<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                       
                                   FORM 10-K

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

For the fiscal year ended April 30, 1998

                                      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 0-12448

                         FLOW INTERNATIONAL CORPORATION

         DELAWARE                                      91-1104842
(State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                      Identification No.)

                            23500 - 64TH AVENUE SOUTH
                             KENT, WASHINGTON 98032
                                 (253) 850-3500

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock $.01 Par Value
                         Preferred Stock Purchase Rights

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 by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein and will not be contained, to 
the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of the Form 10-K or any 
amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock held by non affiliates of the 
registrant based upon the closing price reported by the National Association 
of Securities Dealers' Automated Quotation System ("NASDAQ") as of June 23, 
1998, was $169,000,000. The number of shares of common stock outstanding as 
of June 23, 1998, was 15,061,354 shares.

<PAGE>

------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
------------------------------------------------------------------------------

PART I:   None


PART II:  None


PART III: All Items -- See Registrant's definitive proxy statement which 
          involves the election of directors and which will be filed with the 
          Commission within 120 days after the close of the fiscal year.

Item 10   Directors and Executive Officers of the Registrant

Item 11   Executive Compensation

Item 12   Security Ownership of Certain Beneficial Owners and Management

Item 13   Certain Relationships and Related Transactions


<PAGE>
                                     PART I

ITEM 1.  BUSINESS
-------------------------------------------------------------------------------

     Flow International Corporation ("Flow" or the "Company") designs, 
develops, manufactures, markets, and services ultrahigh-pressure ("UHP") 
waterjet cutting and cleaning systems, and specialized robotics systems. Flow 
provides technologically-advanced, environmentally-sound solutions to the 
manufacturing, industrial and marine cleaning markets. The Company's waterjet 
systems pressurize water from 30,000 to 100,000 pounds per square inch (psi) 
and are used to cut both metallic and nonmetallic materials in many industry 
segments, including the aerospace, automotive, disposable products, food, 
glass, job shop, sign, metal cutting, marble, tile and other stone cutting, 
and paper industries. The Company also manufactures the robotic articulation 
equipment used in the cutting and cleaning processes which may also include 
assembly, pick and place and load/unload operations. The Company's 
infrastructure products include UHP waterjets for use in industrial cleaning, 
surface preparation, construction, nuclear decontamination, and 
petro-chemical and oil field applications.

     In addition to UHP cutting and cleaning, the Company has begun to apply 
UHP technology to pumpable foods. By exposing foods to pressures from 50,000 
psi to 100,000 psi for a short time, typically 30 seconds to slightly more 
than 2 minutes, UHP achieves the effects of pasteurization without heat. Not 
only are spoilage microorganisms destroyed, the process also destroys harmful 
pathogens such as E. coli bacteria, thus increasing shelf life while 
maintaining all of the product's fresh taste and health qualities. Unlike 
thermal treatment (pasteurization), UHP technology does not destroy or alter 
the nutritional qualities, taste, texture and color of the food. Flow's 
technology features a `continuous process' concept whereby pumpable foods 
such as juice, salsas, guacamole, coffee extracts, liquid eggs and salad 
dressings are pumped into the pressure chambers, pressurized and then pumped 
into the next stage of the process.

     The Company was formed in 1974, incorporated in 1980, and completed its 
initial public offering in March 1983. In 1991, the Company's founder 
retired, and Ronald W. Tarrant was appointed President and Chief Executive 
Officer. Since 1991, the Company has grown as a result of continued new 
product development, expanded marketing strategies, and certain strategic 
acquisitions.

     On December 15, 1994, the Company purchased certain net assets of 
Dynovation Machine Systems, Inc. ("Flow Automation"). Flow Automation designs 
and manufactures robotic waterjet cutting cells and automated assembly 
systems for the automotive and other industries, as well as a line of 
proprietary vibratory feeder bowls for these industries.

     On January 3, 1995, the Company purchased certain net assets of ASI 
Robotics Systems ("Flow Robotics"). Flow Robotics designs and manufactures 
high accuracy gantry-type robots and related systems used in waterjet and 
factory automation applications. This manufacturing facility supplies product 
to the aerospace, automotive, job shop, marble and tile and other industries.

<PAGE>

     In May 1995, the Company invested in a 51% majority interest in a joint 
venture with Okura & Co., Ltd., its exclusive Japanese distributor. This 
joint venture supplies UHP products in Japan and to Japanese companies in 
Asia. During March 1998 the Company increased its ownership interest in Flow 
Japan to 95%.

     In May 1997 the Company purchased the stock of Foracon Maschinen und 
Anlagenbau GmbH & CO.KG ("Foracon"). Foracon supplies ultrahigh-pressure and 
related systems to the European market and further increases the Company's 
strength in that market.

     In September 1997 the Company re-focused on its core ultrahigh-pressure 
technology and divested itself of its Access and Services business. The 
Access business was comprised of Spider Staging Corporation ("Spider"), Power 
Climber and affiliated companies, the Ark Systems division and Consortium 
Europeen du Materiel ("CEM"). These companies were purchased at various times 
between fiscal 1993 and fiscal 1995. The Services business represented the 
HydroMilling and HydroCleaning operations. The Company recorded a $4.9 
million restructuring charge during fiscal 1998 and $9 million restructuring 
charge in fiscal 1997 associated with the divestiture of these operations.

     In April 1998 the Company purchased certain net assets of CIS Robotics 
Inc. ("CIS") and acquired the stock of Robot Simulations Limited ("RSL") of 
the U.K. CIS provides robot programming services, primarily to the automotive 
industry, while RSL markets a PC software program for control systems and 
off-line programming of pedestal robots.

<PAGE>

PRODUCTS AND SERVICES

     The Company provides UHP waterjets and related products and services to 
a wide variety of industries. The Company divides its UHP revenues into two 
primary categories of product, `UHP Waterjet Systems' and `UHP Consumable 
Parts and Services':

<TABLE>
<CAPTION>
(In thousands)                         1998                     1997                   1996
                                       Revenue        %       Revenue       %        Revenue        %
                                       --------      ---      --------      ---      --------     ---
<S>                                    <C>           <C>      <C>           <C>      <C>          <C>
UHP Waterjet Systems                   $ 94,728       66      $ 71,658       64      $56,495       61
UHP Consumable Parts and Services        47,904       34        40,774       36       36,076       39
                                       --------      ---      --------      ---      --------     ---
Total UHP Revenue                      $142,632      100      $112,432      100      $92,571      100
</TABLE>

     In addition to UHP revenue, the Company's consolidated revenues also 
include the divested Access and Services business revenues as represented by 
`Access Systems and Services' and `HydroMilling-Registered Trademark- and 
HydroCleaning-TM- Services'.  These two operations were sold during the second 
quarter of fiscal 1998, and the reported results reflect only three months of 
operations in fiscal 1998:

<TABLE>
<CAPTION>
(In thousands)                         1998                     1997                   1996
                                       Revenue        %       Revenue       %        Revenue        %
                                       --------      ---      --------      ---      --------     ---
<S>                                    <C>           <C>      <C>           <C>      <C>          <C>
Total UHP Revenues                     $142,632       90      $112,432       67      $ 92,571      64
Access Systems and Services              11,480        7        40,978       24        38,857      27
HydroMilling-Resgistered Trademark-
   and HydroCleaning-TM- Services         5,370        3        14,783        9        13,477       9
                                       --------      ---      --------      ---      --------     ---
Total Consolidated Revenues            $159,482      100      $168,193      100      $144,905     100
</TABLE>

UHP WATERJET SYSTEMS, CONSUMABLE PARTS AND SERVICES

     The Company offers a variety of UHP waterjet equipment system products 
and accessories, including robotic articulation equipment. UHP pumps, 
intensifier and direct-drive, are currently the core components of the 
Company's product line. An intensifier pump pressurizes water up to 100,000 
psi and forces it through a small nozzle, generating a high-velocity stream 
of water. The Company's unique direct-drive pressure-compensated pumps 
pressurize water to in excess of 55,000 psi utilizing triplex piston 
technology. In order to cut metallic and other hard materials, abrasive is 
added to the waterjet stream creating an abrasivejet. The Company's 
abrasivejet cuts with no heat, causes no metallurgical changes, and leaves a 
high-quality edge that usually requires no secondary operation.

<PAGE>

     A UHP waterjet system consists of an ultrahigh-pressure intensifier or 
direct drive pump, one or more waterjet cutting or cleaning heads with the 
necessary robotics, motion control and automation systems. The Company has 
placed UHP waterjet cutting systems worldwide and in many different 
industries, including the aerospace, automotive, disposable products, food, 
glass, job shop, sign, metal cutting, marble, tile and other stone cutting 
and paper industries. The Company's UHP waterjet systems are also used in 
industrial cleaning applications such as paint removal, surface preparation, 
factory and industrial cleaning, ship hull preparation, oil field services 
and heat exchanger cleaning. Additionally, the Company manufactures systems 
which combine waterjet applications with other processes such as pick and 
place operations, inspection, assembly, and other automated processes. Sales 
of UHP waterjet systems accounted for 66% of fiscal 1998 UHP revenues.

     Flow sells various tools and accessories which incorporate waterjet 
technology, as well as aftermarket consumable parts and service for its 
products. Many of these parts are proprietary in nature. Sales of UHP 
consumable parts and service accounted for 34% of fiscal 1998 UHP revenues. 
Total UHP sales represented 90% of total consolidated revenues in fiscal 1998.

     While the Company is generally associated with providing capital goods 
equipment, historical performance does not indicate the Company follows 
capital spending cycles. The Company has generated double digit revenue 
growth even in weak capital goods markets as the Company's products are 
considered productivity enhancing tools which are easily cost justified. 
Additionally, consumable parts sales represent a base level of business that 
is not significantly affected by the capital goods sales cycle.


ACCESS SYSTEMS AND SERVICES

     Prior to the divestiture of its Access business in September 1997, the 
Company designed, manufactured, rented, sold, and serviced powered access 
systems for use in industrial, structural and facade maintenance and 
construction applications. In fiscal 1998, sales, rental and service of 
access systems amounted to 7% of total consolidated revenues.


HYDROMILLING AND HYDROCLEANING SERVICES

     Prior to the divestiture of its Services business in September 1997, the 
Company provided HydroMilling services on a contract and subcontract basis 
for the removal of deteriorated concrete from bridges and parking garage 
surfaces. Flow's Rampart subsidiary provided HydroCleaning services to 
commercial and military airfields. Ultrahigh-pressure waterjets were used for 
the removal of rubber, paint and grout from airport runways. In fiscal 1998, 
HydroMilling and HydroCleaning revenues were 3% of total revenues.

<PAGE>

MARKETING AND SALES

     The Company markets and sells its UHP products worldwide through its 
headquarters in Kent, Washington (a suburb of Seattle) and through 
subsidiaries, divisions and joint ventures in Birmingham, England; Bretton 
and Darmstadt, Germany; Burlington and Windsor, Canada; Detroit, Michigan; 
Hsinchu, Taiwan; Jeffersonville, Indiana; Lafayette, Louisiana and Nagoya and 
Tokyo, Japan. The Company sells directly to customers in North America, 
Europe, and Asia, and has distributors or agents in most other countries. In 
the U.S., the Company uses a select group of machine tool distributors for 
sales, distribution and services of its Bengal product line.

     No customer accounted for 10% or more of the Company's revenues during 
any of the three years ended April 30, 1998.

     Marketing efforts are focused on various target industries, 
applications, and markets. To enhance the effectiveness of sales efforts, the 
marketing staff and sales force acquire detailed information on the 
manufacturing applications and requirements in targeted market segments. This 
information is used to develop standardized and customized solutions using 
UHP waterjet and robotics technologies. The Company provides turnkey systems, 
including system design, specification, hardware and software integration, 
equipment testing and simulation, installation, start-up services, technical 
training and service.

     One of the Company's marketing techniques utilizes a telemarketing 
program to identify and qualify sales leads, thus increasing the efficiency 
of the direct sales staff. Market responses to these activities are carefully 
screened to identify new areas of interest and new potential applications in 
our target markets. The Company also attends trade shows for targeted market 
segments and advertises in selected industry publications.


PATENTS AND LICENSES

     The Company holds a large number of patents relating to UHP waterjet 
technology and systems. Some of these patents are subject to sub-licenses. In 
addition, the Company has been granted licenses with respect to other patents 
used in the business.

     While the Company believes the patents it uses are valid, it does not 
consider its business dependent on patent protection. In addition, the 
Company has over the years developed non-patented proprietary expertise and 
know-how in waterjet and access system applications, and in the manufacture 
of these systems, which sets it technologically ahead.

     The Company believes the patents it holds and has in process, along with 
the proprietary application and manufacturing know-how, act as a barrier of 
entry into the markets it serves.

<PAGE>

BACKLOG

     At April 30, 1998, the Company's UHP backlog was $18.5 million, 
essentially flat with the prior year end backlog of $18.3 million. The nature 
of the Company's business is that most products can be shipped within a four 
to eight week period and thus backlog and the changes in the Company's 
backlog are not necessarily indicative of comparable variations in sales or 
earnings. The April 30, 1998 backlog represented 13% of fiscal 1998 sales. 
Based upon the terms of the customer contracts and the Company's 
manufacturing schedule, all of the revenue backlog as of April 30, 1998 is 
expected to be realized during fiscal 1999. The unit sales price for most of 
the Company's products and services is relatively high (typically ranging 
from tens of thousands to millions of dollars) and individual orders can 
involve the delivery of several hundred thousand dollars of products or 
services at one time. Furthermore, some items in backlog can be shipped more 
quickly than others, and some have higher profit margins than others.


COMPETITION

     The major competitors for UHP waterjet systems are conventional cutting 
and cleaning methods. These methods are saws, knives, shears, torches, 
lasers, abrasive wheels, grinders, routers, drills, dies, and abrasive 
cleaning techniques. A UHP waterjet cutting system has many advantages over 
conventional cutting systems, including no generation of heat or airborne 
dust, easy adaptability to complex cutting programs, and the ability to leave 
clean-cut edges. These factors, in addition to elimination of secondary 
processing in most circumstances, enhance manufacturing productivity. 
Waterjet cleaning offers many advantages over other cleaning methods, such as 
the ability to remove difficult coatings or deposits from a surface without 
damaging underlying material. A UHP waterjet system is an 
environmentally-friendly answer to many difficult cutting and cleaning 
applications and can often be justified solely on the basis of hazardous 
material containment or reduction of secondary operations in the production 
process. The many advantages of a waterjet over traditional cutting and 
cleaning methods have positioned it in the market as a productivity enhancing 
tool.

     The Company also competes with other waterjet cutting equipment 
manufacturers in the United States, Europe and Asia. Certain of these 
competitors have greater financial resources than the Company. The Company's 
robotics acquisitions give Flow a competitive advantage as the only total 
solution supplier of complete waterjet cutting systems. Although independent 
market information is not generally available, based upon data assembled from 
internal and external sources, Company management believes it is the largest 
manufacturer of UHP waterjet cutting systems in the world.

     Overall, the Company believes that its competitive position is enhanced 
by (1) technically advanced, proprietary products that provide excellent 
reliability, low operating costs, and user-friendly features, (2) a strong 
application-oriented, problem-solving marketing and sales approach, (3) an 
active research and development program that allows it to maintain technical 
leadership, (4) the ability to provide complete turnkey systems, (5) a strong 
position in key markets, such as the U.S., Canada, Japan, southeast Asia and 
Europe, (6) strong OEM customer ties, and (7) efficient production facilities.

<PAGE>

RESEARCH AND ENGINEERING

     The Company has allocated an amount, between 5% and 7% of revenues to 
research and engineering during each of the three years ended April 30, 1998. 
Research and engineering expenses were approximately $10,253,000, $8,749,000, 
and $8,110,000 in fiscal years 1998, 1997, and 1996, respectively.


EMPLOYEES

     As of April 30, 1998, the Company employed 813 full time and 7 part time 
personnel. There are no material collective bargaining agreements to which 
the Company is a party.


FOREIGN AND DOMESTIC OPERATIONS

     See Note 13 of Notes to Consolidated Financial Statements for 
information regarding foreign and domestic operations.


SAFE HARBOR STATEMENT

     Statements in this report that are not strictly historical are "forward 
looking" statements which should be considered as subject to the many 
uncertainties that exist in the Company's operations and business 
environment. Significant factors which may affect future Company performance 
include the following:

     The Company's growth depends, in part, on the successful development of 
improvements to its equipment and on the introduction of new products and 
technologies. Improvements in competing technologies could affect the 
Company's ability to market its products.

     The Company's financial performance could fall short of its goals if a 
change in overall economic conditions results in a decrease in the purchase 
of capital goods by its customers. Changes in the mix of products sold by the 
Company can also affect the gross margin achieved.

     The Company's performance may also be affected by factors related to the 
recent divestiture of its Access and Services businesses.

     The success of the Company's most recently announced technology, 
"Fresher Under Pressure" will be dependent on consumer acceptance of the 
technology as well as the Company's ability to conform the technology to any 
food and beverage regulations.

<PAGE>

ITEM 2. PROPERTIES
-------------------------------------------------------------------------------

     The Company's headquarters and primary manufacturing facilities are 
located in one leased facility in Kent, Washington. The Company also 
manufactures product in Bretton and Darmstadt, Germany; Burlington, Canada; 
Hsinchu, Taiwan and Jeffersonville, Indiana. The Company sells product 
through all of these locations in addition to offices located in Birmingham, 
England; Detroit, Michigan; Nagoya and Tokyo, Japan and Windsor, Canada.

     All facilities of the Company are leased with the exception of a 
manufacturing facility in Jeffersonville, Indiana.

     The Company believes that its facilities are suitable for its current 
operations and that expansion in the near term will not require additional 
space. The Company further considers that its primary manufacturing facility 
will be adequate to meet production requirements for the next three to five 
years.


ITEM 3. LEGAL PROCEEDINGS
-------------------------------------------------------------------------------

     The Company is party to various legal actions incident to the normal 
operation of its business, none of which is believed to be material to the 
financial condition of the Company. See Notes 1 and 12 of Notes to 
Consolidated Financial Statements for a description of the Company's product 
liability insurance coverage and estimated exposure.

<PAGE>

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


         None

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS.
-------------------------------------------------------------------------------

         See page 13

ITEM 6.  SELECTED FINANCIAL DATA.
-------------------------------------------------------------------------------

         See page 13

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.
-------------------------------------------------------------------------------

         See pages 14 through 23

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------------------------------------------

         See pages 25 through 49

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE.
-------------------------------------------------------------------------------

         None.


<PAGE>



ITEM 5. MARKET FOR  THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER 
        MATTERS
-------------------------------------------------------------------------------


     The principal market for the Company's common stock is the over-the-counter
market. The Company's stock is traded on the NASDAQ National Market under the
symbol "FLOW." The range of high and low sales prices for the Company's common
stock for the last two fiscal years is set forth in the following table.

<TABLE>
<CAPTION>

                                                           Fiscal Year 1998                   Fiscal Year 1997
                                                      High               Low            High               Low
                                                      ---------------------------------------------------------
     <S>                                            <C>                <C>             <C>                <C>
     First Quarter                                  $10.38             $7.88           $10.13             $6.50
     Second Quarter                                  11.75              9.13             9.38              7.38
     Third Quarter                                   11.25              9.13            10.00              7.38
     Fourth Quarter                                  10.69              9.56            10.13              8.38

</TABLE>

     There were 1,258 stockholders of record as of June 23, 1998.

     The Company has not paid dividends to common stockholders in the past. The
Board of Directors intends to retain future earnings to finance development and
expansion of the Company's business and does not expect to declare dividends to
common stockholders in the near future.

ITEM 6. SELECTED FINANCIAL DATA
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

(In thousands, except per share amounts)                    Year Ended April 30,
-------------------------------------------------------------------------------------------------------------
                                           1998*          1997*            1996           1995           1994
                                          -------------------------------------------------------------------
<S>                                      <C>            <C>             <C>            <C>             <C>
Income Statement Data:
   Revenue                               $159,482       $168,193        $144,905       $110,010        $88,632
   Pretax Income                            6,505            963           8,902          9,259          3,112
   Net Income                               4,803            725           7,085          7,728          2,953
   Basic Earnings Per Share                  0.33           0.05            0.49           0.55           0.21
   Diluted Earnings Per Share                0.32           0.05            0.47           0.53           0.21

Balance Sheet Data:
   Working Capital                         59,863         68,126          57,866         44,592         25,415
   Total Assets                           121,181        133,466         126,493        105,484         78,228
   Short-Term Debt                          6,905          1,730           3,339          2,412         16,504
   Long-Term Obligations                   32,076         53,569          45,590         33,359         10,559
   Stockholders' Equity                    61,195         56,753          57,060         49,803         37,948

</TABLE>

   *   See Note 3 of the Consolidated Financial Statements which describes the
       disposition of certain business units during fiscal 1998 as well as a
       related restructuring provision in fiscal 1997.


<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
-------------------------------------------------------------------------------

RESULTS OF OPERATIONS

     The Company provides ultrahigh-pressure ("UHP") waterjets and related
products and services to a wide variety of industries. The Company divides its
UHP revenues into two primary categories of product, `UHP Waterjet Systems' and
`UHP Consumable Parts and Services'.


                CONSOLIDATED REVENUES BY MAJOR PRODUCT CATEGORIES

<TABLE>
<CAPTION>

(In thousands)                          1998                    1997                   1996
                                       Revenue        %       Revenue       %        Revenue        %
                                       --------------------------------------------------------------
<S>                                    <C>           <C>      <C>           <C>      <C>          <C>
UHP Waterjet Systems                   $ 94,728       66      $ 71,658       64      $56,495       61
UHP Consumable Parts and Services        47,904       34        40,774       36       36,076       39
                                       --------------------------------------------------------------
Total UHP Revenues                     $142,632      100      $112,432      100      $92,571      100
                                       --------------------------------------------------------------

</TABLE>

     In addition to UHP sales, the Company's consolidated revenues also include
the Access and Services businesses as represented by `Access Systems and
Services' and `HydroMilling(R) and HydroCleaning(TM) Services', respectively.
These non-core operations were sold during the second quarter of fiscal 1998:

<TABLE>
<CAPTION>

(In thousands)                      1998                   1997                   1996
                                   Revenue        %      Revenue       %        Revenue        %
                                 ---------------------------------------------------------------
<S>                              <C>           <C>      <C>           <C>      <C>           <C>
Total UHP Revenues               $142,632       90      $112,432       67      $ 92,571       64
Access Systems and Services        11,480        7        40,978       24        38,857       27
HydroMilling(R)and
   HydroCleaning Services           5,370        3        14,783        9        13,477        9
                                 ---------------------------------------------------------------
Total Consolidated Revenues      $159,482      100      $168,193      100      $144,905      100
                                 ---------------------------------------------------------------

</TABLE>

FISCAL 1998 COMPARED TO FISCAL 1997

     During the second quarter of fiscal 1998 the Company sold its non-core
Access and Services operations. Access was comprised of the following business
units: Spider Staging Corporation, Power Climber and affiliated companies, the
Ark Systems division and Consortium Europeen du Materiel. The HydroMilling
division and the HydroCleaning operations of Flow's subsidiary Rampart,
comprised Services. Fiscal 1998 results included these operations only during
the first quarter, while fiscal 1997 included these operations for the entire
year. The Access and Services business units accounted for approximately 10% and
33% of fiscal 1998 and 1997 revenues, respectively. The Company recorded a total
of $13.9 million in restructuring charges during fiscal 1998 and 1997 to write
down the Access and 


<PAGE>

Services assets sold to net realizable value and provide for transaction 
expenses and probable future obligations associated with the sale. These 
charges are included as a separate component of operating expenses in the 
accompanying Consolidated Statements of Income.

     Given this significant disposition of operations during fiscal 1998, two
separate Results of Operations reviews have been provided. The "UHP RESULTS OF
OPERATIONS ANALYSIS" provides a review of the UHP operations for fiscal 1998 as
compared to 1997 and the "ACCESS AND SERVICES OPERATIONS ANALYSIS" is a review
of the results of operations for Access and Services for fiscal 1998 as compared
to 1997.

     The following pro forma table separates the Company's consolidated income
statement into the ongoing operations (UHP) and the divested operations (Access
and Services). The Access and Services results include the restructuring
charges:

<TABLE>
<CAPTION>

(In thousands)                           Year Ended April 30, 1998                      Year Ended April 30, 1997
                                -----------------------------------------      ------------------------------------------
                                                 Access &                                      Access &
                                    UHP          Services    Consolidated          UHP         Services      Consolidated
                                -----------------------------------------      ------------------------------------------
<S>                             <C>             <C>          <C>               <C>             <C>           <C>
Revenue                         $ 142,632       $ 16,850       $ 159,482       $ 112,432       $ 55,761       $ 168,193
Gross profit                       58,958          5,247          64,205          46,635         19,516          66,151
Operating expenses                 45,593          8,427          54,020          37,431         23,874          61,305
Operating income / (loss)          13,365         (3,180)         10,185           9,204         (4,358)          4,846
Interest / other exp., net         (3,303)          (377)         (3,680)         (2,918)          (965)         (3,883)
Pretax income / (loss)             10,062         (3,557)          6,505           6,286         (5,323)            963

</TABLE>

UHP RESULTS OF OPERATIONS ANALYSIS -

     The following analysis presents a year over year comparison of the ongoing
UHP operations. The following pro forma table presents the results of operations
of the Company's UHP business only and excludes the divested business units:

<TABLE>
<CAPTION>

(In thousands)                                Year ended
                                               April 30,
                                       -------------------------
                                          1998            1997
                                       -------------------------
       <S>                             <C>             <C>
       Revenue                         $ 142,632       $ 112,432
       Gross profit                       58,958          46,635
       Operating expenses:
         Marketing                        21,952          18,924
         Research & engineering            9,990           7,706
         General & administrative         13,651          10,801
                                       ---------       ---------
       Total operating expenses           45,593          37,431
                                       ---------       ---------
       Operating income                   13,365           9,204
       Interest expense, net              (2,886)         (2,248)
       Other expense, net                   (417)           (670)
                                       ---------       ---------
       Pretax income                   $  10,062       $   6,286

</TABLE>

<PAGE>

     Total revenues for the year ended April 30, 1998 were $142.6 million, an
increase of $30.2 million (27%) over the prior year period. The Company's
revenues can be segregated into two primary categories, systems sales and
consumables sales. Systems are generally comprised of a pump along with the
robotics or articulation to move the cutting or cleaning head. Systems sales in
fiscal 1998 were $94.7 million, an increase of $23.1 million (32%) over the
prior year. This growth was driven by the continued increasing recognition that
waterjet cutting is a better alternative to traditional cutting methods. The
Company's standard systems: the Flying Bridge(TM), the Bengal and the A-series
represent the majority of the increase in systems sales. Consumables are
primarily parts used by the pump and cutting head during operation. Consumable
parts and services revenues increased $7.1 million (17%) to $47.9 million in
fiscal 1998. The consumable parts increase reflects the expanding base of
waterjet systems installed throughout the world. Revenues grew in all three
primary geographic markets, The Americas, Europe and Asia, with increases of
27%, 25% and 29%, respectively, over the prior year. The Company typically sells
its products at higher prices outside the United States due to the costs of
servicing these markets. The Company did not significantly raise prices during
fiscal 1998.

     Gross profit expressed as a percentage of revenue (the gross margin rate)
was 41% in both fiscal 1998 and 1997. In general, gross margin rates on systems
sales are less than 40% and on consumables sales are in excess of 50%. As such,
the gross margin rate can vary depending on the revenue mix between systems and
consumables sales. Systems sales represented 66% of fiscal 1998 revenues, up
from 64% in the prior year and consumables sales represented 34% of fiscal 1998
revenues, down from 36% in the prior year. The gross margin rate remained
constant in fiscal 1998 with 1997 even with the continuing shift in revenue mix
towards systems versus consumables sales. This reflects, in part, the benefit of
lower costs on the standard product line as a result of increased production
levels.

     Operating expenses of $45.6 million increased $8.2 million (22%) over the
prior year, however expressed as a percentage of revenues, operating expenses
decreased to 32% from 33% in fiscal 1997. Sales and marketing expense of $22
million increased $3 million (16%) as compared to the prior year; however,
expressed as a percentage of revenues, sales and marketing expense decreased to
15% from 17% in the prior year. This reduction reflected management's ability to
leverage marketing activities against a higher revenue base. Research and
engineering expense in fiscal 1998 increased $2.3 million (30%) to $10 million
as compared to fiscal 1997. This increased spending included continued
development of the "Fresher Under Pressure" technology as well as research in
other areas of the Company's products and applications. Management will continue
to aggressively pursue technological advances through increased research and
engineering spending. As a percent of revenues however, research and engineering
expenses were 7% in both fiscal 1998 and 1997. General & administrative expense
of $13.7 million increased $2.9 million (26%) for the year as compared to the
prior year. Over one half of this increase is attributable to the inclusion of
the fiscal 1998 acquisitions of Foracon and CIS. Expressed as a percent of
revenues, general and administrative expenses were comparable to the prior year.

<PAGE>

     Operating income can vary significantly for domestic and foreign operations
(see Note 13 of Notes to Consolidated Financial Statements), but is primarily
the result of product mix variations and volume from year to year. Management
continues to monitor the situation in Asia resulting from the recent
fluctuations in currency exchange rates against the U.S. dollar. Fiscal 1998
sales into Asia, including Japan totaled $19.2 million, approximately 14% of
revenues. While the Asian situation did not negatively impact the Company's
fiscal 1998 results, management anticipates percentage revenue growth in Asia
will be less in fiscal 1999 than in fiscal 1998. Besides the slower growth in
Asia, there are no known trends that management expects to result in a
materially unfavorable impact on revenues or income from operations.

     Net interest expense of $2.9 million increased $638,000 (28%) in fiscal
1998 compared to 1997. This increase results from higher debt levels associated
with an increased level of production and capital additions as well as
borrowings related to the fiscal 1998 acquisitions. During fiscal 1998, other
expense, net, totaled $417,000 compared to other expense, net, of $670,000 in
1997.

     Fiscal 1998 income tax expense for UHP operations was estimated to be 29%
of income before tax as compared to 25% in the previous year. The income tax
rates were lower than the statutory rates in both the current and prior year due
primarily to lower foreign tax rates, benefits from the foreign sales
corporation, and an ongoing review of the Company's FAS 109 valuation allowance.

     In fiscal 1998 the Company adopted Statement of Financial Accounting
Standards No. 128 ("FAS 128"), "Earnings per Share" which changed the Company's
presentation and calculation of earnings per share. Earnings per share for
fiscal 1997 have been restated to conform to the requirements of FAS 128. The
weighted average number of shares outstanding for the calculation of Basic and
Diluted earnings per share are 14,707,000 and 15,037,000, respectively, for
fiscal 1998 and 14,561,000 and 14,932,000, respectively, for fiscal 1997.

     Utilizing the respective tax rates of 29% and 25%, the Company recorded
fiscal 1998 UHP net income of $7.1 million, or $.48 Basic and $.47 Diluted
earnings per share as compared to $4.7 million, or $.33 Basic and $.32 Diluted
earnings per share in fiscal 1997.

<PAGE>

ACCESS AND SERVICES OPERATIONS ANALYSIS -

     The following pro forma table presents the results of operations of the
Access and Services business units, including the restructuring charges:

<TABLE>
<CAPTION>

(In thousands)                            Year ended
                                           April 30,
                                   -----------------------
                                       1998           1997
                                   -----------------------
<S>                                <C>            <C>
Revenue                            $ 16,850       $ 55,761
Gross profit                          5,247         19,516
Operating expenses                    8,427         23,874
Operating loss                       (3,180)        (4,358)
Interest / other expense, net          (377)          (965)
Pretax loss                          (3,557)        (5,323)

</TABLE>

     The year over year differences between fiscal 1998 and 1997 occurred as a
result of the sale of these businesses during the second quarter of fiscal 1998.
Additionally, the operating expenses include restructuring costs associated with
the divestiture of $4.9 million and $9 million in fiscal 1998 and 1997,
respectively.


FISCAL 1997 COMPARED TO FISCAL 1996

     As discussed in the operations analysis of fiscal 1998 to fiscal 1997, the
Company divested itself of its Access and Services operations in September 1997.
Consistent with the fiscal 1998 to 1997 presentation, two operations analyses
for fiscal 1997 as compared to fiscal 1996 have been provided. The "UHP RESULTS
OF OPERATIONS ANALYSIS" provides a review of fiscal 1997 as compared to fiscal
1996 for the UHP operations, the ongoing business, and the "ACCESS AND SERVICES
OPERATIONS ANALYSIS" is a review of the results of operations for Access and
Services for fiscal 1997 as compared to 1996.

     The following pro forma table separates the Company's consolidated income
statement into the ongoing operations (UHP) and the divested operations (Access
and Services). The fiscal 1997 Access and Services results include a $9 million
restructuring charge:

<TABLE>
<CAPTION>

(In thousands)                          Year Ended April 30, 1997                   Year Ended April 30, 1996
                                -----------------------------------------      ----------------------------------------
                                                Access &                                     Access &
                                    UHP         Services     Consolidated         UHP        Services      Consolidated
                                -----------------------------------------      ----------------------------------------
<S>                             <C>             <C>          <C>               <S>           <C>           <C>
Revenue                         $ 112,432       $ 55,761       $ 168,193       $ 92,571       $ 52,334       $ 144,905
Gross profit                       46,635         19,516          66,151         39,144         18,286          57,430
Operating expenses                 37,431         23,874          61,305         32,896         12,777          45,673
Operating income/(loss)             9,204         (4,358)          4,846          6,248          5,509          11,757
Interest / other exp., net         (2,918)          (965)         (3,883)        (1,797)        (1,058)         (2,855)
Pretax income/(loss)                6,286         (5,323)            963          4,451          4,451           8,902

</TABLE>

<PAGE>

UHP RESULTS OF OPERATIONS ANALYSIS -

     The following analysis presents a year over year comparison of the 
ongoing UHP operations. The following pro forma table presents the results of 
operations of the Company's UHP business only and excludes the divested 
business units:

<TABLE>
<CAPTION>

(In thousands)                                           YEAR ENDED
                                                          APRIL 30,
                                                  ------------------------
                                                     1997             1996
                                                  ------------------------
                             
           <S>                                   <C>             <C>

           Revenue                                $ 112,432       $ 92,571
           Gross profit                              46,635         39,144
           Operating expenses:
            Marketing                                18,924         15,249
            Research & engineering                    7,706          7,051
            General & administrative                 10,801         10,596
                                                  ---------       --------
           Total operating expenses                  37,431         32,896
                                                  ---------       --------
           Operating income                           9,204          6,248
           Interest expense, net                     (2,248)        (1,964)
           Other (expense) / income, net               (670)           167
                                                  ---------       --------
           Pretax income                          $   6,286       $  4,451

</TABLE>

     Total UHP revenues for the year ended April 30, 1997 were $112.4 
million, an increase of $19.9 million (21%) over the prior year period. 
Within UHP, systems sales increased $15.2 million (27%) while consumable 
parts and services revenues increased $4.7 million (13%). Sales of the 
Company's standard systems: the Flying Bridge, the Bengal and the A-series, 
represented the primary increase in systems sales. The growth in consumable 
parts reflects the increased base of waterjet systems installed throughout 
the world. Revenues grew in all three primary geographic markets, The 
Americas, Asia and Europe, with increases of 27%, 16% and 11%, respectively, 
over the prior year.

     The gross margin rate was 41% in fiscal 1997 compared with 42% in fiscal 
1996. The gross margin rate is dependent on the mix of sales between systems 
and consumable parts. This gross margin rate decrease was primarily a result 
of a revenue mix shift towards systems sales. Systems sales represented 64% 
of fiscal 1997 revenues, up from 61% in the prior year.

     Operating expenses increased $4.5 million (14%) over the prior year, 
however expressed as a percentage of revenues, total expenses decreased to 
33% from 36% in the prior year. Marketing expenses increased $3.7 million 
(24%). This increase results from higher expenses associated with increased 
marketing activity. Marketing expenses represented 17% of revenues in fiscal 
1997 as compared to 16% of revenues in fiscal 1996. Research and engineering 
expenses increased $655,000 (9%), however as a percent of revenues they 
decreased to 7% from 8% in the prior year. General and administrative 
expenses of $10.8 million increased $205,000 (2%), but decreased to 10% of 
revenues from 11% as compared to the prior year.

<PAGE>

     Operating income can vary significantly for domestic and foreign 
operations (see Note 13 of Notes to Consolidated Financial Statements), but 
is primarily the result of product mix variations and volume from year to 
year.

     Net interest expense increased by $284,000 (14%) in fiscal 1997 compared to
1996. This increase results from higher debt levels which include borrowings for
a $1.5 million equity investment in Western Garnet International Ltd., the
primary supplier of the Company's garnet. During fiscal 1997, other expense,
net, totaled $670,000 compared to other income, net, of $167,000 in 1996.
Included in the current year is approximately $600,000 associated with foreign
exchange losses related to the strengthening U.S. Dollar versus the Deutsche
mark. Fiscal 1996 contained a $175,000 gain on the sale of stock held by the
Company.

     Income tax expense for UHP operations for fiscal 1997 was estimated at 
25% of income before tax as compared to 20% in the previous year. The income 
tax rate was lower than the statutory rates in both the current and prior 
year due primarily to lower foreign tax rates, benefits from the foreign 
sales corporation, and an ongoing review of the Company's FAS 109 valuation 
allowance.

     Utilizing the respective tax rates of 25% and 20%, the Company recorded 
fiscal 1997 UHP net income of $4.7 million, or $.33 Basic and $.32 Diluted 
earnings per share as compared to $3.5 million, or $.25 Basic and $.24 
Diluted earnings per share in fiscal 1996.

ACCESS AND SERVICES OPERATIONS ANALYSIS -

     The following pro forma table presents the results of operations of the 
Access and Services business units, including the restructuring charge in 
fiscal 1997:

<TABLE>
<CAPTION>

(In thousands)                            YEAR ENDED
                                           APRIL 30,
                                   ------------------------
                                      1997             1996
                                   ------------------------
                             
      <S>                           <C>             <C>

       Revenue                       $ 55,761       $ 52,334
       Gross profit                    19,516         18,286
       Operating expenses              23,874         12,777
                                                      ------
       Operating (loss) income         (4,358)         5,509
       Interest / other expense, net     (965)        (1,058)
       Pretax (loss) income            (5,323)         4,451

</TABLE>

     Total revenues for the year ended April 30, 1997 were $55.8 million, an 
increase of $3.4 million (7%) over the prior year period. Revenues were 
comprised of sales, service and rentals. The Access operations generated 
revenues in all categories, while the Services unit revenues were classified 
as service. Sales decreased $1 million (4%) to $23.5 million versus fiscal 
1996. Rental revenues rose $2.3 million (22%) to $12.8 million and service 
revenues increased $2.2 million (12%) to $19.5 million as compared to the 
prior year. The Services division represented $1.3 million of the service 
revenue increase. The $14.4

<PAGE>

million contract for parking garage rehabilitation services at the John F. 
Kennedy Center for the Performing Arts in Washington, D.C. was completed 
during early fiscal 1997. Domestic markets represent the growth in Access 
revenues, as international Access revenues decreased 5% over the prior year.

     The gross margin rate was 35% in both fiscal 1997 and 1996. The gross 
margin rate is dependent on the mix of sales, service, and rental revenues. 
The gross margin rate on sales improved to 36% from 33%, primarily as a 
result of product mix. The gross margin rate of the Services unit decreased 
to 25% from 27% in the prior year as several large HydroMilling and 
HydroCleaning projects had lower than expected gross margins. The rental 
gross margin rate decreased to 48% from 53% in the prior year. This was 
primarily a result of increased depreciation expense associated with 
additions of rental assets.

     With the increasing acceptance of UHP technology as the machine tool of 
choice, as well as recent developments which utilize core UHP technology in 
pumpable food processing, management determined that refocusing Flow solely 
back to UHP was in the best interests of the Company. As a result, during the 
fourth quarter of fiscal 1997 the Company announced its intent to divest 
itself of its Access and Services businesses. During fiscal 1997 the Company 
recorded $9 million in expenses associated with the planned sale of these 
businesses. The primary components of these expenses were: write down of 
assets to net realizable value: $7.4 million; restructuring costs to be 
incurred in fiscal 1998: $1.3 million; restructuring costs incurred during 
fiscal 1997: $300,000.

     The following discussion of operating expenses excludes the 
restructuring charge of $9 million. Operating expenses increased by $2.1 
million (17%) over the prior year. Expressed as a percentage of revenues, 
total expenses increased to 27% from 24% in the prior year. Approximately 
$1.2 million of the increase represented additional marketing expenses while 
the remaining $900,000 increase was in general & administrative expense. 
Research and engineering was flat year over year.

     Operating income can vary significantly for domestic and foreign 
operations (see Note 13 of Notes to Consolidated Financial Statements), but 
is primarily the result of product mix variations and volume from year to 
year.

     Net interest expense increased by $50,000 (3%) to $1.6 million and other 
income, net, increased $143,000 (30%) to $624,000 as compared to fiscal 1996. 
The increase in other income, net, resulted from higher income associated 
with minority interest in net losses of the joint ventures over the prior 
year.

     Income tax expense for fiscal 1997 was 25% of income before tax as 
compared to 20% in the previous year. Income tax expense was lower than the 
statutory rate in both fiscal 1997 and 1996 primarily due to lower tax rates 
in certain foreign jurisdictions, the benefit of the Company's foreign sales 
corporation, and changes in the Company's valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

     The Company generated $2.7 million in cash flow from operations during 
the year as compared to $3.7 million in the prior year. The current year 
Consolidated Statement of Cash Flows reflects the

<PAGE>

disposition of the Access and Services businesses. Cash flow in fiscal 1998 
was impacted by increases in both trade accounts receivable and inventory as 
discussed further below. The Company invested $6.6 million in property and 
equipment during fiscal 1998 of which Access and Services was $1.9 million. 
Additionally, the Company spent $7.7 million to purchase two businesses as 
well as increase its ownership in the Flow Japan and HydroDynamic Cutting 
Services joint ventures. Total debt at April 30, 1998 was $39 million, down 
$16.3 million (30%) from April 30, 1997. This reduction reflects the receipt 
of cash proceeds from the sale of Access and Services, offset by borrowings 
related to the business combinations. Management believes that the available 
credit facilities and working capital generated by operations will provide 
sufficient resources to meet its operating and capital requirements for the 
next twelve months. The Company's Credit Agreement and Private Placement 
require the Company to comply with certain financial covenants. The covenants 
were amended so as to take into consideration the restructuring charges 
associated with the divestiture of the Access and Services businesses. As of 
April 30, 1998, the Company was in compliance with all such covenants, as 
amended.

     See Note 7 of Notes to Consolidated Financial Statements for a schedule 
of long-term debt maturities. Long-term debt obligations are expected to be 
met from working capital provided by operations and, as necessary, by other 
indebtedness.

     Capital spending plans currently provide for outlays of approximately $4 
million to $5 million in fiscal 1999. It is expected that funds necessary for 
these expenditures will be generated internally, and through available credit 
facilities.

     Gross trade accounts receivable of $38 million at April 30, 1998 
decreased $3 million (7%) from April 30, 1997. This decrease results from the 
divestiture of the Access and Services operations. Excluding these non-core 
operations, gross trade accounts receivable increased $11 million (41%) 
principally due to the acquisition of Foracon and CIS as well as higher 
fourth quarter revenues. Days' sales outstanding in gross accounts receivable 
is negatively impacted by the traditionally longer payment cycle outside the 
United States. Additionally, longer payment terms are sometimes negotiated on 
large system orders. Management does not believe these timing issues will 
present a material adverse impact on the Company's short-term liquidity 
requirements.

     Inventory of $37 million decreased $1.5 million (4%). This was related 
to the divestiture of the Access and Services businesses. Excluding these 
non-core operations, inventory increased $4.4 million (16%) principally due 
to the acquisition of Foracon and higher inventory levels associated with 
increased production levels and new product introductions. Certain products 
manufactured by the Company's robotics and automation divisions require an 
extended manufacturing period, and therefore involve higher levels of work in 
process.

     The Company is currently converting its existing computer applications 
to help ensure readiness for the potential impact of the year 2000 date. 
Additionally, the Company is interviewing key suppliers and customers to 
ensure readiness on their part. Management currently estimates the project 
will be completed in early calendar 1999 and the associated costs will be 
less than $100,000.

<PAGE>

     It is the Company's policy to hedge net assets denominated in foreign 
currencies (primarily the Deutsche mark) where significant currency rate 
fluctuations may impact profitability.

     In fiscal 1998 the Company adopted Statement of Financial Accounting 
Standards No. 128 ("FAS 128"), `Earnings per Share" which changed the 
Company's presentation, disclosure and calculation of earnings per share. The 
adoption of FAS 128 did not have a material impact on the Company's earnings 
per share.

     Statement of Financial Accounting Standards No. 130 ("FAS 130"), 
"Reporting Comprehensive Income" is effective beginning in fiscal 1999. FAS 
130 requires the Company present in the same prominence as other financial 
statements a Comprehensive Income statement. Comprehensive income for the 
Company consists of net income adjusted for any changes in certain 
Shareholders' Equity accounts including the Cumulative Translation Adjustment 
as well as the Unrealized Loss on Equity Securities. The Company will adopt 
FAS 130 in the first quarter of fiscal 1999.

     Statement of Financial Accounting Standards No. 131 ("FAS 131"), 
"Disclosures about Segments of an Enterprise and Related Information" is 
effective beginning in fiscal 1999. FAS 131 requires the Company to report 
information about operating segments both annually as well as condensed data 
quarterly. Operating segments are determined based upon the manner in which 
internal financial information is produced and evaluated. Additionally 
certain geographical information is required regardless of how internal 
financial information is generated. The Company will adopt FAS 131 in the 
first quarter of fiscal 1999. Management is evaluating the impact, if any, 
FAS 131 will have on the Company's present reporting.

                    MANAGEMENT'S STATEMENT OF RESPONSIBILITY

     Management is responsible for the fair and accurate presentation of 
information in this annual report. The financial statements and related notes 
have been prepared in accordance with generally accepted accounting 
principles. Financial and operating information comes from Company records 
and other sources. Certain amounts are, of necessity, based on judgment and 
estimation.

     We believe that adequate accounting systems and financial controls are 
maintained to ensure that the Company's records are free from material 
misstatement and to protect the Company's assets from loss or unauthorized 
use. In addition, the Audit Committee of the Board of Directors periodically 
meets with PricewaterhouseCoopers LLP and management to review the work of 
each, to discuss financial reporting matters, and to review auditing and 
internal control procedures.

                                                     /S/ STEPHEN D. REICHENBACH
                                                         Stephen D. Reichenbach
                                            Executive Vice President, Treasurer
                                                    and Chief Financial Officer
<PAGE>

<TABLE>
<CAPTION>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------------------------------------------------------

     The following consolidated financial statements are filed as
a part of this report:

INDEX TO FINANCIAL STATEMENTS                                                   PAGE IN THIS REPORT
----------------------------------------------------------------------------------------------------
<S>                                                                                    <C>

Report of Independent Accountants                                                      25

Consolidated Balance Sheets at April 30, 1998 and 1997                                 26

Consolidated Statements of Income for each of the three
  years in the period ended April 30, 1998                                             27

Consolidated Statements of Cash Flows for each of
  the three years in the period ended April 30, 1998                                   28

Consolidated Statements of Changes in Stockholders'
  Equity for each of the three years in the period ended April 30, 1998                30

Notes to Consolidated Financial Statements                                             31


FINANCIAL STATEMENT SCHEDULES

VIII   --  Valuation and Qualifying Accounts                                           49


</TABLE>
         All other schedules are omitted because they are not applicable.


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of
Flow International Corporation


     In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Flow International Corporation and its subsidiaries at April 30,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended April 30, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.




/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS  LLP
Seattle, Washington
June 1, 1998



<PAGE>

<TABLE>
<CAPTION>
                         FLOW INTERNATIONAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)

                                                                                                        APRIL 30,
                                                                                                ----------------------
                                                                                                1998 *            1997
                                                                                                ------            ----
<S>                                                                                            <C>               <C>
ASSETS:
Current Assets:
  Cash                                                                                         $  3,006          $  2,479
  Trade Accounts Receivable, less
     allowances for doubtful accounts of $669 and $1,008, respectively                           37,359            40,050
   Inventories, net                                                                              36,976            38,471
   Deferred Income Taxes                                                                          2,493             4,758
   Other Current Assets                                                                           7,846             4,959
                                                                                               -------------------------
Total Current Assets                                                                             87,680            90,717

Property and Equipment, net                                                                      11,992            25,594
Intangible Assets, net of accumulated amortization of
    $5,546 and $4,441, respectively                                                              16,561            11,471
Deferred Income Taxes                                                                             1,562               515
Other Assets                                                                                      3,386             5,169
                                                                                               --------------------------
                                                                                               $121,181          $133,466
                                                                                               --------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
   Notes Payable                                                                               $  1,450          $  1,651
   Current Portion of Long-Term Obligations                                                       5,455                79
   Accounts Payable                                                                              11,338            11,619
   Accrued Payroll and Related Liabilities                                                        5,428             4,564
   Other Accrued Taxes                                                                              374             1,139
   Other Accrued Liabilities                                                                      3,772             3,539
                                                                                               --------------------------
Total Current Liabilities                                                                        27,817            22,591

Long-Term Obligations                                                                            32,076            53,569
Minority Interest                                                                                    93               553

Stockholders' Equity:
   Series A 8% Convertible Preferred Stock -
     $.01 par value, $500 liquidation preference, 1,000,000 shares authorized, 0
     issued 
   Common Stock - $.01 par value, 20,000,000 shares authorized,
     15,227,725 and 14,846,908 shares issued and outstanding, respectively, in 1998
     14,925,627 and 14,544,810 shares issued and outstanding, respectively, in 1997                 152               149
   Capital in Excess of Par                                                                      41,030            38,871
   Retained Earnings                                                                             24,069            19,266
   Treasury Common Stock, 380,817 shares at cost                                                 (1,429)           (1,429)
   Cumulative Translation Adjustment                                                             (2,286)              101
   Unrealized loss on equity securities available for sale                                         (341)             (205)
                                                                                               --------------------------
Total Stockholders' Equity                                                                       61,195            56,753
                                                                                               --------------------------
                                                                                               --------------------------
Commitments and Contingencies (Note 12)
                                                                                               $121,181          $133,466
                                                                                               --------------------------
                                                                                               --------------------------
                                                                                                
</TABLE>

* - SEE NOTE 3 WHICH DESCRIBES THE DISPOSITION OF CERTAIN BUSINESS UNITS DURING
FISCAL 1998

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>



                         FLOW INTERNATIONAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED APRIL 30,
                                                                          ------------------------------------------
                                                                              1998 *             1997           1996
                                                                              ------             ----           ----
<S>                                                                        <C>              <C>            <C>

Revenue:
   Sales                                                                    $149,414         $135,908       $117,090
   Services                                                                    6,423           19,515         17,355
   Rentals                                                                     3,645           12,770         10,460
                                                                            ----------------------------------------
Total Revenues                                                               159,482          168,193        144,905

Cost of Sales:
   Sales                                                                      88,291           80,735         69,889
   Services                                                                    5,887           14,657         12,653
   Rentals                                                                     1,099            6,650          4,933
                                                                             ---------------------------------------
Total Cost of Sales                                                           95,277          102,042         87,475
                                                                             ---------------------------------------
                                                                             ---------------------------------------

Gross Profit                                                                  64,205           66,151         57,430

Expenses:
   Marketing                                                                  23,972           27,173         22,281
   Research and Engineering                                                   10,253            8,749          8,110
   General and Administrative                                                 14,885           16,432         15,282
   Restructuring                                                               4,910            8,951
                                                                             ---------------------------------------
                                                                              54,020           61,305         45,673
                                                                              --------------------------------------

Operating Income                                                              10,185            4,846         11,757

Interest Expense, net                                                         (3,246)          (3,837)        (3,503)
Other (Expense) Income, net                                                     (434)             (46)           648
                                                                             ---------------------------------------

Income Before Provision for Income Taxes                                       6,505              963          8,902
Provision for Income Taxes                                                     1,702              238          1,817
                                                                              --------------------------------------

Net Income                                                                  $  4,803         $    725       $  7,085
                                                                              --------------------------------------
                                                                              --------------------------------------

Basic Earnings Per Share                                                    $    .33         $      .05     $    .49
                                                                              ---------------------------------------
                                                                              ---------------------------------------

Diluted Earnings Per Share                                                  $    .32         $      .05     $    .47
                                                                              ---------------------------------------
                                                                              ---------------------------------------

</TABLE>

* SEE NOTE 3 WHICH DESCRIBES THE DISPOSITION OF CERTAIN BUSINESS UNITS DURING 
  FISCAL 1998

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>



                         FLOW INTERNATIONAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                          Year Ended April 30,
                                                                                 ----------------------------------------
                                                                                1998 *            1997             1996
                                                                                ------            ----             ----
<S>                                                                           <C>               <C>              <C>
Cash Flows from Operating Activities:
 Net Income                                                                    $ 4,803          $    725         $ 7,085
 Adjustments to Reconcile Net Income to Cash
  Provided (Used) by Operating Activities:
  Depreciation and amortization                                                  4,369             7,472           6,856
  Restructuring provision                                                        4,910             8,951
  Provision for losses on trade accounts receivable                                508               704             576

  Tax effect of exercised stock options                                            373               284             170
  Other                                                                                               92              92
  (Increase) Decrease in Current Assets,
   net of effects of restructuring and business combinations:
     Trade Accounts Receivable                                                 (13,007)           (5,960)         (4,032)
     Inventories                                                                (2,377)           (3,946)         (6,275)
     Other Current Assets                                                       (3,078)              (46)           (248)
     Deferred Income Taxes                                                       2,265            (2,793)           (630)
    Increase (Decrease) in Current Liabilities, net of effects of 
     restructuring and business combinations:
     Accounts Payable                                                            2,009              (469)         (1,135)
     Accrued Payroll and Related Liabilities                                     1,562               622             383
     Other Accrued Taxes                                                          (515)              549             (48)
     Other Accrued Liabilities                                                      71              (878)            229
   Decrease (Increase) in Other Long-Term Assets                                   778            (1,165)         (2,962)
   Increase (Decrease) in Other Long-Term Liabilities                               38              (484)         (1,336)
                                                                            ------------      ----------      ----------
   Cash provided (used) by operating activities                                  2,709             3,658          (1,275)
                                                                            ------------      ----------      ----------
Cash Flows from Investing Activities:
  Expenditures for property and equipment                                       (6,600)           (9,153)         (8,820)
  Investment in equity securities                                                                 (1,500)
  Payment for business combinations                                             (7,735)                             (186)
  Proceeds from sale of certain business units                                  31,189
  Other                                                                            (186)             462             445
                                                                            ------------      ----------      ----------
  Cash provided (used) by investing activities                                  16,668           (10,191)         (8,561)
                                                                            ------------      ----------      ----------
Cash Flows from Financing Activities:
  Borrowings under line of credit agreements, net                              (24,512)            8,585          16,771
  Proceeds from bridge loan                                                                                        1,636
  Repayment of bridge loan                                                                                       (14,000)
  Proceeds from long-term obligations                                            8,544               184          17,366
  Payments of long-term obligations                                             (1,389)           (2,399)         (9,076)
  Proceeds from issuance of common stock                                         1,789               550             268
  Treasury stock repurchased and received in settlement of obligations               -              (873)              -
                                                                            ------------      ----------      ----------
  Cash (used) provided by financing activities                                 (15,568)            6,047          12,965
                                                                            ------------      ----------      ----------
Effect of exchange rate changes                                                  (3,282)            (880)           (358)
                                                                            ------------      ----------      ----------
Increase (decrease) in cash and cash equivalents                                   527            (1,366)          2,771
Cash and cash equivalents at beginning of period                                 2,479             3,845           1,074
                                                                            ------------      ----------      ----------
Cash and cash equivalents at end of period                                     $ 3,006           $ 2,479         $ 3,845
                                                                            ------------      ----------      ----------
                                                                            ------------      ----------      ----------
</TABLE>

* - SEE NOTE 3 WHICH DESCRIBES THE DISPOSITION OF CERTAIN BUSINESS UNITS 
DURING  FISCAL 1998

<PAGE>

            THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE 
                    CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>



                         FLOW INTERNATIONAL CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                         Year Ended April 30,
                                                                                ---------------------------------------
                                                                                 1998            1997            1996
                                                                                 -----           -----           ----
<S>                                                                             <C>              <C>            <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

  Cash paid during the year for
    Interest                                                                      $3,504          $3,707         $3,572
    Income Taxes                                                                   1,656           2,091          3,024

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Fair value of assets acquired (Note 2)                                           $10,144                         $2,860
Cash paid, stock issued and notes assumed for assets acquired                     (7,466)                          (597)
                                                                                --------                        -------
Liabilities assumed                                                               $2,278                         $2,263
                                                                                --------                        -------
                                                                                --------                        -------
</TABLE>






              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>



                         FLOW INTERNATIONAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                      Loan to
                                        Common Stock                                                  Employee    Unrealized
                                      -----------------   Capital              Cumulative   Treasury   Stock       Loss on
                                                   Par   In Excess  Retained   Translation   Common  Ownership      Equity
                                      Shares      Value     of Par   Earnings  Adjustment    Stock   Plan & Trust Securities
                                      --------------------------------------------------------------------------------------
<S>                                   <C>         <C>    <C>        <C>        <C>          <C>      <C>          <C>
Balances, April 30, 1995              14,603       $146    $37,602    $11,456   $  1,339   $  (556)     $(184)
                                      --------------------------------------------------------------------------------------
                                      --------------------------------------------------------------------------------------

Exercise of Stock Options                182          2        266
Effect of Exchange Rate Changes                                                    (358)
Other                                                          170                                          92
Net Income                                                              7,085
                                      --------------------------------------------------------------------------------------
Balances, April 30, 1996              14,785        148     38,038     18,541        981      (556)       (92)
                                      --------------------------------------------------------------------------------------
                                      --------------------------------------------------------------------------------------

Exercise of Stock Options                141          1        549
Effect of Exchange Rate Changes                                                    (880)
Repurchase of Treasury Stock                                                                  (498)
Other                                                          284                            (375)         92       $(205)
Net Income                                                                725
                                      --------------------------------------------------------------------------------------
Balances, April 30, 1997              14,926        149     38,871     19,266        101    (1,429)        -          (205)
                                      --------------------------------------------------------------------------------------
                                      --------------------------------------------------------------------------------------

Exercise of Stock Options                302          3      1,786
Effect of Exchange Rate Changes                                                  (2,387)
Other                                                          373                                                    (136)
Net Income                                                              4,803
                                      --------------------------------------------------------------------------------------
Balances, April 30, 1998              15,228       $152    $41,030    $24,069   $(2,286)   $(1,429)     $  -         $(341)
                                      --------------------------------------------------------------------------------------
                                      --------------------------------------------------------------------------------------
</TABLE>



             THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                      CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     For the three years ended April 30, 1998 
        (All tabular dollar amounts in thousands, except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------------------------------------------

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include Flow International 
Corporation, ("Flow" or the "Company"), and its wholly-owned subsidiaries, 
Flow Europe GmbH ("Flow Europe"), Foracon Maschinen und Anlagenbau GmbH & 
CO.KG ("Foracon"), Flow Asia Corporation ("Flow Asia"), Flow Automation Inc. 
("Flow Automation"), RSL Ltd. ("RSL"), and two majority owned joint ventures 
including Flow Japan Corporation ("Flow Japan"). In addition, periods through 
the first quarter of fiscal 1998, included the wholly-owned subsidiaries 
Rampart Waterblast, Inc., Spider Staging Corporation ("Spider"), Power 
Climber and affiliated companies ("Power Climber") as well as a joint 
venture, Consortium Europeen du Materiel ("CEM") and the HydroMilling 
division, collectively ("Access and Services") (see Note 3). All significant 
intercompany transactions have been eliminated.

OPERATIONS

     The Company develops and manufactures ultrahigh-pressure ("UHP") 
waterjet cutting, cleaning and specialized robotic systems for the 
manufacturing, industrial and marine cleaning markets. The Company provides 
products to a wide variety of industries, including the automotive, 
aerospace, disposable products, food processing, job shop, marble, tile and 
other stone cutting, and paper industries. Equipment is designed, developed, 
and manufactured at the Company's principal facilities in Kent, Washington, 
and at manufacturing facilities in Jeffersonville, Indiana; and in 
Burlington, Canada. The Company markets its products to customers worldwide 
through its principal offices in Kent and its subsidiaries in Canada, 
Germany, Japan, Taiwan, and the United Kingdom.

REVENUE RECOGNITION

     Revenues are recognized at the time of shipment for products and certain 
types of systems, and under percentage of completion, measured by the cost to 
cost method, for other types of systems, and at the time of service or rental 
with respect to service and rental revenues. Products are warranted to be 
free from material defects for a period of one year from the date of 
shipment. Warranty obligations are limited to the repair or replacement of 
products. The Company's warranty accrual is reviewed quarterly by management 
for adequacy based upon recent shipments and historical warranty expense. 
Credit is issued for product returns upon receipt of the returned goods, or, 
if material, at the time of notification and approval.

     Services revenues primarily consist of revenues related to 
hydrodemolition services. Rental revenues consist of charges to customers for 
the temporary use of access system equipment.

<PAGE>

PRODUCT LIABILITY

     The Company is obligated under terms of its product liability insurance 
contracts to pay all costs up to deductible amounts. Included in general and 
administrative expense are insurance, investigation and legal defense costs. 
Legal settlements, if any, are included in other expense.

INVENTORIES

     Inventories are stated at the lower of cost, determined by using the 
first-in, first-out method, or market.

PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation for financial 
reporting purposes is provided using the straight-line method over the 
estimated useful lives of the assets which range from three to eleven years. 
Leasehold improvements are amortized over the related lease term.

RECOVERABILITY OF LONG-LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS

     The Company reviews most long-lived assets, certain identifiable 
intangibles and goodwill related to those assets to be held and used in its 
business annually for impairment, or whenever events or changes in 
circumstances indicate that the carrying amount of an asset or group of 
assets may not be recoverable in accordance with Statement of Financial 
Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived 
Assets and for Long-Lived Assets to Be Disposed Of". An impaired asset is 
written down to its estimated fair market value based on the best information 
available. The Company generally measures estimated fair market value by 
discounting estimated future cash flows. Accordingly, actual results could 
vary significantly from such estimates.

INTANGIBLE ASSETS

     Intangible assets represent goodwill which is amortized on a 
straight-line basis over fifteen years.

INCOME TAXES

     The Company accounts for income taxes under the asset and liability 
method, which requires recognition of deferred tax assets and liabilities for 
the expected future tax consequences of temporary differences between the 
carrying amounts and the tax bases of assets and liabilities. If it is more 
likely than not that some portion of a deferred tax asset will not be 
realized, a valuation allowance is recorded.

<PAGE>

EARNINGS PER SHARE

     In fiscal 1998 the Company adopted Statement of Financial Accounting 
Standards No. 128 ("FAS 128"), "Earnings per Share" which changed the 
Company's presentation and calculation of earnings per share. Basic earnings 
per share represents net income available to common stockholders divided by 
the weighted average number of shares outstanding during the period. Diluted 
earnings per share represents net income available to common stockholders 
divided by the weighted average number of shares outstanding including the 
potentially dilutive impact of stock options. Common stock options are 
converted using the treasury stock method. Earnings per share for 1997 and 
1996 have been restated to conform to the requirements of FAS 128. The 
adoption of FAS 128 did not have a material impact on the Company's earnings 
per share.

     The following table sets forth the computation of Basic and Diluted 
earnings per share for the years ended April 30, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
                                                        Year Ended April 30,
                                                   1998         1997        1996
                                                 ---------------------------------
<S>                                              <C>          <C>          <C>
Numerator:
     Net income                                  $ 4,803      $   725      $ 7,085

Denominator:

     Denominator for basic earnings
       per share - weighted average shares        14,707       14,561       14,422

     Dilutive potential common shares from-
       Employee stock options                        330          371          517
                                                 ---------------------------------
     Denominator for diluted earnings
       per share - weighted average shares
       and assumed conversions                    15,037       14,932       14,939

Basic earnings per share                         $   .33      $   .05      $   .49

Diluted earnings per share                       $   .32      $   .05      $   .47
</TABLE>

<PAGE>

FOREIGN CURRENCY TRANSLATION

     The functional currency of Flow Asia is the New Taiwan dollar; of Flow 
Europe and Foracon, the German mark; of Flow Automation, the Canadian dollar; 
of Power Climber N.V. (part of Power Climber), the Belgian franc; and of Flow 
Japan, the Japanese yen. The functional currency of Flow Europe was converted 
from the U.S. dollar to the German mark as of the beginning of fiscal 1998. 
The acquisition of Foracon by Flow Europe in May 1997 made this change 
preferable. All assets and liabilities of these foreign subsidiaries are 
translated at year-end or historical exchange rates, as appropriate. Income 
and expense accounts of the foreign subsidiaries are translated at the 
average rates in effect during the year. Adjustments resulting from the 
translation of Flow Asia, Flow Automation, Flow Europe, Foracon, Power 
Climber N.V., and Flow Japan's financial statements are recorded in the 
cumulative translation adjustment account in the stockholders' equity section 
of the accompanying Consolidated Balance Sheets.

     The Company utilizes forward exchange contracts and local currency 
borrowings to hedge its exposure to exchange rate fluctuations in connection 
with monetary assets and liabilities held in foreign currencies. The Company 
held no forward exchange contracts at April 30, 1998 but held forward 
exchange contracts with a face value of approximately $480,000 at April 30, 
1997. Unrealized gains associated with these forward contracts of $17,000 at 
April 30, 1997 are included in the caption Other (Expense) Income, net, in 
the accompanying Consolidated Statements of Income. For the years ended April 
30, 1998, 1997 and 1996 a net foreign exchange loss of $75,000, $590,000 and 
$183,000, respectively, is included in the caption Other (Expense) Income, 
net, in the accompanying Consolidated Statements of Income.

STATEMENTS OF CASH FLOWS

     For the purposes of the Consolidated Statements of Cash Flows, the 
Company considers short-term investments with maturities from the date of 
purchase of three months or less, if any, to be cash equivalents.

CONCENTRATION OF CREDIT RISK

     In countries or industries where the Company is exposed to material 
credit risk, sufficient collateral, including cash deposits and/or letters of 
credit, is required prior to the completion of a transaction. The Company 
does not believe there is a material credit risk beyond that provided for in 
the financial statements in the ordinary course of business. The Company 
makes use of foreign exchange contracts to cover some transactions 
denominated in foreign currencies, and does not believe there is an 
associated material credit or financial statement risk.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     All financial instruments on the balance sheet as of April 30, 1998 and 
1997 are valued at cost which approximates fair value with the exception of 
the Company's investment in Phenix Composites, Incorporated, ("Phenix") (see 
Note 4).

<PAGE>

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosures of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period. Actual results could differ from those estimates. Estimates 
that are particularly susceptible to significant change in the near term are 
the percentage of completion estimates and the adequacy of the allowance for 
obsolete inventory, warranty obligations and doubtful accounts receivable.

MINORITY INTERESTS IN JOINT VENTURES

     The Company includes income or expense associated with the minority 
interest in joint ventures as part of Other (Expense) Income, net in the 
accompanying Consolidated Statements of Income.

RECLASSIFICATIONS

Certain 1997 and 1996 amounts have been reclassified to conform with the 1998 
presentation.

NOTE 2 - BUSINESS COMBINATIONS:
-------------------------------------------------------------------------------

     In May 1997 the Company purchased the stock of Foracon. Foracon supplies
UHP and related systems to the European market. In April 1998 the Company
purchased substantially all the assets and selected liabilities of CIS Robotics
Inc. and the stock of RSL. These companies develop software used to program
industrial robots as well as provide, as a service, industrial robot
programming.

     Total cash consideration for the above two acquisitions was $6.9 million.
The difference between the net fair market value of assets acquired and
consideration given totaled $6.3 million and has been recorded as goodwill.
Results have been included in the Consolidated Financial Statements from the
date of acquisition based upon the purchase method of accounting. Unaudited pro
forma results are not presented as they are not materially different from the
results reported in the Consolidated Financial Statements.

     During fiscal 1998 the Company invested an additional $800,000 to increase
its ownership in two joint ventures, Flow Japan and HCS.

<PAGE>

NOTE 3 - BUSINESS DIVESTITURE:
-------------------------------------------------------------------------------

     During the second quarter of fiscal 1998 the Company sold its Access and
Services operations. The Company recorded a $4.9 million restructuring provision
during fiscal 1998 associated with this sale. The primary components of this
expense were: write down of assets to net realizable value: $4 million; probable
future obligations associated with the sale: $900,000. In addition, during
fiscal 1997 the Company recorded a $9 million restructuring provision associated
with the then proposed divestiture. The primary components of this expense were:
write down of assets to net realizable value: $7.4 million; restructuring costs
to be incurred in fiscal 1998: $1.3 million; restructuring costs incurred during
fiscal 1997: $300,000. These charges are included as a separate component of
operating expenses in the accompanying Consolidated Statements of Income.

     The following table summarizes the operating results of the Access and
Services operations, excluding the restructuring provisions, for the year ended
April 30,

                                   1998              1997             1996
                                   ----              ----             ----
Revenue                         $16,850           $55,761          $52,334
Gross Profit                      5,427            19,516           18,286
Operating Income                  1,730             4,593            5,509
Pretax Income                     1,353             3,628            4,451


 NOTE 4 - RELATED PARTY TRANSACTIONS:
-------------------------------------------------------------------------------

     In August 1992, the Company entered into a stock purchase agreement with
Phenix and contributed cash and certain equipment valued at cost. The book value
of the investment is $484,000 at April 30, 1998 and 1997 and is being accounted
for under the cost method. During fiscal 1996 the Company sold 46,153 shares
representing 20.6% of its holdings of Phenix and recorded a gain of $175,000
which is included in other income. Currently, the Company's CEO and president is
a member of the board of directors of Phenix.

     During fiscal 1997 the Company purchased 369,791 shares or 3.1% of Western
Garnet International Ltd. ("Western Garnet") for $1.5 million. Western Garnet is
a publicly traded on the Toronto stock exchange. This investment was made to
secure a long term relationship with the Company's supplier of its high quality
garnet. Garnet is sold by the company as a consumable used in abrasivejet
cutting. The Company classifies this investment as available-for-sale under
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Based upon the April 30, 1998
closing stock price of Western Garnet, the Company recorded an unrealized loss
of $341,000 which is reflected in the equity section of the accompanying
Consolidated Balance Sheets. Currently, the Company's CEO and president is a
member of the board of directors of Western Garnet.


<PAGE>

NOTE 5 - INVENTORIES:
-------------------------------------------------------------------------------

Inventories consist of the following:

                                                               April 30,
                                                        1998              1997
                                                      -------------------------
              Raw Materials and Parts                 $23,617           $25,793
              Work in Process                           9,312             5,872
              Finished Goods                            6,574             8,703
                                                      -------------------------
                                                       39,503            40,368
              Less: Provision for Slow-Moving
                 and Obsolete Inventory                 2,527             1,897
                                                      -------------------------
                                                      $36,976           $38,471
                                                      -------------------------
                                                      -------------------------

NOTE 6 - PROPERTY AND EQUIPMENT:
-------------------------------------------------------------------------------

Property and equipment are as follows:

<TABLE>
<CAPTION>
                                                                               April 30,
                                                                        1998              1997
                                                                    ---------------------------
              <S>                                                   <C>               <C> 
              Land and Buildings                                    $     461         $     511
              Machinery and Equipment                                  23,674            51,334
              Furniture and Fixtures                                    2,323             2,469
              Leasehold Improvements                                    6,902             6,254
              Construction in Progress                                    261             1,442
                                                                    ---------------------------
                                                                       33,621            62,010
              Less:
                Accumulated Depreciation and Amortization              21,629            34,288
                Net Realizable Value Provision                            -               2,128
                                                                    ---------------------------
                                                                      $11,992           $25,594
                                                                    ---------------------------
                                                                    ---------------------------
</TABLE>

<PAGE>


NOTE 7 - LONG-TERM OBLIGATIONS AND NOTES PAYABLE:
-------------------------------------------------------------------------------


Long-term obligations are as follows:

                                                               April 30,
                                                        1998              1997
                                                      -------------------------

              Flow Line of Credit                     $12,414           $36,648
              Private Debt Placement                   15,000            15,000
              Term Loans Payable                       10,117             2,000

                                                       37,531            53,648
              Less: Current Portion                     5,455                79
                                                      -------------------------
                                                      $32,076           $53,569
                                                      -------------------------
                                                      -------------------------

Current notes payable are as follows:

                                                               April 30,
                                                        1998              1997
                                                       ------------------------
              Flow Japan Notes Payable                 $  756            $1,261
              Power Climber N.V. Notes Payable                              360
              Flow Automation Notes Payable               430
              Other Notes Payable                         264                30
                                                       ------------------------
                                                       $1,450            $1,651
                                                       ------------------------
                                                       ------------------------

     The Company's Credit Agreement provides for a revolving line of credit of
up to $60 million, split between two financial institutions, which expires on
November 30, 2000. The amount which can be borrowed is limited based upon
certain debt covenant restrictions. Interest rates under the Credit Agreement
are at the bank's prime rate or are linked to LIBOR, at the Company's option.
The funded debt ratio determines the LIBOR based interest rate. The Company has
borrowed $12.4 million under the Credit Agreement as of April 30, 1998, all of
which carries an interest rate of prime. Prime at April 30, 1998 was 8.5%. The
Company pays 0.1% as an unused commitment fee. As of April 30, 1998, the Company
has approximately $18 million of available domestic unused line of credit

     The Private Debt Placement is a ten-year note with seven equal principal
payments beginning in September 1999. The Company pays interest semi-annually at
a fixed rate of 7.2%. The Credit Agreement and Private Debt Placement are
collateralized by a general lien on all of the Company's assets. The Company is
required to comply with certain covenants relating to the Credit Agreement and
Private Debt Placement including restrictions on dividends and transactions with
affiliates, limitations on additional indebtedness, and maintenance of tangible
net worth, working capital, fixed charge coverage, funded debt and debt service
ratios. The covenants were amended so as to exclude the effect of the
restructuring charges (see Note 3) associated with the divestiture of the Access
and Services businesses. As of April 30, 1998, the Company was in compliance
with all such covenants, as amended.


<PAGE>

     Included in Term Loans Payable are the following:

     A Deutsche mark denominated loan of $9.5 million. The Company's principal
bank has issued a $10.5 million standby letter of credit to the Company's German
bank, to secure a credit facility for use by Flow Europe. Principal and interest
is payable monthly at a rate of 4.6% through fiscal 2003. At April 30, 1998,
Flow Europe had an unused $1 million credit facility.

     An unsecured Japanese yen denominated loan of $397,000. Principal and
interest is payable monthly at a rate of 1.7% through fiscal 2003.

     An unsecured $198,000 note to a previous owner of Power Climber in
conjunction with the acquisition of assets. The note requires monthly payment of
principal and interest, at 7.25%, through fiscal 2003.

     A 100 million Japanese yen standby letter of credit has been issued by the
Company's principal bank to the Company's Japanese bank, to secure a credit
facility for use by Flow Japan. The notes payable by Flow Japan are denominated
in Japanese yen at interest rates ranging from 1.6% to 2.3% at April 30, 1998.
As of April 30, 1998 Flow Japan's credit facility was fully utilized.

     The notes payable by Flow Automation are collateralized by trade accounts
receivable and inventory, and are denominated in Canadian dollars at an interest
rate of Canadian prime plus 1.25%. Flow Automation has approximately $94,000 in
unused credit facilities at April 30, 1998.

     Principal payments under long-term obligations for the next five years and
thereafter are as follows: $5,455,000 in 1999, $4,270,000 in 2000, $16,684,000
in 2001, $4,215,000 in 2002, $2,618,000 in 2003, and $4,289,000 thereafter.


NOTE 8 - INCOME TAXES:
-------------------------------------------------------------------------------


The components of consolidated income before income taxes and the provision for
income taxes are as follows:

<TABLE>
<CAPTION>
                                                                       Year Ended April 30,
                                                             -----------------------------------------
                                                              1998              1997              1996
                                                              ----              ----              ----
   <S>                                                        <C>             <C>                <C> 
   Income Before Income Taxes:
     Domestic                                                 $3,237           $2,509            $8,038
     Foreign                                                   3,268           (1,546)              864
                                                              ------           -------           ------
     Total                                                    $6,505           $  963            $8,902
                                                              ------           -------           ------
                                                              ------           -------           ------
</TABLE>

<PAGE>

         The provision for income taxes comprises:
<TABLE>
<CAPTION>
                                                                      Year Ended April 30,
                                                             -----------------------------------------
                                                                1998             1997              1996
                                                                ----             ----              ----
   <S>                                                        <C>           <C>               <C>      
   Current Tax Expense:
     Domestic                                                 $ (135)       $   1,952         $   2,453
     State and Local                                             219              261               281
     Foreign                                                     400              476               630
                                                              ------         --------          --------
     Total                                                       484            2,689             3,364

    Deferred Tax Liability (Benefit)                           1,218           (2,451)           (1,547)
                                                              ------         --------          --------
   Total Provision for Income Taxes                           $1,702           $  238            $1,817
                                                              ------         --------          --------
                                                              ------         --------          --------
</TABLE>


         Net deferred tax assets (liabilities) comprise the following:

<TABLE>
<CAPTION>
                                                               April 30, 1998           April 30, 1997
                                                               --------------           --------------
   <S>                                                           <C>                      <C>
   Fixed assets                                                  $  471                   $  (648)
   Obsolete inventory provisions                                    513                       400
   Restructuring charge                                             292                     3,043
   Net operating loss carryover                                   3,712                     4,394
   Subpart F income                                                 228                       239
   Foreign taxes                                                   (781)                     (500)
   Accounts receivable allowances                                   108                        82
   Inventory capitalization                                          92                        91
   AMT Credits                                                    1,076                       225
   All other                                                        192                       446
                                                                  -----                     -----
        Subtotal                                                  5,903                     7,772
   Valuation allowance                                           (1,848)                   (2,499)
                                                                  -----                     -----
   Total Net Deferred Taxes                                      $4,055                    $5,273
                                                                 ------                    ------
                                                                 ------                    ------
</TABLE>

         A reconciliation of income taxes at the federal statutory rate to the
provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                                                Year Ended April 30,
                                                               -------------------------------------------------------
                                                                      1998               1997                1996
                                                                     -------            -------            -------
    <S>                                                               <C>                 <C>              <C>   
    Income taxes at federal statutory rate                            $2,212              $ 327            $ 3,026
    Foreign sales corporation benefit                                   (327)              (228)              (196)
    Foreign operations expense                                           199               (199)               279
    Change in valuation allowance                                       (651)                92             (2,285)
    State and local taxes                                                144                261                281
    Alternative minimum tax - domestic                                                                         822
    Other                                                                125                (15)              (110)
                                                                     -------            -------            -------
    Income tax provision                                              $1,702             $  238             $1,817
                                                                     -------            -------            -------
                                                                     -------            -------            -------
</TABLE>


<PAGE>

     As of May 1, 1998, the Company had approximately $5 million of domestic net
operating loss carryforwards to offset certain Flow earnings for federal income
tax purposes. Of the $5 million carryforward, $943,000 was currently available.
An additional $943,000 becomes available each fiscal year. These net operating
loss carryforwards expire in varying amounts through the year 2003.

     Due to current and expected future earnings, the Company expects increased
utilization of its foreign net operating loss carryforwards of $4.8 million.
Therefore, the foreign valuation allowance was reduced by a net tax effected
amount of $651,000 in fiscal 1998.

     Provision has not been made for U.S. income taxes or foreign withholding
taxes on $5 million of undistributed earnings of foreign subsidiaries. Those
earnings have been and will continue to be reinvested. These earnings could
become subject to additional tax if they were remitted as dividends, if foreign
earnings were lent to the Company or a U.S. affiliate, or if the Company should
sell its stock in the subsidiaries. It is not practicable to estimate the amount
of additional tax that might be payable on the foreign earnings; however, the
Company believes that U.S. foreign tax credits would largely eliminate any U.S.
tax and offset any foreign tax.


NOTE 9 - VOLUNTARY PENSION AND SALARY DEFERRAL PLAN AND ESOP PLAN:
--------------------------------------------------------------------------------

     The Company has a 401(k) savings plan in which employees may contribute a
percentage of their compensation. The Company makes contributions based on
employee contributions and length of employee service. Company contributions and
expenses under the plan for the years ended April 30, 1998, 1997, and 1996 were
$763,000, $709,000, and $689,000, respectively.

     In September 1989, the Company established an ESOP for all employees
meeting certain service requirements. Company contributions to the ESOP are
discretionary; however, the Company has agreed to make contributions as
necessary to fund the repayment of the ESOP loan. During fiscal 1997 the ESOP
loan was repaid and the remaining ESOP stock was distributed. During the years
ended April 30, 1998, 1997 and 1996, the Company recorded compensation and
interest expense related to the ESOP of $0, $108,000 and $121,000, respectively.


NOTE 10 - STOCK OPTIONS:
--------------------------------------------------------------------------------

     The Company has stock options outstanding under various option plans
described below.

     1984 RESTATED STOCK OPTION PLAN (THE "1984 RESTATED PLAN"). Approved by the
Company's shareholders in September 1984 and subsequently amended and restated,
the 1984 Restated Plan provides for grants to employees and contractors to
purchase a maximum of 


<PAGE>


1,800,000 shares of the Company's common stock. The 1984 Restated Plan allows 
for the grant of either incentive or nonqualified stock options.

     ADMAC 1984 INCENTIVE STOCK OPTION PLAN (THE "ADMAC PLAN"). The ADMAC Plan
was adopted in September 1983. Options vested under the plan were converted into
Flow stock options when the Company acquired ADMAC, Inc. in February 1989. No
further grants can be made under the ADMAC Plan.

     1987 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS (THE "1987 NONEMPLOYEE
DIRECTORS PLAN"). Approved by the Company's stockholders in September 1987, the
1987 Nonemployee Directors Plan, as subsequently amended, provides for the
automatic grant of nonqualified options for 10,000 shares of Company common
stock to a nonemployee director when initially elected or appointed, and
currently, the issuance of 10,000 shares annually thereafter during the term of
directorship.

     OTHER NONEMPLOYEE DIRECTOR OPTIONS. In fiscal 1988, two separate stock
options were granted for 45,000 and 10,000 shares to two nonemployee directors.

     1991 STOCK OPTION PLAN (THE "1991 SO PLAN"). The 1991 SO Plan was adopted
in October 1991 and amended in August 1993. Incentive and nonqualified stock
options up to 700,000 shares may be issued under this plan.

     1995 LONG-TERM INCENTIVE PLAN (THE "1995 LTI PLAN"). The 1995 LTI Plan was
adopted in August 1995. Incentive and nonqualified stock options up to 1,350,000
shares may be issued under this plan.

     During the years ended April 30, 1998, 1997 and 1996, a total of 302,000,
141,000 and 182,000 options, respectively, were exercised under all stock option
plans of the Company at an average price of $5.93, $3.80 and $3.04 per share,
respectively.

     All options become exercisable upon a change in control of the Company.
Options have a two-year vesting schedule, and are granted at fair market value.
No compensation expense has been recorded in fiscal 1998, 1997 or 1996. The
following chart summarizes the status of the options at April 30, 1998:

<TABLE>
<CAPTION>
                                  ----------------------- --------------------- ----------------- ----------------
                                      1984 Restated          1987 and Other       1991 SO Plan
                                           and                Nonemployee           and 1995
                                          ADMAC              Directors Plan         LTI Plan           Total
                                           Plan
--------------------------------- ----------------------- --------------------- ----------------- ----------------
<S>                                      <C>                    <C>               <C>                <C>
Number of options outstanding            215,100                300,000           1,388,493          1,903,593
Number of options vested                 215,100                280,000             736,452          1,231,552
Average exercise price per                 $2.57                  $8.41               $8.32              $7.64
share of options outstanding
--------------------------------- ----------------------- --------------------- ----------------- ----------------
</TABLE>


<PAGE>

     In October 1995 Statement of Financial Accounting Standards No. 123 ("FAS
123") "Accounting for Stock Based Compensation," was issued , which establishes
financial accounting and reporting standards for stock based employee
compensation plans and for the issuance of equity instruments to acquire goods
and services from non-employees. In fiscal 1997, the Company adopted the
disclosure-only provisions of FAS 123. If the Company had elected to recognize
compensation costs based on the fair value at the date of grant for awards in
fiscal 1998, 1997 and 1996, consistent with the provisions of FAS 123, the
Company's net income (loss) and earnings (loss) per Basic and Diluted share
would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
-------------------------------------------------------------- -------------------- -------------------- ---------------------
                     Year Ended April 30                              1998                 1997                  1996
-------------------------------------------------------------- -------------------- -------------------- ---------------------
<S>                                                            <C>                  <C>                  <C>
Income (Loss) from Continuing Operations:
    As reported                                                      $4,803                $725                 $7,085
    Pro forma                                                         3,808              ($1,110)               $6,120

Earnings (Loss) Per Share - Basic:
    As reported                                                      $ 0.33               $ 0.05                $ 0.49
    Pro forma                                                        $ 0.26              ($ 0.08)               $ 0.42

Earnings (Loss) Per Share - Diluted:
    As reported                                                      $ 0.32               $ 0.05                $ 0.47
    Pro forma                                                        $ 0.25              ($ 0.08)               $ 0.41
-------------------------------------------------------------- -------------------- -------------------- ---------------------
</TABLE>

     The pro forma effect on net income for fiscal 1998, 1997 and 1996 may not
be representative of the pro forma effect on net income for future years because
the FAS 123 method of accounting for pro forma compensation expense has not been
applied to options granted prior to May 1, 1995.

     The weighted-average fair values at date of grant for options granted in
fiscal 1998, 1997 and 1996 were estimated using the Black-Scholes option-pricing
model, based on the following assumptions: (i) no expected dividend yields for
fiscal years 1998, 1997 and 1996; (ii) expected volatility rates of 48.9%, 47.1%
and 49.7% for fiscal 1998, 1997 and 1996, respectively; and (iii) expected lives
of 6 years for fiscal 1998, 1997 and 1996. The risk-free interest rate applied
to fiscal 1998, 1997 and 1996 was 5.8%, 6.9% and 6.9%, respectively.


<PAGE>

     The following table rolls forward the stock option activity for the years
ended April 30,:

<TABLE>
<CAPTION>
                                 ------------------------------ ------------------------------- ---------------------------------
                                             1998                            1997                             1997
                                     Shares        Weighted         Shares         Weighted         Shares          Weighted
                                                   -Average                        -Average                         -Average
                                                 Exercise Price                 Exercise Price                   Exercise Price
-------------------------------- --------------- -------------- --------------- --------------- ---------------- ----------------
<S>                              <C>             <C>            <C>             <C>             <C>              <C>
Outstanding - beginning of year   1,887,199         $ 6.92       1,498,825          $ 5.73        1,312,824          $ 4.34

Granted during the year:            423,700         $10.21         622,195          $ 9.41          384,660          $ 8.96

Exercised during the year:          301,648         $ 5.93         140,980          $ 3.80          182,374           $3.04

Forfeited during the year:          105,658         $ 9.19          92,841          $ 9.31           16,285          $ 7.87
                                  ---------         ------       ---------          ------        ---------          ------

Outstanding, end of year          1,903,593         $ 7.64       1,887,199          $ 6.92        1,498,825          $ 5.73

Exercisable, end of year          1,231,552         $ 6.51       1,027,465          $ 5.52        1,105,425          $ 4.53
-------------------------------- --------------- -------------- --------------- --------------- ---------------- ----------------
</TABLE>


         The following table summarizes information about stock options
outstanding at April 30, 1998:

<TABLE>
<CAPTION>
                          -----------------  ------------------  ---------------  -----------------  ----------------

Range of Exercise Prices       Number           Weighted-Avg     Weighted-Average      Number        Weighted-Average
                           Outstanding at        Remaining       Exercise Price    Exercisable at    Exercise Price
                           April 30, 1998     Contractual Life                     April 30, 1998
------------------------- ------------------ ------------------- ---------------- ------------------ ----------------
<S>                       <C>                <C>                 <C>              <C>                <C>
$1.25 - $4.99                   260,100             2.87             $ 2.60             260,100           $ 2.60
$5.00 - $7.99                   485,400             5.30             $ 5.94             475,400           $ 5.90
$8.00 - $12.25                1,158,093             7.44             $ 9.56             496,052           $ 9.14
---------------------------------------------------------------------------------------------------------------------
                  Total:      1,903,593             6.35             $ 7.64           1,231,552           $ 6.51
---------------------------------------------------------------------------------------------------------------------
</TABLE>


NOTE 11 - PREFERRED SHARE RIGHTS PURCHASE PLAN:
-------------------------------------------------------------------------------

     On June 7, 1990, the Board of Directors of the Company adopted a Preferred
Share Rights Purchase Plan under which a Preferred Share Purchase Right (a
"Right") is attached to each share of Company common stock. The Rights will be
exercisable only if a person or group acquires 20% or more of the Company's
common stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the common stock. Each Right
entitles stockholders to buy one one-hundredth of a share of Series B 


<PAGE>

Junior Participating Preferred Stock (the "Series B Preferred Shares") of the 
Company at a price of $15. If the Company is acquired in a merger or other 
business combination transaction, each Right will entitle its holder to 
purchase a number of the acquiring company's common shares having a value 
equal to twice the exercise price of the Right. If a person or group acquires 
20% or more of the Company's outstanding common stock, each Right will 
entitle its holder (other than such person or members of such group) to 
receive, upon exercise, a number of the Company's common shares having a 
value equal to two times the exercise price of the Right. Following the 
acquisition by a person or group of 20% or more of the Company's common stock 
and prior to an acquisition of 50% or more of such common stock, the Board of 
Directors may exchange each Right (other than Rights owned by such person or 
group) for one share of common stock or for one one-hundredth of a Series B 
Preferred Share. Prior to the acquisition by a person or group of 20% of the 
Company's common stock, the Rights are redeemable, at the option of the 
Board, for $.01 per Right. The Rights expire on June 17, 2000. The Rights do 
not have voting or dividend rights, and until they become exercisable, have 
no dilutive effect on the earnings of the Company.



NOTE 12 - COMMITMENTS AND CONTINGENCIES:
-------------------------------------------------------------------------------

     The Company rents certain facilities and equipment under agreements treated
for financial reporting purposes as operating leases. The majority of leases
currently in effect are renewable for periods of two to five years. Rent expense
under these leases was approximately $3,356,000, $3,716,000, and $4,041,000 for
the years ended April 30, 1998, 1997 and 1996, respectively.

     Future minimum rents payable under operating leases for years ending April
30 are as follows:

<TABLE>
<CAPTION>
                                 Year Ending April 30,
                              ---------------------------
                         <S>                      <C>
                               1999               $ 2,666
                               2000                 2,181
                               2001                 1,714
                               2002                 1,473
                               2003                   872
                         Thereafter                 1,532
                                                  -------
                                                  $10,438
                                                  -------
                                                  -------
</TABLE>


     The Company has been subject to product liability claims primarily through
Spider, its former subsidiary which was sold in September 1997. To minimize the
financial impact of product liability risks and adverse judgments, product
liability insurance has been purchased in amounts and under terms considered
acceptable to management.


<PAGE>

     At any point in time covered by these financial statements, there are
outstanding product liability claims against the Company, and incidents are
known to management which may result in future claims. Management, in
conjunction with defense counsel, periodically reviews the likelihood that such
product claims and incidents will result in adverse judgments, the estimated
amount of such judgments and costs of defense, and accrues liabilities as
appropriate.

     Recoveries, if any, may be realized from indemnitors, codefendants,
insurers or insurance guaranty funds. Management, based on estimates provided by
the Company's legal counsel on such claims, believes its insurance coverage is
adequate.

     Management estimates the range of the Company's future exposure amounts
relating to unresolved claims at April 30, 1998, aggregate from approximately $0
to $450,000.

     Included in Other (Expense) Income, net, in the years ended April 30, 1998,
1997 and 1996 are settlements of approximately $134,000, $161,000, and $102,000,
respectively.


<PAGE>

NOTE 13 - FOREIGN OPERATIONS:
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                               ADJUSTMENTS
                                        UNITED                                    OTHER             &
                                        STATES        EUROPE         ASIA        FOREIGN       ELIMINATIONS      CONSOLIDATED
------------------------------------ ------------- ------------- ------------- ------------- ----------------- ----------------
<S>                                  <C>           <C>           <C>           <C>           <C>               <C>
1998
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Revenues:
     Customers (1)                        $86,561       $36,041       $18,807       $18,073    $        -          $159,482
     Inter-area (2)                        16,772                       3,053                     (19,825)
-------------------------------------------------------------------------------------------------------------------------------
Total revenues                            103,333        36,041        21,860        18,073       (19,825)          159,482
-------------------------------------------------------------------------------------------------------------------------------

Operating Income (Loss) Before
Corporate Expenses                         18,700           711         1,694         1,019                          22,124
Corporate Expenses                                                                                                  (11,939)
                                                                                                                   --------
Operating Income                                                                                                    $10,185
                                                                                                                   --------
                                                                                                                   --------
Identifiable Assets                       $67,384       $25,049       $11,850       $16,898                        $121,181
                                                                                                                   --------
                                                                                                                   --------

1997
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Revenues:
     Customers (1)                       $103,721       $33,845       $17,231       $13,396    $        -          $168,193
     Inter-area (2)                        17,711             -         2,293                     (20,004)                -
-------------------------------------------------------------------------------------------------------------------------------
Total revenues                            121,432        33,845        19,524        13,396       (20,004)          168,193
-------------------------------------------------------------------------------------------------------------------------------

Operating Income (Loss) Before
Corporate Expenses                         14,085        (1,215)        1,880        (1,925)                         12,825
Corporate Expenses                                                                                                   (7,979)
                                                                                                                   --------
Operating Income                                                                                                     $4,846
                                                                                                                   --------
                                                                                                                   --------
Identifiable Assets                       $87,677       $20,698       $11,302       $13,789                        $133,466
                                                                                                                   --------
                                                                                                                   --------

1996
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Revenues:
     Customers (1)                        $85,810       $32,394       $13,598       $13,103    $        -          $144,905
     Inter-area (2)                        13,284             -           897             -       (14,181)                -
-------------------------------------------------------------------------------------------------------------------------------
Total revenues                             99,094        32,394        14,495        13,103       (14,181)          144,905
-------------------------------------------------------------------------------------------------------------------------------

Operating Income Before Corporate
Expenses                                   15,223         1,556           320          (124)                         16,975
Corporate Expenses                                                                                                   (5,218)
                                                                                                                   --------
Operating Income                                                                                                    $11,757
                                                                                                                   --------
                                                                                                                   --------
Identifiable Assets                       $81,342       $20,563       $10,541       $14,047                        $126,493
                                                                                                                   --------
                                                                                                                   --------
</TABLE>

(1)  U.S. sales to unaffiliated customers in foreign countries were $5,300,000,
     $7,600,000 and $6,000,000 in fiscal 1998, 1997, and 1996, respectively.

(2)  Inter-area sales to affiliates represent products which were transferred
     between geographic areas at negotiated prices. These amounts have been
     eliminated in the consolidation.


<PAGE>

NOTE 14- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Fiscal 1998 Quarters              First           Second           Third         Fourth          Total
--------------------              -----           ------           -----         ------          -----
<S>                             <C>              <C>             <C>            <C>           <C>     
Revenue                         $47,514          $35,162         $34,463        $42,343       $159,482
Gross Profit                     18,060           14,686          14,467         16,992         64,205
Net Income (Loss)                 (949)            1,804           1,810          2,138          4,803
Earnings (Loss) Per share:                                                                            
    Basic *                       (.07)              .12             .12            .14            .33
    Diluted *                     (.07)              .12             .12            .14            .32
                                                                                                      
<CAPTION>
Fiscal 1997 Quarters              First           Second           Third         Fourth          Total
--------------------              -----           ------           -----         ------          -----
<S>                             <C>              <C>             <C>            <C>           <C>     
Revenue                         $40,929          $41,323         $39,661        $46,280       $168,193
Gross Profit                     16,273           17,311          15,779         16,788         66,151
Net Income (Loss)                 2,232            2,424           1,312        (5,243)            725
Earnings (Loss) Per share :                                                                           
    Basic                           .15              .17             .09          (.36)            .05
    Diluted *                       .15              .16             .09          (.36)            .05
                                                                                                      
<CAPTION>
Fiscal 1996 Quarters              First           Second           Third         Fourth          Total
--------------------              -----           ------           -----         ------          -----
<S>                             <C>              <C>             <C>            <C>           <C>     
Revenue                         $33,013          $35,622         $35,641        $40,629       $144,905
Gross Profit                     13,905           14,191          13,826         15,508         57,430
Net Income                        2,060            1,806           1,151          2,068          7,085
Earnings Per Share:                                                                                   
    Basic                           .14              .13             .08            .14            .49
    Diluted *                       .14              .12             .08            .14            .47
</TABLE>

* The total of the four quarters does not equal the year due to rounding.

<PAGE>

                         FLOW INTERNATIONAL CORPORATION
                                  SCHEDULE VIII
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                               Additions
                                                      ----------------------------
                                         Balance at     Charged to      Charged                      Balance
                                         Beginning      Costs and      to Other                      at End
Classification                           of Period       Expenses      Accounts     Deductions*     of Period
--------------                           ----------     ---------      ---------    ------------    ---------
<S>                                         <C>             <C>          <C>           <C>           <C>
YEAR ENDED APRIL 30:
ALLOWANCE FOR DOUBTFUL ACCOUNTS
1998                                        $1,008          $508         $(377)        $ (470)       $  669
1997                                         1,186           704                         (882)        1,008
1996                                         1,150           576                         (540)        1,186

PROVISION FOR SLOW-MOVING AND 
  OBSOLETE INVENTORY
1998                                        $1,897        $1,060         $  (224)     $  (206)       $2,527
1997                                         2,352            83                         (538)        1,897
1996                                         2,205           207                          (60)        2,352
</TABLE>
------------
*   Write-offs of uncollectible accounts and disposal of obsolete inventory.

<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
-------------------------------------------------------------------------------

     Information regarding directors and executive officers of the registrant 
is incorporated herein by reference from the Company's Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.
-------------------------------------------------------------------------------

     Information regarding executive compensation is incorporated herein by 
reference from the Company's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------------------------------------------------------------------------------

     Information regarding security ownership of certain beneficial owners 
and management is incorporated herein by reference from the Company's Proxy 
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-------------------------------------------------------------------------------

     Information regarding certain relationships and related transactions is 
incorporated herein by reference from the Company's Proxy Statement.


<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------------

(a)   The following documents are filed as a part of this report:

      1.   Consolidated Financial Statements.

           See Item 8 of Part II for a list of the Financial Statements filed
           as part of this report.

      2.   Financial Statement Schedules.

           See Item 8 of Part II for a list of the Financial Statement
           Schedules filed as part of this report.

      3.   Exhibits.  See subparagraph (c) below.

(b)   Reports on Form 8-K -

           None

(c)   Exhibits.

<PAGE>


<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S>      <C>
3.1      Restated Certificate of Incorporation, filed with the state of Delaware
         September 14, 1989. (Incorporated by reference to Exhibit 3.1 to the
         registrant's Annual Report on Form 10-K for the year ended April 30,
         1990.)

3.2      By-Laws of Flow International Corporation. (Incorporated by reference
         to Exhibit 3.2 to the registrant's Annual Report on Form 10-K for the
         year ended April 30, 1990.)

4.1      Certificate of Designation of Series B Junior Participating Preferred
         Stock. (Incorporated by reference to Exhibit 4.5 to the registrant's
         Annual Report on Form 10-K for the year ended April 30, 1990.)

4.2      Rights Agreement dated as of June 7, 1990, between Flow International
         Corporation and First Interstate Bank, Ltd. (Incorporated by reference
         to Exhibit 4.1 to the registrant's Current Report on Form 8-K dated
         June 8, 1990.)

10.1     Flow International Corporation 1984 Restated Stock Option Plan, as
         amended. (Incorporated by reference to Exhibit 10.1 to the registrant's
         Annual Report on Form 10-K for the year ended April 30, 1990.)

10.2     Flow International Corporation 1987 Stock Option Plan for Nonemployee
         Directors, as amended. (Incorporated by reference to Exhibit 10.5 to
         the registrant's Annual Report on Form 10-K for the year ended April
         30, 1994.)

10.3     Flow International Corporation 1991 Stock Option Plan, as amended.
         (Incorporated by reference to Exhibit 10.6 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1994.)

10.4     Flow International Corporation 1995 Long-Term Incentive Plan.
         (Incorporated by reference to Exhibit 10.4 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1995.)

10.5     Flow International Corporation Employee Stock Ownership Plan and Trust
         Agreement, as amended and restated effective January 1, 1994, and
         certain later dates, between Flow International Corporation and
         Seattle-First National Bank, as trustee. (Incorporated by reference to
         Exhibit 10.7 to the registrant's Annual Report on Form 10-K for the
         year ended April 30, 1994).

10.6     Stock Purchase Agreement dated as of September 26, 1989, between Flow
         International Corporation Employee Stock Ownership Plan and Trust and
         Seattle-First National Bank. (Incorporated by reference to Exhibit 10.7
         to the registrant's Annual Report on Form 10-K for the year ended April
         30, 1990.)

10.7     ESOT Loan and Guaranty Agreement dated September 26, 1989, among U.S.
         Bank of Washington, N.A., Flow International Corporation Employee Stock
         Ownership Plan and Trust and Flow International Corporation.
         (Incorporated by reference to Exhibit 10.8 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1990).

10.8     Replacement ESOT Note dated September 1992. (Incorporated by reference
         to Exhibit 10.10 to the registrant's Annual Report on Form 10-K for the
         year ended April 30, 1993).

<PAGE>

10.9     Pledge Agreement dated September 26, 1989, among U.S. Bank of
         Washington, N.A., Flow International Corporation. Employee Stock
         Ownership Plan and Trust and Flow International Corporation.
         (Incorporated by reference to Exhibit 10.10 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1990.)

10.10    Unconditional Guaranty dated September 26, 1989, by Flow International
         Corporation for the benefit of U.S. Bank of Washington, N.A.
         (Incorporated by reference to Exhibit 10.11 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1990.)

10.11    Flow International Corporation Voluntary Pension and Salary Deferral
         Plan and Trust Agreement, as restated effective January 1, 1992.
         (Incorporated by reference to Exhibit 10.13 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1993).

10.12    Amendment to Flow International Corporation Voluntary Pension and
         Salary Deferral Plan. (Incorporated by reference to Exhibit 10.13 to
         the registrant's Annual Report on Form 10-K for the year ended April
         30, 1994).

10.13    Lease dated September 24, 1991, between Flow International and Birtcher
         LP/LC Partnership, together with Addendum to Lease. (Incorporated by
         reference to Exhibit 10.25 to the registrant's Annual Report on Form
         10-K for the year ended April 30, 1992.)

10.14    Credit agreement amount Flow International Corporation, as borrower,
         the Lenders listed herein, as lenders, and US Bank of Washington, N.A.
         as agent for lenders dated September 25, 1995. (Incorporated by
         reference to Exhibit 10.1 to the registrant's Quarterly Report on Form
         10-Q for the period ended October 31, 1995.)

10.15    Letter agreement dated April 25, 1997 between Flow International
         Corporation and U.S. Bank of Washington, N.A. (Incorporated by
         reference to Exhibit 10.15 to the registrant's Annual Report on Form
         10-K for the year ended April 30, 1997).

10.16    Letter agreement dated April 23, 1998 between Flow International
         Corporation and U.S. Bank of Washington, N.A.

10.17    Note purchase agreement dated September 1, 1995. (Incorporated by
         reference to Exhibit 10.2 to the registrant's Quarterly Report on Form
         10-Q for the period ended October 31, 1995.)

10.18    First amendment to Note Purchase Agreement dated July 16, 1997.
         (Incorporated by reference to Exhibit 10.17 to the registrant's Annual
         Report on Form 10-K for the year ended April 30, 1997).


10.19    Form of Change in Control Agreement. (Incorporated by reference to
         Exhibit 10.17 to the registrant's Annual Report on Form 10-K for the
         year ended April 30, 1996.)

10.20    Asset Purchase and Sale Agreement dated as of August 25, 1997 between
         Flow International Corporation, SafeWorks, LLC., etc. (Incorporated by
         reference to Exhibit 2.1 to the registrants Current Report on Form 8-K
         dated September 30, 1997.)

21.1     Subsidiaries of the Registrant.

23.1     Consent of Independent Accountants

27.1     Financial Data Schedule
</TABLE>

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                       FLOW INTERNATIONAL CORPORATION

July 22, 1997

                                       /s/ Ronald W. Tarrant
                                       ----------------------------------------
                                       Ronald W. Tarrant
                                       Chairman, President and Chief 
                                         Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on the behalf of 
the registrant and in the capacities on this 22th day of July, 1997

<TABLE>
<CAPTION>
         Signature                       Title
         ----------                      -----
<S>                                      <C>
/s/ Ronald W. Tarrant                    Chairman, President, Chief Executive 
-----------------------------------      Officer (Principal Executive Officer)
Ronald W. Tarrant                  

/s/ Stephen D. Reichenbach               Executive Vice President,
------------------------------------     Chief Financial Officer
Stephen D. Reichenbach                   (Principal Financial Officer & 
                                         Principal Accounting Officer)

/s/ Ronald D. Barbaro                    Director
------------------------------------
Ronald D. Barbaro


/s/ Daniel J. Evans                      Director
------------------------------------
Daniel J. Evans


/s/ Kathryn L. Munro                     Director
------------------------------------
Kathryn L. Munro

<PAGE>

<CAPTION>
         Signature                       Title
         ----------                      -----
<S>                                      <C>
/s/ Arlen I. Prentice                    Director
------------------------------------
Arlen I. Prentice


/s/ J. Michael Ribaudo                   Director
------------------------------------
J. Michael Ribaudo


/s/ Kenneth M. Roberts                   Director
------------------------------------
Kenneth M. Roberts


/s/ Sandra F. Rorem                      Director
------------------------------------
Sandra F. Rorem


/s/ Dean D. Thornton                     Director
------------------------------------
Dean D. Thornton
</TABLE>