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 June 1, 1997

                           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
June 1, 1997:  2,469,055.
               ---------


<PAGE>


                                      - 2 -

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

ITEM 1.    FINANCIAL STATEMENTS
-------    --------------------
SI HANDLING SYSTEMS, INC.
Balance Sheets
     (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
                                                         June          March
Assets                                                  1, 1997       2, 1997
------                                                ---------      ---------
<S>                                                    <C>             <C>
Current assets:
   Cash and cash equivalents, principally
     time deposits                                     $    728         1,852
   Short-term investments                                 1,472         3,741
                                                        -------       -------
       Total cash, cash equivalents, and
         short-term investments                           2,200         5,593
                                                        -------       -------

   Receivables:
     Trade                                                3,786         3,900
     Notes and other receivables                            436           719
                                                        -------       -------
       Total receivables                                  4,222         4,619
                                                        -------       -------

   Costs and estimated earnings in excess
     of billings                                          5,053         1,640

   Inventories:
     Raw materials                                          935           814
     Finished goods and work-in-process                   1,141         1,151
                                                        -------       -------
       Total inventories                                  2,076         1,965
                                                        -------       -------

   Deferred income tax benefits                             372           372
   Prepaid expenses and other current assets                208           173
                                                        -------       -------
       Total current assets                              14,131        14,362
                                                        -------       -------

Property, plant and equipment, at cost:
   Land                                                      27            27
   Buildings and improvements                             3,358         3,358
   Machinery and equipment                                3,792         3,717
                                                        -------       -------
                                                          7,177         7,102
   Less:  accumulated depreciation                        5,888         5,801
                                                        -------       -------
       Net property, plant and equipment                  1,289         1,301
                                                        -------       -------

Deferred income tax benefits                                214           214
Investment in joint venture                                 710           606
Other assets, at cost less accumulated
   amortization of $70 in 1998 and $67
   in 1997                                                   65            64
                                                        -------       -------
       Total assets                                    $ 16,409        16,547
                                                        =======       =======
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                                      - 3 -

ITEM 1.    FINANCIAL STATEMENTS (CONTINUED)
-------    --------------------------------
SI HANDLING SYSTEMS, INC.
Balance Sheets
     (In Thousands, Except Share Data)
<TABLE>
<CAPTION>

                                                          June         March
Liabilities and Stockholders' Equity                    1, 1997       2, 1997
------------------------------------                   ---------     ---------
<S>                                                    <C>            <C>
Current liabilities:
   Current installments of long-term debt              $     12           12
   Accounts payable                                       2,415        2,056
   Customers' deposits and billings in excess
     of costs and estimated earnings                      2,516        2,752
   Accrued salaries, wages, and commissions                 649          778
   Income taxes payable                                     538          442
   Accrued royalties payable                                138          427
   Accrued other liabilities                                576          870
                                                        -------      -------

     Total current liabilities                            6,844        7,337
                                                        -------      -------

Long-term liabilities:
   Long-term debt, excluding current installments:
     Mortgages payable                                       31           35
                                                        -------      -------
       Total long-term debt                                  31           35
   Deferred compensation                                    140          132
                                                        -------      -------
       Total long-term liabilities                          171          167
                                                        -------      -------

Stockholders' equity:
   Common stock, $1 par value; authorized
     5,000,000 shares; issued 2,469,055 shares
     in 1998 and 2,460,306 shares in 1997                 2,469        2,460
   Additional paid-in capital                             3,828        3,752
   Retained earnings                                      3,097        2,831
                                                        -------      -------

       Total stockholders' equity                         9,394        9,043
                                                        -------      -------

       Total liabilities and stockholders' equity      $ 16,409       16,547
                                                        =======      =======
</TABLE>











                 See accompanying notes to financial statements.


<PAGE>


                                      - 4 -

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
                                                         ---------------------
                                                            June        June
                                                          1, 1997     2, 1996
                                                         ---------   ---------
<S>                                                      <C>          <C>
Net sales                                                $  9,542       5,631
Cost of sales                                               7,322       3,941
                                                           ------      ------

Gross profit on sales                                       2,220       1,690
                                                           ------      ------
Selling, general and
   administrative
   expenses                                                 1,487       1,330
Product development
   costs                                                       82          80
Interest expense                                                2           3
Interest income                                           (    67)    (    45)
Equity in income
   of joint venture                                       (   104)    (    30)
Other income, net                                         (    93)    (    64)
                                                           ------      ------
                                                            1,307       1,274
                                                           ------      ------

Earnings before
   income taxes                                               913         416
Income tax expense                                            357          31
                                                           ------      ------

Net earnings                                             $    556         385
                                                           ======      ======

Net earnings per common
   share and common
   share equivalents*                                    $    .22         .16
                                                           ======      ======

Dividends per share                                      $    .10         .10
                                                           ======      ======

<FN>
*   Net earnings per share are based on the  weighted  average  number of shares
    outstanding  and equivalent  shares from dilutive stock options,  which were
    2,497,000 and 2,455,000, respectively, at June 1, 1997 and June 2, 1996.
</FN>
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>


                                      - 5 -

ITEM 1.    FINANCIAL STATEMENTS (CONTINUED)
-------    --------------------------------
SI HANDLING SYSTEMS, INC.
Statements of Cash Flows
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                         ----------------------
                                                            June         June
                                                          1, 1997      2, 1996
                                                         ---------    ---------

<S>                                                      <C>           <C>
Cash flows from operating activities:
   Net earnings                                          $    556          385
   Adjustments to reconcile net earnings
     to net cash provided (used)
     by operating activities:
       Depreciation of plant and equipment                     87           79
       Amortization of intangibles                              3            2
       Equity in income of joint venture                  (   104)     (    30)
       Change in operating assets and liabilities:
         Receivables                                          397      ( 1,199)
         Costs and estimated earnings in
           excess of billings                             ( 3,413)     (    55)
         Inventories                                      (   111)          41
         Prepaid expenses and other
           current assets                                 (    35)          11
         Other noncurrent assets                          (     4)           -
         Accounts payable                                     359           66
         Customers' deposits and billings
           in excess of costs and estimated
           earnings                                       (   236)         287
         Accrued salaries, wages, and
           commissions                                    (   129)     (   363)
         Income taxes payable                                  96      (    64)
         Accrued royalties payable                        (   289)     (   349)
         Accrued other liabilities                        (   294)         154
         Deferred compensation                                  8      (     7)
                                                           ------       ------
   Net cash used by operating activities                  ( 3,109)     ( 1,042)
                                                           ------       ------

Cash flows from investing activities:
   Sales of short-term investments                          3,741        1,633
   Purchase of short-term investments                     ( 1,472)           -
   Additions to property, plant and equipment             (    75)     (   104)
                                                           ------       ------
   Net cash provided by investing activities                2,194        1,529
                                                           ------       ------
</TABLE>






                 See accompanying notes to financial statements.


<PAGE>


                                      - 6 -

ITEM 1.    FINANCIAL STATEMENTS (CONTINUED)
-------    --------------------
SI HANDLING SYSTEMS, INC.
Statements of Cash Flows (Continued)
     (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                         ----------------------
                                                            June         June
                                                          1, 1997      2, 1996
                                                         ---------    ---------

<S>                                                      <C>           <C>
Cash flows from financing activities:
   Sale of common shares in connection
     with employee incentive stock
     option plan                                               42            3
   Repayment of long-term debt                            (     4)     (     6)
   Dividends paid on common stock                         (   247)     (   244)
                                                           ------       ------
   Net cash used by financing
     activities                                           (   209)     (   247)
                                                           ------       ------

   Increase (decrease) in cash and
     cash equivalents                                     ( 1,124)         240
   Cash and cash equivalents, beginning
     of period                                              1,852        1,335
                                                           ------       ------
   Cash and cash equivalents, end of
     period                                              $    728        1,575
                                                           ======       ======

   Supplemental disclosures of cash flow information:
     Cash paid during the period for:
       Interest                                          $      1            1
                                                           ======       ======
       Income taxes                                      $    261           95
                                                           ======       ======

   Supplemental disclosures of noncash
   financing activities:
     Issuance of 5,650 common shares in
     exchange for 2,523 common shares
     delivered to the Company by officers
     in connection with the employee
     incentive stock option plan                         $     43            -
                                                           ======       ======

     Issuance of 10,603 common shares in
     exchange for 3,865 common shares
     delivered to the Company by officers
     in connection with the employee
     incentive stock option plan                         $      -           30
                                                           ======       ======
</TABLE>




                 See accompanying notes to financial statements.


<PAGE>


                                            - 7 -

ITEM 1.    FINANCIAL STATEMENTS (CONTINUED)
-------    --------------------
SI HANDLING SYSTEMS, INC.
Notes To Financial Statements
Three Months Ended June 1, 1997 and June 2, 1996

(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  decreased to $728,000  during the
first three months of fiscal 1998 from $1,852,000 at the end of fiscal 1997. The
decrease resulted from cash used by operating  activities  totaling  $3,109,000,
repayments  of  long-term  debt of $4,000,  purchases  of capital  equipment  of
$75,000,  and the  payment  of  $247,000  in  cash  dividends  to  shareholders.
Offsetting  the decrease in cash and cash  equivalents  from these uses were net
sales of short-term  investments  of $2,269,000 and proceeds of $42,000 from the
sale of common  stock in  connection  with the employee  incentive  stock option
plan. Funds used by operating activities during the first three months of fiscal
1997 were $1,042,000.


<PAGE>


                                      - 8 -

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 1998. The term of the original arrangement was for three years with an
expiration  date of July  31,  1996;  however,  effective  March  1,  1996,  the
Company's  principal bank amended certain covenants to allow the Company greater
operating  flexibility and extended the expiration date of the revolving  credit
facility.  Currently,  the committed revolving credit facility has an expiration
date of August 31,  1999.  During the first  three  months of fiscal  1998,  the
Company  did not  have any  borrowings  under  the  committed  revolving  credit
facility.
     On March 4, 1996, SI/BAKER, INC. ("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 Prescription Systems, Inc., have each provided a limited guarantee
and surety in the 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.  As of May 31,
1997,  SI/BAKER's  related debt  outstanding  under the Facility was $1,750,000.
SI/BAKER  intends to satisfy the note and thereby release the parent  companies'
guarantees  during  the second  quarter  of fiscal  1998.  The  Facility  has an
expiration date of August 31, 1997.
     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.

Results Of Operations
---------------------
Three Months Ended June 1, 1997 versus Three Months Ended June 2,
-----------------------------------------------------------------
1996
----
     The  Company's  net earnings for the first three months of fiscal 1998 were
$556,000  compared to net  earnings of  $385,000  for the first three  months of
fiscal 1997.


<PAGE>


                                      - 9 -

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------    -------------------------------------------------
           CONDITION AND RESULTS OF OPERATIONS
           -----------------------------------
SI HANDLING SYSTEMS, INC.

Results Of Operations
---------------------
Three Months Ended June 1, 1997 versus Three Months Ended June 2,
-----------------------------------------------------------------
1996 (Continued)
----
     Backlog at the end of the first quarter of fiscal 1998 was $32,593,000 with
the  majority of the  backlog  pertaining  to  Switch-Cart  and  Dispen-SI-matic
contracts.  During  the  first  quarter  of fiscal  1998,  the  Company  was the
recipient of orders  totalling  $11,106,000  with the largest order taken by the
Company's  Production & Assembly  Systems  Business Unit. The Defense  Logistics
Agency of the United States  government  procured an addition of $6.7 million to
the prime mechanization contract it awarded the Company in September,  1996. The
contract  options were exercised to expand the scope of a material  handling and
storage system at the Distribution Operations Center of the Defense Distribution
Depot located in Red River,  Texas. This contract,  the largest in the Company's
history, totals approximately $23.4 million.
     Net sales of $9,542,000 for the first three months of fiscal 1998 increased
69.5%  compared to net sales of $5,631,000  for the first three months of fiscal
1997.  The sales increase in the first three months of fiscal 1998 is attributed
primarily to a larger backlog of orders entering fiscal 1998 ($31,029,000 versus
a $10,488,000  backlog  beginning fiscal 1997).  The largest  increases in sales
occurred in the Switch-Cart and Order Selection  product lines.  The increase in
the Switch-Cart product line was primarily  attributable to progress made on the
contract  with the Defense  Logistics  Agency of the United  States  government.
Also, the increase  experienced in the Company's  Order  Selection  product line
during the first three  months of fiscal  1998 was  primarily  attributable to a
significant  amount of progress  relating to several  large  contracts  received
prior to the start of fiscal 1998. During the first three months of fiscal 1997,
the Company's  Order  Selection  product line accounted for a moderate amount of
sales  revenues.  Contributing  to the lower  backlog at the beginning of fiscal
1997,  and hence sales in the first three months of fiscal 1997,  were delays by
prospective customers, particularly those interested in Order Selection Systems,
in  signing  contracts  due  to  expanding  project  scope  and  to  merger  and
acquisition interference.
     Gross profit as a percentage  of sales was 23.3% for the first three months
of fiscal 1998 compared to 30.0% for the first three months of fiscal 1997.  The
decrease in the gross  profit  percentage  for the first three  months of fiscal
1998 was primarily  attributable to (i) a higher content in contracts  currently
in progress  of  ancillary  products  wherein  margins are lower than  contracts
containing a high degree of proprietary  products and (ii) a contract containing
new  product  requiring  greater  than  expected  complex  systems   integration
services.  The  attainment of the elevated  gross profit  percentage  during the
first three months of fiscal 1997 was  primarily  attributable  to the favorable
performance on several contracts initiated in prior fiscal years that

<PAGE>


                                     - 10 -

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------    -------------------------------------------------
           CONDITION AND RESULTS OF OPERATIONS
           -----------------------------------
SI HANDLING SYSTEMS, INC.

Results Of Operations
---------------------
Three Months Ended June 1, 1997 versus Three Months Ended June 2,
-----------------------------------------------------------------
1996 (Continued)
----
were  completed  during the first  three  months of fiscal  1997 as well as to a
higher  content in contracts  then in progress of  proprietary  product  wherein
margins  are  higher  than  contracts  containing  a high  degree  of  ancillary
products.
     Selling,  general, and administrative expenses of $1,487,000 were higher by
$157,000 in the first three months of fiscal 1998 than in the comparable  fiscal
1997 period. The increase in selling,  general,  and administrative  expenses is
attributable  to  inflationary  trends  and  to  the  Company's  incentive-based
compensation  plan  which  provides  for gain  sharing  as a means of  promoting
performance excellence.
     Product  development  costs for the first three  months of fiscal 1998 were
relatively the same as costs for the comparable fiscal 1997 period.  Development
programs in the first three months of fiscal 1998 included  efforts  directed at
improvements  across various product lines,  and to efforts  associated with the
introduction of the Henke light-duty overhead  transportation product, for which
the  Company  is  in  the  process  of  becoming  an  exclusive  North  American
distributor.  Development  programs  in the first  three  months of fiscal  1997
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 Dispen-SI-matic and Pick-to-Light Systems.
     Interest  income of $67,000 was higher by $22,000 in the first three months
of fiscal  1998 than in the  comparable  fiscal  1997  period.  The  increase in
interest income is primarily attributable to the higher level of funds available
for short-term investments during the first three months of fiscal 1998.
     Equity in income of joint venture  represented the Company's  proportionate
share of its investment in SI/BAKER, INC. which is being accounted for under the
equity method.  The favorable variance for the first three months of fiscal 1998
in the equity in income of joint venture was  attributable to SI/BAKER's  growth
in revenues,  as compared to the comparable  fiscal 1997 quarter,  as well as to
reductions in product development costs and selling, general, and administrative
expenses.  SI/BAKER's  fiscal 1997 comparable  period product  development costs
were associated with the BK2000  automated  pharmacy system product line,  while
selling, general, and administrative expenses were impacted unfavorably by legal
costs  associated  with  the  since  settled  patent  infringement   litigation.
Partially  offsetting the favorable variance was increased revenue based royalty
costs due to the parent companies.
     The favorable variance in other income,  net, is primarily  attributable to
an increase in royalty income related to the SI/BAKER, INC. joint venture and
<PAGE>


                                     - 11 -

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------    -------------------------------------------------
           CONDITION AND RESULTS OF OPERATIONS
           -----------------------------------
SI HANDLING SYSTEMS, INC.

Results Of Operations
---------------------
Three  Months  Ended  June 1, 1997  versus  Three  Months  Ended June 2,
------------------------------------------------------------------------
1996 (Continued)
----
an  increase  in  purchase  discounts  earned by the  Company  due to  increased
purchasing requirements.
     The Company  incurred income tax expense of $357,000 during the first three
months of  fiscal  1998  compared  to  income  tax  expense  of  $31,000  in the
comparable fiscal 1997 period.  Income tax expense for the first three months of
fiscal 1998 was recorded at the statutory  federal and state tax rates  expected
to apply for the  current  fiscal  year.  Income tax expense for the first three
months  of  fiscal  1997 was  less  than  the  statutory  rate of 34% due to the
recognition of previously unrecognized deferred tax assets which are anticipated
to be realizable due to the current and projected profitability of the Company.



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


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K
-------    --------------------------------

     (a) Exhibit 27 - Financial Data Schedule

     (b) During the quarter ended June 1, 1997, no report on Form 8-K was filed.


<PAGE>


                                     - 12 -

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

Dated:        July 15, 1997 
       ---------------------------




<PAGE>


                                     - 13 -


                                                                     SCHEDULE A









                                 SI/BAKER, INC.

                              FINANCIAL STATEMENTS
                                  MAY 31, 1997


<PAGE>


                                     - 14 -

SI/BAKER, INC.
Balance Sheets
May 31, 1997 and February 28, 1997
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>

                                                          May          February
                                                       31, 1997        28, 1997
                                                      ---------        --------
<S>                                                   <C>               <C>
Assets
------
Current assets:
   Cash and cash equivalents, principally
     time deposits                                    $    418             484

Receivables:
   Trade                                                 3,489           1,618
   Other receivables                                        --             122
                                                        ------          ------
     Total receivables                                   3,489           1,740
                                                        ------          ------

   Costs and estimated earnings in
     excess of billings                                  5,751           4,111
   Inventories                                              44              36
   Deferred income tax benefits                            367             367
   Prepaid expenses and other current
     assets                                                 90              87
                                                        ------          ------

       Total current assets                             10,159           6,825
                                                        ------          ------

   Machinery and equipment, at cost                        114             106
     Less:  accumulated depreciation                        46              41
                                                        ------          ------
   Net machinery and equipment                              68              65
                                                        ------          ------
 
   Equipment leased to customer                            487             487
   Less:  accumulated depreciation                         157             127
                                                        ------          ------
     Net equipment leased to customer                      330             360
                                                        ------          ------

   Deferred income tax benefits                              6               6
                                                        ------          ------

       Total assets                                   $ 10,563           7,256
                                                       =======          ======
</TABLE>




<PAGE>


                                     - 15 -

SI/BAKER, INC.
Balance Sheets
May 31, 1997 and February 28, 1997
  (In Thousands, Except Share Data)

<TABLE>
<CAPTION>
                                                          May          February
                                                       31, 1997        28, 1997
                                                      ---------        --------
<S>                                                   <C>              <C>
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
   Note payable to bank                               $  1,750           1,750
   Accounts payable:
     Trade                                               2,647           1,920
     Affiliated companies                                    2             356
                                                        ------          ------
       Total accounts payable                            2,649           2,276
                                                        ------          ------

   Customers' deposits and billings in
     excess of costs and estimated
     earnings                                            3,159             779
   Accrued salaries, wages, and
   commissions                                            253              307
   Income taxes payable                                    107               -
   Accrued royalties payable                               336             319
   Accrued product warranties                              553             463
   Accrued other liabilities                               337             151
                                                        ------          ------
       Total current liabilities                         9,144           6,045
                                                        ------          ------

Stockholders' equity:
   Common stock, $1 par value; authorized
     1,000 shares; issued 200 shares                         -               -
   Additional paid-in capital                              200             200
   Retained earnings                                     1,219           1,011
                                                        ------          ------
       Total stockholders' equity                        1,419           1,211
                                                        ------          ------

       Total liabilities and stockholders'
         equity                                       $ 10,563           7,256
                                                        ======          ======
</TABLE>



<PAGE>


                                     - 16 -

SI/BAKER, INC.
Statements of Operations
Three Months Ended May 31, 1997 and 1996
  (In Thousands)

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                      -------------------------
                                                         May              May
                                                       31, 1997        31, 1996
                                                      ---------       ---------
<S>                                                   <C>              <C>
Net sales                                             $  4,704           3,670
Cost of sales                                            3,896           2,969
                                                        ------          ------

Gross profit on sales                                      808             701
                                                        ------          ------

Selling, general and
administrative

   expenses                                                261             314
Product development
   costs                                                     3             136
Royalty expense to
   parent companies                                        188             147
Interest income                                        (     7)        (     6)
Interest expense                                            33               7
Other expense
   (income), net                                       (    20)              3
                                                        ------          ------
                                                           458             601
                                                        ------          ------

Earnings before
   income taxes                                            350             100
Income tax expense                                         142              40
                                                        ------          ------

Net earnings                                          $    208              60
                                                        ======          ======
</TABLE>





<PAGE>


                                     - 17 -

SI/BAKER, INC.
Statements of Cash Flows
Three Months Ended May 31, 1997 and 1996
  (In Thousands)

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                      -------------------------
                                                         May              May
                                                       31, 1997        31, 1996
                                                      ---------       ---------
<S>                                                   <C>              <C>
Cash flow from operating activities:
   Net earnings                                       $    208             60
   Adjustments to reconcile net earnings
     to net cash provided (used) by
     operating activities:
       Depreciation of machinery and
         equipment and leased equipment                     35              4
       Changes in operating assets and
         liabilities:
           Receivables                                 ( 1,749)       ( 2,910)
           Costs and estimated earnings
              in excess of billings                    ( 1,640)         1,060
           Inventories                                 (     8)       (    31)
           Prepaid expenses and other
              current assets                           (     3)       (    29)
           Accounts payable                                373        (   352)
           Customers' deposits and
              billings in excess of costs
              and estimated earnings                     2,380            222
           Accrued salaries, wages, and
              commissions                              (    54)       (   135)
           Income taxes payable                            107        (   142)
           Accrued royalties payable                        17             13
           Accrued product warranties                       90              -
           Accrued other liabilities                       186            167
                                                        ------         ------
Net cash used by operating
   activities                                          (    58)       ( 2,073)
                                                        ------         ------

Cash flows used in investing activities:
   Additions to machinery and equipment                (     8)       (     9)
   Equipment leased to customer                              -        (     9)
                                                        ------         ------
     Net cash used by investing activities             (     8)       (    18)
                                                        ------         ------

Cash flows provided by financing activities:
   Increase in note payable to bank                          -          2,000
                                                        ------         ------

Decrease in cash and cash equivalents                  (    66)       (    91)
Cash and cash equivalents,
   beginning of period                                     484            327
                                                        ------         ------
Cash and cash equivalents, end of period              $    418            236
                                                        ======         ======
</TABLE>


<PAGE>


                                     - 18 -

SI/BAKER, INC.
Statements of Cash Flows (Continued)
Three Months Ended May 31, 1997 and 1996
  (In Thousands)

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                      -------------------------
                                                         May              May
                                                       31, 1997        31, 1996
                                                      ---------       ---------
<S>                                                   <C>              <C>


Supplemental disclosure of cash flow
 information:
     Cash paid during the period for:
       Income taxes                                   $     37             182
                                                        ======          ======
       Interest                                       $     30               -
                                                        ======          ======
</TABLE>