<PAGE>

                                     FORM 10-Q
                                          

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark one)

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

                 For the quarterly period ended February 28, 1999

                                       OR

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

                 For the transition period from       to      
                                                -----    -----


                         Commission file number: 1-7736


                                TAB PRODUCTS CO.
          ---------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

          DELAWARE                                       94-1190862
--------------------------------               ---------------------------------
  (State of Incorporation)                     (IRS Employer Identification No.)

1400 PAGE MILL ROAD, PALO ALTO, CALIFORNIA                 94304
-------------------------------------------            --------------
 (Address of principal executive offices)                (Zip Code)

Registrant's telephone number - including area code   (650) 852-2400
                                                   --------------------

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes  X    No
                                       -----    -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common shares outstanding as of
February 28, 1999 - 5,027,689.


This report, including all exhibits and attachments, contains 27 pages.

                                      1

<PAGE>



                                TAB PRODUCTS CO.

                                      INDEX

                          PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                        Page No.
<S>           <C>                                                       <C>
ITEM 1        Financial Statements:

              Consolidated Condensed Balance Sheets
              February 28, 1999 and May 31, 1998                           3

              Consolidated Condensed Statements of Earnings
              Three months and Nine months ended February 28,
              1999 and 1998                                                4

              Consolidated Condensed Statements of Cash Flows
              Nine months ended February 28, 1999 and 1998                 5

              Supplemental Financial Data - Notes                          6

ITEM 2        Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          9

ITEM 3        Quantitative and Qualitative Disclosure About
              Market Risks                                                17

                           PART II. OTHER INFORMATION

ITEM 6        Exhibits                                                    17

              Signatures                                                  18
</TABLE>

                                      2
<PAGE>

                         PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
                                  TAB PRODUCTS CO.
                CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
                        (000's omitted except share data)

<TABLE>
<CAPTION>
                                                                                    February 28,                  May 31,
                                                                                        1999                        1998
                                                                                    ------------                 ---------
<S>                                                                                    <C>                      <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                          $   5,710                  $  7,199 
    Short-term investments                                                                 2,977                     4,896 
    Accounts receivable, less allowances of
    $977 and $947 for doubtful accounts                                                   28,320                    24,943 
    Inventories                                                                            9,422                    11,015 
    Prepaid income taxes and other expenses                                                5,725                     5,725 
                                                                                       ---------                  --------
       Total current assets                                                               52,154                    53,778 

Property, plant and equipment, net of accumulated 
depreciation of $42,837 and $40,162                                                        19,464                    19,063
Goodwill, net                                                                              3,175                     3,683
Other assets                                                                                 958                       964 
                                                                                       ---------                  --------
Total Assets                                                                           $  75,751                  $ 77,488 
                                                                                       ---------                  --------
                                                                                       ---------                  --------

LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
     Current portion of long-term debt                                                 $   3,438                  $  3,437 
     Accounts payable                                                                      6,915                     6,257 
     Compensation payable                                                                  1,759                     3,910 
     Other accrued liabilities                                                            10,296                     8,389 
                                                                                       ---------                  --------
         Total current liabilities                                                        22,408                    21,993 
                                                                                       ---------                  --------
Long-term debt                                                                             6,531                     7,391
                                                                                       ---------                  --------
Deferred taxes and other non-current
liabilities                                                                                3,337                     3,207 
                                                                                       ---------                  --------
Stockholders' equity:
     Preferred stock: $.01 par value,                                                                
     authorized-500,000 shares, issued-none                                                    -                         - 
     Common stock: $.01 par value, authorized-
     25,000,000 shares, issued-February 1999-
     7,606,116 shares and May 1998-7,601,616                                                         
     shares                                                                                   76                        76 
     Additional paid-in capital                                                           15,244                    15,219 
     Retained earnings                                                                    63,485                    63,885
     Treasury stock: February 1999-2,578,427                                                         
     shares and May 1998-2,432,227 shares                                                (32,320)                  (31,365)
     Accumulated other comprehensive income                                               (3,010)                   (2,918)
                                                                                       ---------                  --------
          Total stockholders' equity                                                      43,475                    44,897 
                                                                                       ---------                  --------
Total liabilities and stockholder's equity                                             $  75,751                  $ 77,488 
                                                                                       ---------                  --------
                                                                                       ---------                  --------
</TABLE>

See Notes to Consolidated Condensed Financial Statements.

                                      3
<PAGE>

                                  TAB PRODUCTS CO.
           CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
                        (000'S OMITTED EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                Three Months Ended                     Nine Months Ended
                                                                   February 28,                           February 28,
                                                      ---------------------------------------  -----------------------------------
                                                             1999                1998               1999               1998
                                                      -------------------  ------------------  ----------------  -----------------
<S>                                                   <C>                  <C>                 <C>               <C>
Revenues                                                       $ 40,575             $41,096         $ 117,975          $ 122,112 
                                                      -------------------  ------------------  ----------------  -----------------
Costs and expenses:
    Cost of revenues                                             24,690              23,807            72,788             71,385 
    Selling, general and
    administrative                                               14,729              14,463            43,145             43,069 
    Research and development                                        257                 215               719                663 
                                                      -------------------  ------------------  ----------------  -----------------
       Total costs and expenses                                  39,676              38,485           116,652            115,117 
                                                      -------------------  ------------------  ----------------  -----------------
       Operating income                                             899               2,611             1,323              6,995 

Interest, net, and other                                           (288)               (130)             (559)              (461)
                                                      -------------------  ------------------  ----------------  -----------------
       Earnings before income taxes                                 611               2,481               764              6,534 

Provision for income taxes                                          331               1,079               400              2,842 
                                                      -------------------  ------------------  ----------------  -----------------
       Net earnings                                              $  280             $ 1,402             $ 364             $3,692 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
Basic net earnings per share                                     $ 0.06              $ 0.27            $ 0.07             $ 0.73 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
Shares used in computing basic
net earnings per share                                        5,045,000           5,135,156         5,111,000          5,079,793 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
Diluted net earnings per share                                   $ 0.06              $ 0.26            $ 0.07             $ 0.70 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
Shares used in computing diluted
net earnings per share                                        5,047,000           5,315,576         5,158,000          5,269,782 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
</TABLE>

See Notes to Consolidated Condensed Financial Statements.

                                      4
<PAGE>

                                TAB PRODUCTS CO.
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (000'S OMITTED)

<TABLE>
<CAPTION>
                                                                                                         Nine Months Ended
                                                                                                            February 28,
                                                                                                -----------------------------------
                                                                                                      1999                1998
                                                                                                -----------------   ---------------
<S>                                                                                              <C>                <C>
Operating Activities:
     Net earnings                                                                                        $  364           $ 3,692
     Adjustments to reconcile net earnings to net cash
            provided by operating activities:
     Depreciation and amortization                                                                        3,839             3,211 
     Other                                                                                                    -                21 
     Changes in operating assets and liabilities:
           Accounts receivable                                                                           (3,447)             (143)
           Inventories                                                                                    1,601            (1,241)
           Prepaid income taxes and other expenses                                                          261              (299)
           Other assets                                                                                     188               406 
           Accounts payable                                                                                 676               908 
           Compensation payable                                                                          (2,138)              127 
           Other accrued liabilities                                                                      1,356               379 
                                                                                                -----------------   ---------------
Net cash provided by operating activities                                                                 2,700             7,061 
                                                                                                -----------------   ---------------

Investing Activities:

     Purchase of property, plant and equipment, net                                                      (3,899)           (3,691)
     Purchases of short-term investments                                                                 (4,464)           (6,848)
     Sales of short-term investments                                                                      6,383             5,679 
                                                                                                -----------------   ---------------
Net cash required by investing activities                                                                (1,980)           (4,860)
                                                                                                -----------------   ---------------

Financing Activities:

     Repayment of long-term debt                                                                           (859)             (734)
     Proceeds from issuance of common stock                                                                  25             1,385 
     Repurchase of Treasury Stock                                                                          (955)                -
     Dividends paid                                                                                        (764)             (765)
                                                                                                -----------------   ---------------
Net cash required by financing activities                                                                (2,553)             (114)
                                                                                                -----------------   ---------------

Effect of exchange rate changes on cash                                                                     344              (481)
                                                                                                -----------------   ---------------

Increase (decrease) in cash and cash equivalents                                                         (1,489)            1,606 

Cash and cash equivalents at beginning of period                                                          7,199             8,568 
                                                                                                -----------------   ---------------

Cash and cash equivalents at end of period                                                              $ 5,710          $ 10,174 
                                                                                                -----------------   ---------------
                                                                                                -----------------   ---------------
</TABLE>

See Notes to Consolidated Condensed Financial Statements.

                                      5
<PAGE>

                              TAB PRODUCTS CO. 

               SUPPLEMENTAL FINANCIAL DATA - NOTES (UNAUDITED)

1.   Basis of Presentation

     The Company's unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and,
in the opinion of management, reflect all adjustments (consisting only of normal
recurring adjustments) considered necessary to fairly state the Company's
financial position, results of operations, and cash flows for the periods
presented. These consolidated financial statements should be read in conjunction
with the Company's audited consolidated financial statements included in the
Company's Form 10-K for the fiscal year ended May 31, 1998. The results of
operations for the nine-month period ended February 28, 1999 are not necessarily
indicative of the results to be expected for any subsequent quarter or for the
entire fiscal year ending May 31, 1999. The May 31, 1998 balance sheet was
derived from audited consolidated financial statements, but does not include all
disclosures required by generally accepted accounting principles.

2.   Inventory

     Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                              February 28, 1999        May 31, 1998
                                              -----------------     ---------------
                       <S>                   <C>                   <C>
                        Finished goods        $           4,739     $         4,265
                        Work in process                     572               2,704
                        Raw materials                     4,111               4,046
                                              -----------------     ---------------
                                              $           9,422     $        11,015
                                              -----------------     ---------------
                                              -----------------     ---------------
</TABLE>

3.   Dividends

     Dividends declared for the nine month periods ended February 28, 1999 and
1998 were as follows:

<TABLE>
<CAPTION>
            Record Date        Shares Outstanding    Dividend Per Share
            -----------        ------------------    ------------------
         <S>                  <C>                   <C>
          Fiscal 1999: 
           August 25, 1998         5,171,514             $   0.05
           November 25, 1998       5,084,889             $   0.05
           February 25, 1999       5,027,689             $   0.05
          Fiscal 1998: 
           August 25, 1997         5,041,576             $   0.05
           November 25, 1997       5,103,014             $   0.05
           February 25, 1998       5,161,764             $   0.05
</TABLE>

                                       6
<PAGE>

Item 1.  Financial Statements (continued)

Tab Products Co., Notes to Consolidated Condensed Financial Statements
(continued)

4.   Net Earnings Per Share

     Basic earnings per share is computed by dividing net earnings by the
weighted average common shares outstanding for the period while diluted earnings
per share also includes the dilutive impact of stock options. Basic and diluted
earnings per share for the quarters and nine-months ended February 28, 1999 and
1998, respectively, are calculated as follows (in thousands, except share data):

<TABLE>
<CAPTION>
                                                                Three Months Ended                     Nine Months Ended
                                                                   February 28,                           February 28,
                                                      ---------------------------------------  -----------------------------------
                                                             1999                1998               1999               1998
                                                      -------------------  ------------------  ----------------  -----------------
<S>                                                  <C>                   <C>                 <C>                <C>
   Net earnings                                             $       280         $     1,402       $       364         $    3,692 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
   Basic:
   Weighted average common shares outstanding 
      used in computing basic net earnings
      per share                                               5,045,127           5,135,156         5,110,787          5,079,793 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
   Basic net earnings per share                             $      0.06         $      0.27       $      0.07         $     0.73 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
   Diluted:
   Weighted average common
     shares outstanding                                       5,045,127           5,135,156         5,110,787          5,079,793 
   Dilutive options outstanding                                   2,023             180,420            47,464            189,989 
                                                      -------------------  ------------------  ----------------  -----------------
   Shares used in computing diluted
     net earnings per share                                   5,047,150           5,315,576         5,158,251          5,269,782 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
   Diluted net earnings per share                           $      0.06         $      0.26       $      0.07         $     0.70 
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
</TABLE>

5.   Comprehensive Income

     The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," as of the first quarter of
fiscal 1999. SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, it has no impact on the
Company's net earnings or total stockholders' equity.

     The components of comprehensive income, net of tax, are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                Three Months Ended                     Nine Months Ended
                                                                   February 28,                           February 28,
                                                      ---------------------------------------  -----------------------------------
                                                             1999                1998               1999               1998
                                                      -------------------  ------------------  ----------------  -----------------
<S>                                                    <C>                  <C>                 <C>               <C> 
   Net earnings                                                  $ 280             $ 1,402             $ 364            $ 3,692 
   Foreign currency translation                                    315                  23               (92)              (481)
                                                      -------------------  ------------------  ----------------  -----------------
   Comprehensive income                                          $ 595             $ 1,425             $ 272            $ 3,211
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------
</TABLE>

                                       7
<PAGE>

Item 1.  Financial Statements (continued)

     Tab Products Co., Notes to Consolidated Condensed Financial Statements
(continued)

     Accumulated other comprehensive income, net of tax, presented on the 
accompanying consolidated condensed balance sheets consists of the following 
(in thousands):

<TABLE>
<CAPTION>
                                                                               February 28,                 May 31,
                                                                                   1999                      1998
                                                                          ------------------------  ------------------------
<S>                                                                       <C>                         <C>
Foreign currency translation                                                       $  (592)                  $  (500)
Minimum pension liability                                                           (2,418)                   (2,418)
                                                                          ------------------------  ------------------------
Accumulated other
 comprehensive loss                                                                $(3,010)                  $(2,918)
                                                                          ------------------------  ------------------------
                                                                          ------------------------  ------------------------
</TABLE>

6.   Stock Repurchase

     During the three and nine months ended February 28, 1999, the Company
repurchased 57,200 and 146,200 shares of Common Stock under the Company's
authorized repurchase program at a cost of $314,000 and $955,000, respectively.
As of February 28, 1999, the Company intends to repurchase in the future an
additional 153,800 shares under the previously announced stock repurchase
program.

7.   Recently Issued Accounting Pronouncements

     In June 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures About Segments of an Enterprise and Related
Information." The Statement establishes standards for the manner in which public
business enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for annual financial statements for
periods beginning after December 15, 1997, and for interim periods after the
first year of adoption. The Company has not determined the impact of the
adoption of this new accounting standard on its consolidated financial statement
disclosures.

     In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which the Company is required
to adopt for its fiscal 1999 annual financial statements. This statement revises
existing disclosure requirements for pension and other postretirement benefit
plans thereby intending to improve the understandability of benefit disclosures,
eliminate certain requirements that the Financial Accounting Standards Board
believes are no longer necessary, and standardize footnote disclosures. This
statement requires comparative information for earlier years to be restated. The
Company has not determined the impact of the adoption of this new accounting
standard on its consolidated financial statement disclosures.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedging accounting
when certain conditions are met. This statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. The Company expects to
adopt this Standard as of the beginning of its fiscal year 2001. The effect of
adopting the Standard is currently being evaluated, but is not expected to have
a material effect on the Company's financial position or results of operations.

8.       Events Subsequent to February 28, 1999

     During March 1999, the Company announced that the Tab Products Co. Pension
Plan, (the "Plan") for which all domestic employees of the Company are eligible
to participate, would be suspended as of March 31, 1999. After this date
employees will not receive any further pension credits and no new employees
will enter the 

                                       8
<PAGE>

Item 1. Financial Statements (continued)

Tab Products Co., Notes to Consolidated Condensed Financial Statements
(continued)

Plan. All employees will become fully vested in the Pension benefit they have 
accrued to March 31, 1999. The pension expense related to the Plan for fiscal 
1999 will be approximately the same as if the Plan had not been suspended, as 
certain curtailment costs will have to be expensed that will offset the 
savings of suspending the plan two months before the end of fiscal 1999.

The Company also announced plans to enhance the Company matching component of
its Tax Deferred Savings Plan ("401(k)") effective with the fiscal year
beginning June 1, 1999. The Company match is currently a maximum of 2% and 
will be increased to a maximum of 3% effective June 1, 1999; however, the 
impact to the Company will depend on employee participation. In fiscal 1999 
the Company's contribution will be approximately $450,000.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

This report, including without limitation the following section regarding
Management's Discussion and Analysis of Financial Condition and Results of
Operations, contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, regarding the Company and its business,
financial condition, results of operations and prospects. Words such as
"experts," "anticipates," "intends," "plans," "believes," "seeks,"
"foreseeable," "estimates," and similar expressions or variations of such words
are intended to identify forward-looking statements, but are not the exclusive
means of identifying forward-looking statements in this report. Additionally,
statements concerning future matters such as the development of new products,
enhancements or technologies, possible changes in legislation and other
statements regarding matters that are not historical are forward-looking
statements.

Although forward-looking statements in this report reflect the good faith
judgement of the Company's management, such statements can only be based on
facts and factors currently known by the Company. Consequently, forward-looking
statements are inherently subject to risks and uncertainties and actual results
and outcomes may differ materially from the results and outcomes discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences in results and outcomes include without limitation those discussed
in "Business Environment and Risk Factors" as well as those discussed elsewhere
in this report. Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report, which attempt to advise interested parties of the
risks and factors that may affect the Company's business, financial condition,
results of operations and prospects.

The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements of the Company.

FINANCIAL CONDITION

At February 28, 1999 the Company had cash and short-term investments of $8.7 
million, a decrease of $3.4 million from the $12.1 million at May 31, 1998. 
The Company's working capital position at February 28, 1999 was $29.7 million 
as compared with $31.8 million at May 31, 1998. The decrease in cash and 
working capital are the result of investments in new enterprise software, 
hardware infrastructure improvements, stock repurchases, debt repayments and 
foreign exchange impacts. Additionally, the sales cycle for larger scale 
projects is substantially longer than the Company's historical 
sales-to-delivery cycle resulting in additional working capital requirements. 
Accounts receivable has been impacted by product sales related to services 
projects resulting in a longer payment cycle. The current ratio of 2.3 at 
February 28, 1999 was slightly lower

                                       9 <PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Financial Condition (Continued)

than the current ratio of 2.4 reported for May 31, 1998. Inventories at February
28, 1999 were $ 9.4 million as compared to $11.0 million at May 31, 1998. The
decrease in inventory levels is due to a program to reduce inventory in the
manufacturing operations. Management believes that the Company's cash and cash
equivalents, available credit facilities and operational cash flow will
adequately finance anticipated growth, capital expenditures and debt obligations
for the foreseeable future.

Investments in property, plant and equipment, which were primarily focused on
enterprise management information systems and associated infrastructure
investments and in retainable parts to support the growth of service contracts
in the Company's field services operation, were $0.7 and $3.9 million for the
three and nine months ended February 28, 1999, respectively. Capital
expenditures to support operations for fiscal 1999 are expected to total
approximately $5.0 million.

During the three and nine months ended February 28, 1999, the Company
repurchased 57,200 and 146,200 shares of Common Stock under the Company's
authorized repurchase program at a cost of $314,000 and $955,000, respectively.
As of February 28, 1999, the Company intends to repurchase an additional 153,800
shares in the future under the previously announced stock repurchase program.
The Company currently has no plans to reissue the stock which has been
repurchased.

For the nine month period ended February 28, 1999 the Company paid cash
dividends of $764,000 as compared to $765,000 in the prior fiscal year.

The Company has an unsecured revolving line of credit of $15 million with a bank
which expires on October 31, 2000. There were no borrowings outstanding under
the line of credit at February 28, 1999. Effective January 29, 1999, the Company
entered into a master lease agreement with a technology equipment leasing
company for a total lease line of $0.5 million. The Company utilized the line to
lease computer equipment with a cost of $0.1 million at the end of February. The
lease is classified as an operating lease.

RESULTS OF OPERATIONS

REVENUES for the third quarter of fiscal 1999 amounted to $40.6 million, down
$.5 million or 1% from the $41.1 million reported in the third quarter of fiscal
1998. Revenues for the nine months ended February 28, 1999 were $118.0 million,
down $4.1 million or 3% from revenues of $122.1 million reported in the first
nine months of the prior fiscal year. As in the Company's first two quarters,
the Company continued to experience revenue decreases associated with products
previously withdrawn from its sales channels as a result of the Company's change
in strategy. In addition, the Company experienced softness in domestic
manufactured product sales offset somewhat by increased technology product sales
and international product and services sales.

BACKLOG of orders has historically not been a significant factor in
understanding the business of the Company because the order-to-ship cycle was
primarily completed within 30 days and revenue is generally recognized upon
product shipment. The Branch channel shift to projects with large customers has
created a lengthening order-to-execution period and a resultant increase in
backlog. Additionally, the growing professional services component of project
sales is recognized as revenue when the project is completed resulting in a
longer order-to-revenue cycle for a component of the Company's revenue stream.

COST OF REVENUE, as a percentage of revenues, was 60.9% for the third quarter of
fiscal 1999 as compared to the 57.9% reported in the third quarter of fiscal
1998. Cost of revenues for the third quarter was $24.7 million as compared to
the $23.8 million reported in the comparable quarter of fiscal 1998. For the
nine months

                                       10
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Results of Operations (continued)

ended February 28, 1999 cost of revenues was 61.7% as compared to 58.5% in the
first nine months of the prior fiscal year. The increase in cost of revenues as
a percentage of revenue was the result of sales mix and increased manufacturing
costs due to lower factory efficiencies.

OPERATING EXPENSES were $15.0 million or 37.0% of total revenues for the third
quarter of fiscal 1999 as compared to $14.7 million or 35.8% of total revenues
for the third quarter of fiscal 1998. For the nine months ended February 28,
1999 Operating Expenses were $43.9 million or 37.2% of total revenues as
compared to $43.7 million or 35.8% of total revenues for the prior fiscal year.
The increase in operating expenses as a percentage of revenues was primarily
driven by increases in defined benefit pension costs, sales training, systems
development costs, technology support costs and continued overlap of a new sales
compensation plan implemented at the start of the fiscal year. Offsetting these
increases were reductions in expenses for operating the Company's sales branches
and reduction of management incentive plan expense as a result of lower revenues
in the first nine months.

INTEREST EXPENSE, net, and other was $288,000 in the third quarter of fiscal
1999 as compared to $130,000 in the third quarter of fiscal 1998. For the nine
months ended February 28, 1999 interest expense, net, and other was $559,000 as
compared to $461,000 in the prior fiscal year. The increase for the three and
nine months ended February 28, 1999 was primarily due to foreign currency
translation losses in international operations of $155,000.

EARNINGS PER SHARE for the three months ended February 28, 1999 were $0.06 per
share for both basic and diluted shares compared to $0.27 and $0.26 per basic
and diluted shares, respectively, for the three months ended February 28, 1998.
For the nine months ended February 28, 1999 earnings per share were $0.07 per
share for both basic and diluted shares compared to $0.73 and $0.70 per basic
and diluted shares, respectively, for the prior fiscal year.

EVENTS SUBSEQUENT TO FEBRUARY 28, 1999

During March 1999, the Company announced that the Tab Products Co. Pension 
Plan, (the "Plan") for which all domestic employees of the Company are 
eligible to participate, would be suspended as of March 31, 1999. After this 
date employees will not receive any further pension credits and no new 
employees will enter the Plan. All employees will become fully vested in the 
Pension benefit they have accrued to March 31, 1999. The pension expense 
related to the Plan for fiscal 1999 will be approximately the same as if the 
Plan had not been suspended, as certain curtailment costs will have to be 
expensed that will offset the savings of suspending the Plan two months 
before the end of fiscal 1999.

The Company also announced plans to enhance the Company matching component of
its Tax Deferred Savings Plan ("401(k)") effective with the fiscal year
beginning June 1, 1999.

MANAGEMENT SYSTEM UPGRADES AND YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of potential problems with computer systems or
any equipment with computer chips that use dates where the date has been stored
as just two digits (e.g. 99 for 1999). On January 1, 2000, any clock or date
recording mechanism, including date sensitive software which uses only two
digits to represent the year, may recognize a date incorrectly (e.g., interpret
the two digits 00 as the year 1900 rather than the year 2000). This could result
in a system failure or miscalculations causing disruption of operations,
including among other things, a temporary inability to process transactions,

                                       11
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Management System Upgrades and Year 2000 Compliance (continued)

send invoices, or engage in similar activities.

The Company has undertaken a program to address Year 2000 compliance with
respect to the following: (i) the Company's information technology hardware and
software ("IT systems"); (ii) the Company's non-information technology systems,
such as buildings, plant, equipment, telephone systems, and other infrastructure
systems that may contain microcontroller technology ("non-IT systems"); and
(iii) exposure from third parties with which the Company does business.

The Company's plan with regard to the Year 2000 issue for each of the above
involves the following phases: (i) assessment of systems to determine the extent
to which the Company may be vulnerable to the Year 2000 issue; (ii) the
development of remedies to address problems discovered in the assessment phase;
(iii) the testing of such remedies; and (iv) the preparation of contingency
plans to address potential worst case scenarios should the remedies not be
successful.

The Company has analyzed most of its IT systems in an effort to identify any
systems that are not Year 2000 compliant and implement any changes required to
make such systems Year 2000 compliant. The result to date of the analysis is
that most of the IT systems used by the Company are not Year 2000 compliant. A
Company-wide enterprise software solution was chosen as the primary means to
achieve Year 2000 compliance. The software was selected not only to achieve Year
2000 compliance, but also to add functionality and efficiency in the business
processes of the Company. The software is being implemented in stages and in
each of the Company's operating locations. The first stage, which comprises most
of the manufacturing, sales and financial modules, was recently implemented. The
second stage includes project accounting, human resources and the remaining
manufacturing operations. This stage is planned to be completed by the end of
August 1999. Remediation and testing of IT systems not replaced are planned to
be completed by September 1999.

The Company is assessing its significant non-IT systems that may contain
embedded microcontrollers to determine what remediation efforts may be
necessary. The assessment is planned to be completed by July 1999. To date,
certain non-IT systems have been tested and most such tested non-IT systems have
been evaluated as being Year 2000 compliant. Remediation plans for those systems
not Year 2000 compliant are planned to be in place by July 1999.

The Company is taking steps designed to assess the Year 2000 readiness of
certain suppliers whose possible lack of Year 2000 readiness could, in the
Company's judgment, cause a materially adverse impact on the Company's business,
results of operations or financial condition. The Company has conducted
extensive inquiries of such suppliers compliance status during the fiscal year
and expects to complete the inquiries over the next eight months.

The Company believes that its most reasonably likely worst case year 2000
scenarios would relate to problems with the systems of third parties rather than
with the Company's internal systems or its products. It is clear that the
Company has the least ability to assess and remediate the year 2000 problems of
third parties and the Company believes the risks are greatest with
infrastructure (e.g. electricity supply, water and sewer service),
telecommunications, transportation supply chains and critical suppliers of
materials.

The Company's production is conducted in domestic and foreign facilities. Each
location relies on local private and governmental suppliers for electricity,
water, sewer and other needed supplies. Failure of an electricity grid or an
uneven supply of power, as an example, would be a worst case scenario that would

                                       12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Management System Upgrades and Year 2000 Compliance (continued)

completely shut down the affected facilities. Electrical failure could also shut
down airports and other transportation facilities. The Company does not
currently maintain facilities which would allow it to generate its own
electrical or water supply in lieu of that supplied by utilities. To the extent
possible, the Company is working with the infrastructure suppliers for its
manufacturing sites, major subcontractor sites and relevant transportation hubs
to seek to better ensure continuity of infrastructure services. Contingency
planning regarding major infrastructure failure generally emphasizes the shift
of production to other, unaffected sites, if appropriate, or planned increases
in inventory levels of specific products.

A worst case scenario involving a critical supplier of materials would be the
partial or complete shutdown of the supplier and its resulting inability to
provide critical supplies to the Company on a timely basis. The Company does not
maintain the capability to replace most third party supplies with internal
production. Where efforts to work with critical suppliers to ensure year 2000
capability have not been successful, contingency planning generally emphasizes
the identification of substitute and second-source suppliers, and in certain
limited situations includes a planned increase in the level of inventory
carried.

The Company is not in a position to identify or to avoid all possible scenarios;
however, the Company is currently assessing scenarios and taking steps to
mitigate the impacts of various scenarios if they were to occur. This
contingency planning will continue through 1999 as the Company learns more about
the preparations and vulnerabilities of third parties regarding year 2000
issues. Due to the large number of variables involved, the Company cannot
provide an estimate of the damage it might suffer if any of these scenarios were
to occur.

The total Year 2000 remediation project is estimated to cost approximately $1.8
to $2.2 million of which approximately $1.5 million has been spent to date.
Since the system replacement costs are related to an overall systems initiative,
the Year 2000 compliance costs cannot be reasonably determined. The costs and
time schedules for the IT systems and non-IT systems changes are based on
management's best estimates.

The Company's technology products have all been determined to be Year 2000
compliant. For most of the Company's products the Year 2000 issue does not
apply. Products such as file supplies, furniture, forms handling equipment, file
storage equipment and mobile file equipment have no date-related processing,
hence are not affected by the arrival of the Year 2000.

BUSINESS ENVIRONMENT AND RISK FACTORS

The Company's future operating results may be affected by various trends and
factors which the Company must successfully manage in order to achieve favorable
operating results. In addition, there are trends and factors beyond the
Company's control which affect its operations. In accordance with the provisions
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, the cautionary statements set forth
below identify important factors that could cause actual results to differ
materially from those in any forward-looking statements contained in this
report. Such trends and factors include, but are not limited to, adverse changes
in general economic conditions or conditions in the specific markets for the
Company's products, governmental regulation, fluctuations in foreign exchange
rates, and other factors, including those listed below.

                                       13
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Business Environment and Risk Factors (continued)

Distribution Channels

The Company is currently pursuing a strategy to refine and expand its
distribution channels. The Branch direct sales strategy has been shifted to
focus on projects with larger customers that bundle products and services as a
way of providing value-added solutions to the Company's customers.

The Company is also seeking to expand its call center operations and to direct
replenishment business through this efficient distribution method. In
conjunction with handling inbound sales activity a new initiative is underway to
generate sales through the use of outbound telemarketing.

The Company has notified its existing independent distributors (indirect
channel) that effective June 1, 1999 the existing distributor contract is
canceled. A new contract has been offered that eliminates the exclusive
territory rights in the existing contract with other material terms and
conditions remaining substantially the same. The Company believes the removal of
exclusivity is crucial to the Company's ability to serve its larger nationwide
customers where an independent's resources cannot support the customer's
professional services, technology and project management needs. As of February
28, 1999 approximately one third of the current independent distributors have
signed the new contract. The Company is working to achieve acceptance of the new
dealer agreement with the remaining independent distributors. The Company is
also seeking to expand its indirect distribution with the addition of dealers to
Branch territories to focus on small to mid-size customers.

These changes in distribution, including the potential loss of existing
independent distributors, may disrupt the selling process of the Company
resulting in lower sales. Additionally, the sales cycle for larger scale
projects is substantially longer than the Company's historical sales-to-delivery
cycle resulting in additional working capital requirements. Market penetration
of larger customers may not happen as quickly as anticipated and may result in
higher selling costs.

Retaining and Attracting Qualified Personnel

The Company's future performance may depend in significant part upon attracting
and retaining key senior management, manufacturing, sales, marketing and
technical support personnel. Competition for such personnel is intense and the
inability to retain its current key personnel or to attract, assimilate or
retain other highly qualified personnel in the future on a timely basis could
have a material adverse effect on the Company's business, results of operations
and financial condition.

Fluctuations in Operating Results

Factors affecting the Company's operating results and gross margins include the
volume of product sales, competitive pricing pressures, the ability of the
Company to match supply with demand, changes in product and customer mix, market
acceptance of new or enhanced versions of the Company's products and services,
changes in the channels through which the Company's products and services are
distributed, timing of new product announcements and introductions by the
Company and its competitors, fluctuations in product costs, variations in
manufacturing cycle time, fluctuations in manufacturing utilization, the ability
of the Company to achieve manufacturing efficiencies with its new and existing
products, increased research and development expenses, exchange rate
fluctuations, a change in the Company's effective tax rate and changes in
general economic conditions. All of these factors are difficult to forecast and

                                       14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Business Environment and Risk Factors (continued)

these or other factors can materially affect the Company's quarterly or annual
operating results or gross margins.

Competition

The Company expects competition to increase in the future from existing
competitors and from other companies that may enter the Company's existing or
future markets with similar or alternative document management solutions that
may be less costly or provide additional features. Such competition could result
in lower gross margins in the future, if the Company's average selling prices
decrease faster than its costs and could result in lost sales.

Dependence on Sole Source Suppliers

The Company purchases several critical components from single or sole source
vendors for which alternative sources are not currently developed. Development
of alternative suppliers would require a significant amount of time to qualify
in the case of certain of the Company's components. The Company does not
maintain long-term supply agreements with any of these vendors. The inability to
develop alternative sources for these single or sole source components or to
obtain sufficient quantities of these components could result in delays or
reductions in product shipments which could adversely affect the Company's
business, financial condition and results of operations.

New Processes and Products and Manufacturing Efficiencies

There can be no assurance that the Company's manufacturing facilities will
achieve or maintain acceptable manufacturing efficiencies in the future. The
inability of the Company to achieve planned efficiencies from its manufacturing
facilities could have an adverse effect on the Company's business, financial
condition and results of operations. Any problems experienced by the Company in
its current or future transitions to new processes and products could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Backlog

The backlog of orders has historically not been a significant factor in
understanding the business of the Company because the order-to-ship cycle was
primarily completed within 30 days and revenue is generally recognized upon
product shipment. The Branch channel shift to projects with large customers has
created a lengthening order-to-execution period and a resultant increase in
backlog. Additionally, the growing professional services component of project
sales is recognized as revenue when the project is completed resulting in a
longer order-to-revenue cycle for a component of the Company's revenue stream.

Government Sales

With the government, both Federal and State/Local comprising 10% of the
Company's revenues, the Company is primarily exposed to risks from reductions in
budget allocations to support regulation and administrative offices. The current
reinventing government initiative opens opportunities to help the government
streamline workflow processes, reduce paperwork and increase customer service
which may provide short-term opportunities for the Company. However, the
long-term effect of a government initiative to streamline processes could have a
negative impact on the Company's business, financial condition and results of
operations.

                                       15
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (continued)

Business Environment and Risk Factors (continued)

Patents, Proprietary Rights and Related Litigation

The Company relies on a combination of patents, trademarks, copyright and trade
secret laws, confidentiality procedures and licensing arrangements to protect
its intellectual property rights. The Company has been notified in the past and
the Company may be notified in the future of claims that they may be infringing
upon patents or other intellectual property rights owned by third parties. There
can be no assurance that in the future any patents held by the Company will not
be invalidated, that patents will be issued for any of the Company's pending
applications or that any claims allowed from existing or pending patents will be
of sufficient scope or strength or be issued in the primary countries where the
Company's products can be sold to provide meaningful protection or any
commercial advantage to the Company. Additionally, competitors of the Company
may be able to design around the Company's patents.

Risks Associated with International Sales

In fiscal 1998, international sales accounted for approximately 20% of the
Company's total revenues and in the first nine months of fiscal 1999 they
accounted for approximately 19% of the Company's total revenues. Fluctuations in
currencies could adversely affect the Company's business, financial condition
and results of operations. In addition, gains and losses on the conversion to
United States dollars of accounts receivable, accounts payable and other
monetary assets and liabilities arising from international operations may
contribute to fluctuations in the Company's results of operations. Because sales
of the Company's products have been denominated to date primarily in United
States dollars, increases in the value of the United States dollar could
increase the price of the Company's products so that they become relatively more
expensive to customers in the local currency of a particular country, leading to
a reduction in sales and profitability in that country. The Company is subject
to the risks of conducting business internationally, including foreign
government regulation and general geopolitical risks such as political and
economic instability, potential hostilities and changes in diplomatic and trade
relationships. Manufacturing and sales of the Company's products may also be
materially adversely affected by factors such as unexpected changes in, or
imposition of, regulatory requirements, tariffs, import and export restrictions
and other barriers and restrictions, longer payment cycles, greater difficulty
in accounts receivable collection, potentially adverse tax consequences, the
burdens of complying with a variety of foreign laws and other factors beyond the
Company's control. In addition, the laws of certain foreign countries in which
the Company's products are or may be developed, manufactured or sold, may not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States and thus make piracy of the Company's products a more
likely possibility. There can be no assurance that these factors will not have a
material adverse effect on the Company's business, financial condition or
results of operations.

Management of Growth

The Company has increased its expense levels to support its planned growth. The
Company expects to continue to increase its operating expenses by hiring
additional personnel to support expected growth, increased marketing efforts and
additional research and development activities. If the Company does not achieve
increased levels of revenues commensurate with these increased levels of
operating expenses, or if the Company's revenues decrease or do not meet the
Company's expectations for a particular period, the Company's business,
financial condition and results of operations will be materially adversely
affected.

                                       16
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

         Not applicable.

                         PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION

         Not applicable.

ITEM 6.  EXHIBITS

                  (a)      10.1     Lease Agreement dated January 29, 1999

                           27       Financial Data Schedule

                  (b)      Reports on Form 8-K

                           None

                                       17
<PAGE>


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.


                                             TAB PRODUCTS CO.
                                   ----------------------------------
                                                  (Registrant)

Date:    April 14, 1999                /s/ David J. Davis
                                   ---------------------------------------
                                   David J. Davis, Senior Vice
                                   President, Operations and Chief
                                   Financial Officer

Date:    April 14, 1999               /s/ William R. Kinzie
                                   ---------------------------------------
                                   William R. Kinzie, Corporate
                                   Controller and Chief Accounting
                                   Officer



                                       18