MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(Dollars in thousands, except share data)


The following discussion should be read in conjunction with the Company's 
Consolidated Financial Statements and Notes included in this report.


RESULTS OF OPERATIONS:

The following table sets forth certain statements of operations data as a 
percentage of net sales for the periods indicated.


                            Years Ended December 31,       Increase (Decrease)
                                                            1998 vs    1997 vs
                              1998     1997     1996         1997       1996
                              ----     ----     ----         ----       ----
Net Sales                    100.0%   100.0%   100.0%         7.8%       5.7%
  Cost of goods sold          64.5     60.6     59.3         14.9        7.9
Gross profit                  35.5     39.4     40.7         (3.0)      13.0
  Selling, general and 
    administrative            24.5     24.0     22.5          9.8       12.9
  Research, development and
    engineering                5.6      6.4      7.0         (7.1)      (2.8)
  Special charges              4.5      0.9       -           N/A        N/A
Operating profit               1.0      8.1     11.2        (87.2)     (23.3)
  Other income/(expense)      (1.6)    (0.6)     1.5       (188.0)    (138.7)
  Recovery from discontinued
    operations                 -        0.8      -            N/A        N/A
  Income taxes                 -        2.4      4.1       (100.6)     (39.0)
Net income (loss)             (0.6)     5.9      8.6       (110.8)     (27.3)


COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997:

Net Sales for 1998 increased $12,914 or 7.8% to $177,819 as compared to net 
sales of $164,905 for 1997.  The 1998 sales increase was attributed to the 
acquisition of Micron Separations Inc. (MSI) during the first quarter of 1998
and Membrex Corp. during the second quarter of 1998.  Existing business sales
were essentially flat in 1998 due to slow sales of capital equipment, and of 
components sold to OEM customers.  Overall, sales slowed to customers in 
Asia/Pacific, and partially in the United States market.

Gross Profit decreased $1,944 or 3.0% to $63,101 as compared to $65,045 in 
1997.  As a percentage of net sales, gross profit decreased to 35.5% from 
39.4% in 1997.  1998 gross profit includes a $2,000 or 1.1% of net sales 
impact related to a second quarter special charge for slow moving inventory.
The decrease in gross profit is also due to lower utilization of certain 
production facilities and competitive pricing pressures.  In the third quarter
of 1998, the Company took action to reduce its manufacturing capacity and 
improve its gross margins.  Employment on June 30, 1998 of 1,559 was reduced
to 1,360 at December 31, 1998.  Three manufacturing facilities were closed by
December 31, 1998 and two additional facilities are expected to be closed in
1999. 

Selling, General and Administrative Expenses increased $3,884 or 9.8% to 
$43,487 in 1998 as compared to $39,603 in 1997.  As a percentage of sales, 
SG&A expenses increased to 24.5% from 24.0% in 1997.  The 1998 increase is 
attributed to costs of implementing a new enterprise resource planning (ERP)
system, costs related to the 1998 restructuring, and costs added in the 
acquisition of two companies in the first half of 1998.

The Company's marketing priority is to get its products into distribution as
soon as possible.  The Company has worked to centralize its sales groups to 
focus responsibility for customer relationships for all products through 
expanded local sales offices and to provide technical sales support from the
appropriate product manufacturing site.  In addition, the Company has invested
in a world wide web site.  The Company believes that these actions have 
enhanced customer service and will increase market penetration in the future;
however, in 1998 no significant sales benefit was achieved and marketing 
expenses increased.

Research, Development and Engineering Expenses decreased $722 or 6.8% to 
$9,913 in 1998, compared to $10,635 in 1997.  As a percentage of sales, the 
R&D expenses decreased to 5.6% from 6.4% in 1997.  The Company has worked to
centralize its R&D efforts and to eliminate any duplication of activity at 
different locations.  The Company believes the current level of funding may 
still be higher than required to support its product development priorities.

Special Charges of $9,988 ($7,569 net-of-tax or $0.54 per share assuming 
dilution) were recorded in the second quarter of 1998.  Charges included a 
$6,222 charge to operating expense for in-process research and development 
related to the acquisitions of Micron Separations, Inc. ($1,902) and Membrex 
Corp. ($4,320) and a $2,000 charge to cost of sales for slow moving inventory.
The special charges also included operating expense charges of $875 for 
corporate restructuring and consolidation of operations, and $891 for re-
engineering costs and write-downs of assets in connection with the Company's 
implementation of a global information system.  The special charges are 
summarized below:

    In-process R&D*                                  $6,222
    Corporate restructuring                             875
    SAP/Re-engineering costs                            891
    Slow moving inventory                             2,000
                                                     ------
        Gross special charges                        $9,988
        Less slow moving inventory - in COS          (2,000)
                                                     ------
        Special charge in Operating Expense          $7,988
                                                     ======

*See Note 2 - Business Acquisitions footnote for further analysis.


This compares to a special charge of $1,448 or 0.9% of sales ($0.07 per share
assuming dilution) in 1997.  These non-recurring charges were for the write-
offs of certain impaired assets and expenses related to recent acquisitions.

Other Income/(Expense) decreased $1,822 to $(2,791) in 1998, compared to 
$(969) in 1997.  The 1998 change is primarily the result of interest expense
of $1,300 and $950 on the additional borrowing of $20,000 and $18,000 for the
acquisitions of Micron Separations, Inc. during the first quarter of 1998 and
Membrex Corp. during the second quarter of 1998, respectively.

Recovery on Discontinued Operations of $1,330 (net of taxes) was recorded 
during 1997.  This gain of $0.09 per share assuming dilution resulted from the
reversal of a warranty reserve for discontinued operations, which was deemed
no longer necessary.

Income Taxes (Benefit) was $(25) in 1998.  The benefit is less than might be
anticipated due to the non-deductibility of the Micron Separations, Inc. in-
process R&D that was written off in the second quarter of 1998.  The 1997 
effective tax rate was 31.7%.

Net Income/(Loss) decreased $10,846 to a loss of $1,053 ($0.08 loss per share
assuming dilution) in 1998, compared to income of $9,793 ($0.68 per share 
assuming dilution) in 1997.  The current year net loss is due to second 
quarter special charges.  Without the special charges, 1998 net income would
have been $6,516 ($0.46 per share assuming dilution).


COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996:

Net Sales for 1997 increased $8,959 or 5.7% to $164,905 as compared to net 
sales of $155,946 for 1996.  The 1997 sales increase was attributed to the 
acquisition of AquaMatic during the first quarter of the year.  Existing 
business sales were relatively flat in 1997 due to a decline in large 
equipment sales both domestically and in Asian markets.  

Gross Profit increased $1,622 or 2.6% to $65,045 as compared to $63,423 in 
1996.  As a percentage of net sales, gross profit decreased to 39.4% from 
40.7% in 1996.  The reduction in gross profits for 1997 was due to a less 
favorable sales mix, more aggressive market pricing in certain product lines,
and a lower level of plant utilization at several locations.

Selling, General and Administrative Expenses increased $4,524 or 12.9% to 
$39,603 in 1997, compared to $35,079 in 1996.  As a percentage of sales, SG&A
expenses increased to 24.0% from 22.5% in 1996.  The 1997 increase is 
attributed to costs committed in anticipation of a higher level of sales which
did not materialize, and the ongoing implementation of a new integrated 
information system.  

The Company's marketing priority is to get its products into distribution as
soon as possible.  As a result of the Company's acquisitions, the Company 
inherited a number of separate sales forces selling individual products.  In
1996, the Company reorganized and centralized its sales groups to focus 
responsibility for customer relationships for all products through expanded 
local sales offices and to provide technical sales support from the 
appropriate product manufacturing site.  This reorganization resulted in some
increased costs in 1997; however, the Company believes these changes have 
enhanced customer service and will increase market penetration in the future.

Research, Development and Engineering Expenses decreased $302 or 2.8% to 
$10,635 in 1997, from $10,937 in 1996.  As a percentage of sales, R&D expenses
decreased to 6.4% from 7.0% in 1996.  The Company believes the current level 
of funding is adequate to support its product development priorities.

Special Charges of $1,448 or 0.9% of sales were recorded during the fourth 
quarter of 1997.  These non-recurring charges of $0.07 per share after taxes
assuming dilution were for the write-offs of certain impaired assets and 
expenses related to recent acquisitions.

Other Income/(Expense) decreased $3,470 to $(969) in 1997, compared to $2,501
in 1996.  The 1997 change is primarily due to lower gains on the sale of 
investments than in previous years, and the increased utilization of an 
existing line of credit for the acquisition of AquaMatic.

Recovery on Discontinued Operations of $1,330 (net of taxes) was recorded 
during 1997.  This gain of $0.09 per share assuming dilution resulted from the
reversal of a warranty reserve for discontinued operations, which was deemed 
no longer necessary.

Income Taxes (Benefit) effective tax rates for the years ended December 31, 1997
and 1996 were 31.7% and 32.4%, respectively.  The 1997 decrease in the effective
 tax rate is primarily due to an increased proportion of foreign sales and the 
extension of certain research-related tax credits.

Net Income (Loss) decreased $3,674 or 27.3% to $9,793 ($0.68 per share assuming
dilution) for 1997, compared to $13,467 ($0.93 per share assuming dilution) for
1996.  As a percentage of net sales, net income was 5.9% and 8.6% for 1997 and
1996, respectively.


LIQUIDITY AND CAPITAL RESOURCES:

At December 31, 1998, the Company had cash and marketable securities of 
$14,847 as compared to $21,876 at December 31, 1997.  The reduction in cash 
and marketable securities was primarily the result of investment maturities 
being utilized to help fund 1998 acquisitions and other investments in capital
assets.

Cash provided by operations was $8,102, $16,768, and $5,736 for the years 
ending December 31, 1998, 1997 and 1996, respectively.  The decrease in cash 
provided by operating activities during 1998 was principally due to increased
working capital requirements to support the manufacturing facilities acquired
in 1998.  The increase in cash provided by operating activities during 1997 
was principally due to the improved management of the inventory and accounts
receivable balances of the Company.

Capital expenditures for the years ending December 31, 1998, 1997 and 1996 
were $7,808, $6,609, and $15,658, respectively.  In 1998, the Company's 
capital expenditures were comparable to 1997 amounts and significantly lower 
in comparison to 1996 amounts.  The 1998 and 1997 lower level of capital 
expenditures is the result of the Company not incurring significant facility 
expansion and reconfiguration costs similar to those in 1996.

In 1998, the Company negotiated an increase in its unsecured revolving line of
credit to $35,000 for working capital needs and to help fund acquisitions.  
The revolving line of credit is for five years with a variable interest rate,
which is related to LIBOR.  The revolving line of credit replaced a $22,000 
line of credit.  At December 31, 1998, the Company had $9,000 available under
the revolving line of credit. 

In 1998, the Company entered into a new $20,000 long-term, ten-year loan from
an insurance company.  This loan contains $15,000 with a variable interest 
rate related to LIBOR and $5,000 which is fixed at 6.72%.  Interest is payable
quarterly.  The loan was obtained to finance the acquisition of Micron 
Separations, Inc. in 1998.

In March 1998, the Accounting Standards Executive Committee (AcSEC) of the 
American Institute of CPAs issued Statement of Position (SOP) 98-1, 
"Accounting for the Costs of Computer Software Developed or Obtained for 
Internal Use," which provides guidance on accounting for costs of internal-use
computer software.  The Company is in the process of evaluating the impact of
this statement.

Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities" was issued recently.  The 
Company anticipates no material impact on operating results or financial 
position.

The Company's operating cash requirements consist principally of working 
capital requirements, capital expenditures and scheduled payments of principal
on outstanding indebtedness.  The Company believes that its cash and 
marketable securities, cash flow from operating activities and borrowings 
under its bank facility will be adequate to meet the Company's liquidity and 
capital investment requirements in the foreseeable future.

The Company expects to continue to grow internally and through strategic 
acquisitions within the industry in which it operates.  As shown in the 
Supplementary Data, the Company has experienced significant long-term growth
in sales and financial position including the two acquisitions in the last 
five years accounted for as poolings.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF IN-PROCESS R&D CHARGES:

The In-Process R&D acquired with the acquisition of Micron Separations, Inc. 
was determined to have a fair value of $1,902 based on the "Percent Complete"
method.  Out of nine ongoing projects there are three major programs involving
development of specialized membranes for microporous filtration, diagnostics 
and genetic research.

The first major project, judged to be 20% complete at acquisition, could 
result in a class of membranes that could replace a sole source product at 
approximately half the cost.  If successful, this will generate 5-10% margin 
improvement on products assembled with this membrane.  A patent has since been
applied for and the savings are expected to accrue in the third quarter of 
1999.

The second major project, 40% complete at acquisition, has also resulted in a
patent application.  This development allows the tailoring of membrane to 
provide unique surface characteristics for biotech, diagnostic and filtration
applications.  A patent disclosure has also been filed on results of a 
companion project, which successfully allows the treatment of certain 
membranes to ensure their utility in applications that require membrane 
wettability.  

The third major project, 50% complete at acquisition, resulted in a 
competitive membrane useful in genetic research and protein analysis.  It was
commercialized in late 1998.

The other six projects are expected to result in new or improved products and
an improved production process that will reduce product costs.  

No material changes from historical pricing, margin and expense levels are
anticipated.  A risk-adjusted discount rate of 18% was applied to the projected
cash flows to determine the fair value of the In-Process R&D.  Less than
$1 million of funding is projected to complete these projects, including
capital expenditures.

The fair value of the In-Process R&D acquired with Membrex was valued at 
$4,320 by the "Percent Complete" method.  Two products contributed to the 
total value:  (1) WasteWizard fluid separation units valued at $3,220, and (2)
Mini WasteWizard units valued at $1,100.

The WasteWizard unit is an ultrafiltration system used for recycling of 
various aqueous-based fluids including hard surface cleaners and metal cutting
fluids.  The new product could provide significant process cost savings by 
minimizing chemical usage and wastewater generation.  The Mini WasteWizard 
unit is a smaller version of the WasteWizard unit with a process capacity of 
less than 50 gallons per day.  Both products are protected by five U.S. 
patents with two U.S. patents pending.

At the time of the acquisition, the WasteWizard unit and Mini WasteWizard unit
were 85% and 50% complete, respectively.  The WasteWizard unit is scheduled to
be completed and introduced in the second quarter of 1999.  The Mini 
WasteWizard unit is scheduled for field trials through the fourth quarter of 
1999 and market introduction in the first quarter of 2000.  Less than $1 
million of funding is projected to complete these projects, including capital
expenditures for molds and other tooling.

No material changes from historical pricing, margin and expense levels are 
anticipated.  A risk-adjusted discount rate of 20% was applied to the 
projected cash flows to determine the fair value of the In-Process R&D.  


REVIEW OF INDUSTRY SEGMENTS:

As discussed in Note 13 to the consolidated financial statements, the Company
established a five-unit marketing structure on July 1, 1998.  These marketing
units are made up of related product lines.  In accordance with Statement of 
Financial Standards (SFAS No. 131), these five marketing units have been 
aggregated into two reportable business segments - "Consumables" and 
"Equipment."  Comparable information is not available for the two reportable 
business segments for prior periods.  

                            Consumables       Equipment      Consolidated Total
                            -----------       ---------      ------------------
Sales                         $36,631          $51,685             $88,316
Cost of sales                  22,342           34,425              56,767
                               ------           ------              ------
Gross profit                   14,289           17,260              31,549
  Gross margin %                 39.0%            33.4%               35.7%
Operating expenses             11,431           16,741              28,172
                               ------           ------              ------
Operating income              $ 2,858          $   519             $ 3,377

Sales by United States operations to unaffiliated customers in foreign 
geographic areas are as follows:

                                         Year ended December 31,
                                     1998         1997         1996
                                     ----         ----         ----
Asia/Pacific                      $15,967      $20,030      $14,661
Euro/Africa                        17,710       14,536        9,181
Americas                           11,227       11,678        9,222
                                  -------      -------      -------
                                  $44,904      $46,244      $33,064

Total international sales for the Company were as follows:
1998 - $58,815; 1997 - $60,396; and 1996 - $47,886.

Due to lower plant utilization, pricing pressures and slow sales in 
Asia/Pacific, the gross margin and operating income for Equipment was less 
than Consumables.  The standard equipment marketing unit is the only marketing
unit which incurred an operating loss for the six-month period ended December
31, 1998.  This loss of $(1.4) million was principally due to lower 
utilization of certain production facilities and costs incurred related to the
products acquired in the Membrex acquisition.

The products acquired in the MSI acquisition are included in the "Consumables"
segment and were additive to earnings in 1998.  The products acquired in the 
Membrex acquisition are included in the "Equipment" segment and were dilutive
to earnings in 1998.  The net impact of these acquisitions on 1998 results was
approximately a $(0.03) per share loss.  Both acquisitions are expected to be
additive to earnings in 1999.  


YEAR 2000 READINESS DISCLOSURE:

STATE OF READINESS

The Company is currently working to fully determine and resolve the potential 
impact of the Year 2000 on the processing of date-sensitive information by its
computerized information systems.  The Year 2000 problem is the result of 
computer programs being written using two digits (rather than four) to define
the applicable year.  Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the 
Year 2000, which could result in miscalculations or system failures.

The Company's Year 2000 Project (the Project) began in 1994 with reviews of 
the Company's business information systems.  The objective was to improve 
access to business information through an integrated, company-wide system 
which is also Year 2000 compliant.  

The Company is using a multi-step approach in conducting the Project.  These 
steps include:  needs analysis, resource requirements, remediation, testing, 
and implementation.  The Project plan identified the major issues and 
alignment of priorities, resources, and contingency plans.  The remediation 
and testing phases will continue through third quarter of 1999.

The Project scope includes all computing systems hardware, software, 
information technology (IT) infrastructure (such as networks and 
telecommunications), and all third-party suppliers and vendors.  The Company
has completed the needs analysis phase of the Project.  The Company has not 
yet completed, corrected and/or tested for all possible Year 2000 compliance
issues.  The Company is utilizing the services of consulting firms to assist
in dealing with Year 2000 issues.

An integral part of the Project is the implementation of SAP, a company-wide
integrated business information and accounting system.  The Company began 
implementing SAP as its primary information system in 1996.   SAP is being 
implemented in a two-phase approach.  Phase I, the conversion of the previous
primary computing system at the Company's headquarters and primary 
manufacturing facility in Minnetonka, MN was completed in 1997.  Phase II is
the business process re-engineering within SAP, and the rollout to other 
plants.  The existing software at three other plants has also been upgraded 
with Year 2000 compliant versions on an interim basis.  As of December 31, 
1998, the Company is approximately 75% complete on converting or upgrading its
systems to be Year 2000 compliant.  The remaining three plants are scheduled 
to be completed by September 30, 1999. 

Very few of the Company's products contain software or embedded 
microprocessors.  The Company has reviewed all of these products and 
identified only a few that will be impacted by the year 2000.  In all cases, 
the effect will be in the retrieval and display of logged data and not in the
correct operation of the product.  A solution for each of the products 
identified has either been made available, or will be made available to our 
customers prior to the year 2000.

Customers and vendors could be disrupted with their own Year 2000 issues, 
which could affect their ability to buy products or supply the Company with 
raw materials.  However, the Company believes this is unlikely, since no 
single customer or vendor represents more than 5 percent of the Company's 
present business.  Alternative sources of supply are also currently available
and the Company believes will be available if needed.  The Company is in the 
process of seeking assurances from its material suppliers that their ability 
to sell to the Company will not be materially impacted by any Year 2000 issue.
The Company does not at this time see the need to develop additional 
contingency plans to deal with this aspect of the Year 2000 problem.


COST

As of December 31, 1998, the Company has invested over $5,000 during the years
1995-1998 to upgrade its information systems.  The remaining cost associated 
with required modifications to become Year 2000 compliant is not expected to 
be material to the Company's financial position.  The estimated total external
cost to accelerate the replacement of certain hardware, software, and 
infrastructure is not expected to exceed $500.  The remaining SAP 
implementation costs and the related business process improvements, which 
would be incurred in any case, are excluded from the figure above.


RISKS

Although the Company believes that it will be able to correct all material 
Year 2000 problems prior to January 1, 2000, the failure to correct a material
Year 2000 problem could result in an interruption in, or a failure of, certain
normal business activities or operations.  Such interruptions or failures 
could materially and adversely affect the Company's results of operations and
financial condition.  For example, the failure to update its business 
information system could result in delayed performance on contracts, loss of 
contracts, or lawsuits for failure to perform.

The Project is expected to significantly reduce the Company's level of 
uncertainty regarding the Year 2000 problem.  The Company believes that, with
the implementation of new business systems and completion of the Project as 
scheduled, the possibility of significant interruptions of normal operations
should be minimized.

The failure of the Company's customers to be Year 2000 compliant could 
materially reduce or delay the Company's sale of water systems because of 
budget constraints and the diversion of customer resources to fixing the 
customers' Year 2000 problems.  At this time, the Company does not believe 
that its customers' Year 2000 problems will materially impact the Company's 
business.

Readers are cautioned that forward-looking statements contained in this Year
2000 readiness disclosure should be read in conjunction with the Company's 
disclosures under the heading - "Private Securities Litigation Reform Act" -
that follows.


CONTINGENCY PLANS

The Company has developed and put in place contingency plans to address 
internal and external issues specific to the Year 2000 problem, to the extent
practicable.  The Company believes that due to the widespread nature of 
potential Year 2000 issues, the contingency planning process may require 
further modifications as the Company obtains additional information regarding:
(1) the Company's internal systems and equipment during the remediation and 
testing phases of its Year 2000 program; and (2) the status of third party 
Year 2000 readiness.


PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act provides a "safe harbor" for 
forward-looking statements.  Certain information included in this Annual Report
and other materials filed or to be filed with the Securities and Exchange 
Commission (as well as information included in statements made or to be made by
the Company) contains statements that are forward-looking.  Such statements may
relate to plans for future expansion, business development activities, capital
spending, financing, or the effects of regulation, competition and Year 2000
compliance.  Such information involves important risks and uncertainties that
could significantly affect results in the future.  Such results may differ from
those expressed in any forward-looking statements made by the Company.  These
risks and uncertainties include, but are not limited to, those relating to
product development, computer systems development, dependence on existing
management, global economic and market conditions, and changes in federal or
state laws.