for Year 2000  compliance;  and (7) designing  and  implementing
contingency plans to the extent deemed necessary.  The Company has substantially
completed  phases (1)  through  (5)  relating  to  existing  internal  hardware,
software,  facilities  and equipment;  however,  testing is ongoing as hardware,
software, and equipment are remediated, upgraded or replaced.  Additionally, the
Company  continues to assess and test newly engaged suppliers and their products
for Year 2000 compliance as part of the Company's  normal  business  operations.
The Company has not completed its external  surveys or contingency  plans in the
case that it is not Year 2000  compliant  by the Year  2000.  The  Company  will
continue  to monitor its Year 2000  compliance  program,  address  any  material
issues and develop contingency planning as it deems appropriate.
     The scheduled completion date for the Company's efforts to address the Year
2000 issue is August  1999.  The failure to identify or correct a material  Year
2000  problem  could  result in an  interruption  in, or a failure  of,  certain
business  activities or operations such as the Company's  ability to service its
customers.  Such failures could  materially  and adversely  affect the Company's
results of operations,  liquidity,  and financial condition.  The Company's Year
2000 assessment process is expected to significantly  reduce the Company's level
of uncertainty  about the Year 2000 problem and, in  particular,  about the Year
2000 compliance and readiness of its material suppliers and customers.  However,
due to the general uncertainty  inherent in the Year 2000 problem,  resulting in
part from the uncertainty of the Year 2000 readiness of suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000  failures  will  have  a  material  impact  on  the  Company's  results  of
operations, liquidity, and financial condition.

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 or by the  Securities  and  Exchange  Commission
rules, regulations,  and releases. The Company intends that such forward-looking
statements be subject to the safe harbors created  thereby.  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,"
"will  likely,"  "are  expected  to," "will  continue,"  "project,"  and similar
expressions that denote uncertainty, are

                                     - 11 -

<PAGE>




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

Cautionary Statement (Continued)
--------------------
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,  certain  costs  increases,  and any  potential  exposures
relating  to Year 2000  matters;  or (3) if the  factors on which the  Company's
conclusions are based do not conform to the Company's expectations.

Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
     The Company  does not believe that its  exposures to interest  rate risk or
foreign currency exchange risks, risks from commodity prices,  equity prices and
other market changes that affect market risk sensitive  instruments are material
to its results of operations.



                           PART II - OTHER INFORMATION

Item 5.   Other Information
-------   -----------------

     Effective July 21, 1999,  Elmer D. Gates will become  Chairman of the Board
of  Directors  and  William R.  Johnson  will  become  President  and CEO of the
Company.


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

(a)  Exhibit 10.10 - Executive  Employment  Agreement with William Johnson dated
     March 29, 1999.

     Exhibit 27 - Financial Data Schedule

(b)  During the quarter  ended May 30,  1999,  a Form 8-K was filed on April 29,
     1999.  The filing  pertained  to the  election by the Board of Directors of
     William R. Johnson as President and Director,  effective March 29, 1999. As
     President, Mr. Johnson succeeds Leonard S. Yurkovic who has led the Company
     as  President  and CEO since  1988.  Mr.  Yurkovic  will  continue  as Vice
     Chairman of the Board of Directors,  but will retire as CEO of the Company,
     effective July 21, 1999.


                                     - 12 -

<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 13, 1999
          -------------





















                                     - 13 -

<PAGE>




                                                                     Schedule A











                                 SI/BAKER, INC.

                              Financial Statements
                                  May 31, 1999




























                                     - 14 -

<PAGE>




SI/BAKER, INC.
Balance Sheets
May 31, 1999 and February 28, 1999
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>

                                                         May           February
                                                      31, 1999         28, 1999
                                                      --------         --------

Assets
------

<S>                                                   <C>               <C>

Current assets:
   Cash and cash equivalents, principally
     time deposits                                    $   468              154

Receivables:
   Trade                                                3,200            1,658
   Other receivables                                      136              238
                                                        -----            -----
     Total receivables                                  3,336            1,896
                                                        -----            -----

   Costs and estimated earnings in
     excess of billings                                 1,037            2,516
   Deferred income tax benefits                           258              258
   Prepaid expenses and other current
     assets                                               136              136
                                                        -----            -----

       Total current assets                             5,235            4,960
                                                        -----            -----

   Machinery and equipment, at cost                       186              176
     Less:  accumulated depreciation                      104               95
                                                        -----            -----
   Net machinery and equipment                             82               81
                                                        -----            -----

   Equipment leased to customer                           487              487
   Less:  accumulated depreciation                        420              370
                                                        -----            -----
     Net equipment leased to customer                      67              117
                                                        -----            -----

   Deferred income tax benefits                            51               51
                                                        -----            -----

   Other assets                                             -               95
                                                        -----            -----

       Total assets                                   $ 5,435            5,304
                                                        =====            =====
</TABLE>



                                     - 15 -

<PAGE>




SI/BAKER, INC.
Balance Sheets
May 31, 1999 and February 28, 1999
  (In Thousands, Except Share Data)

  <TABLE>
<CAPTION>

                                                         May           February
                                                      31, 1999         28, 1999
                                                      --------         --------

Assets
------

<S>                                                   <C>               <C>
Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
   Note payable to bank                               $     -              500
   Accounts payable:
     Trade                                                626              510
     Affiliated companies                                  66               15
                                                        -----            -----
       Total accounts payable                             692              525
                                                        -----            -----

   Customers' deposits and billings in
     excess of costs and estimated
     earnings                                           1,341            1,104
   Accrued salaries, wages, and
     commissions                                           92               91
   Income taxes payable                                    44                -
   Accrued royalties payable                              316              209
   Accrued product warranties                             712              660
   Accrued other liabilities                               29               10
                                                        -----            -----
       Total current liabilities                        3,226            3,099
                                                        -----            -----

Deferred compensation                                      72              123
                                                        -----            -----

Stockholders' equity:
   Common stock, $1 par value; authorized
     1,000 shares; issued 200 shares                        -                -
   Additional paid-in capital                             200              200
   Retained earnings                                    1,937            1,882
                                                        -----            -----
       Total stockholders' equity                       2,137            2,082
                                                        -----            -----

       Total liabilities and stockholders'
         equity                                       $ 5,435            5,304
                                                        =====            =====
</TABLE>


                                     - 16 -

<PAGE>




SI/BAKER, INC.
Statements of Operations
Three Months Ended May 31, 1999 and 1998
  (In Thousands)

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                      -------------------------
                                                        May               May
                                                      31, 1999         31, 1998
                                                      --------         --------
<S>                                                   <C>                <C>
Net sales                                             $ 2,972            2,074
Cost of sales                                           2,348            1,743
                                                        -----            -----

Gross profit on sales                                     624              331
                                                        -----            -----

Selling, general and
   administrative
   expenses                                               311              204
Product development
   costs                                                   96                -
Royalty expense
   to parent companies                                    119               83
Interest income                                            (5)              (2)
Interest expense                                            4               14
Other income, net                                          (2)              (2)
                                                        -----            -----
                                                          523              297
                                                        -----            -----

Earnings before
   income taxes                                           101               34
Income tax expense                                         46               14
                                                        -----            -----

Net earnings                                          $    55               20
                                                        =====            =====
</TABLE>



                                     - 17 -

<PAGE>




SI/BAKER, INC.
Statements of Cash Flows
Three Months Ended May 31, 1999 and 1998
  (In Thousands)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                        -----------------------
                                                          May             May
                                                        31, 1999       31, 1998
                                                        --------       --------

<S>                                                     <C>             <C>
Cash flow from operating activities:
   Net earnings                                         $    55             20
   Adjustments to reconcile net earnings to net
     cash provided (used) by operating activities:
       Depreciation of machinery and
         equipment and leased equipment                      59             38
       Changes in operating assets and
         liabilities:
           Receivables                                   (1,440)         1,387
           Costs and estimated earnings
              in excess of billings                       1,479           (666)
           Inventories                                        -            118
           Prepaid expenses and other
              current assets                                  -           (163)
           Other assets                                      95            (29)
           Accounts payable                                 167             27
           Customers' deposits and
              billings in excess of costs
              and estimated earnings                        237           (481)
           Accrued salaries, wages, and
              commissions                                     1           (361)
           Income taxes payable                              44            (44)
           Accrued royalties payable                        107              1
           Accrued product warranties                        52             24
           Accrued other liabilities                         19             (8)
           Deferred compensation                            (51)             -
                                                          -----          -----
Net cash provided (used)
   by operating activities                                  824           (137)
                                                          -----          -----

Cash flows from investing activities:
   Additions to machinery and equipment                     (10)           (25)
                                                          -----          -----
     Net cash used by investing activities                  (10)           (25)
                                                          -----          -----

Cash flows from financing activities:
   Repayment of note payable to bank                       (500)             -
                                                          -----          -----
     Net cash used by financing activities                 (500)             -
                                                          -----          -----

Increase (decrease) in cash and cash equivalents            314           (162)
Cash and cash equivalents,
   beginning of period                                      154            388
                                                          -----          -----
Cash and cash equivalents, end of period                $   468            226
                                                          =====          =====

Supplemental disclosure of cash flow
   information:
     Cash paid during the period for:
       Income taxes                                     $     2            207
                                                          =====          =====
       Interest                                         $     3             20
                                                          =====          =====
</TABLE>

                                     - 18 -

<PAGE>




                            SI HANDLING SYSTEMS, INC.

                                    FORM 10-Q

                                  EXHIBIT INDEX



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

10.10      Executive Employment Agreement with William Johnson dated March 29,
           1999.

27         Financial Data Schedule.


















                                     - 19 -