<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549
                                   FORM 10-Q

(Mark One)
  XX   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 ----  EXCHANGE ACT OF 1934
       For the quarterly period ended             March 31, 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     1-9603
                                              -------------

                          STEVENS INTERNATIONAL, INC.
                          ---------------------------
             (Exact name of registrant as specified in its charter)

                          Delaware                    75-2159407
               ------------------------------------------------------
               (State or other jurisdiction of     (IRS Employer
                incorporation or organization)    Identification No.)

                 5500 Airport Freeway, Fort Worth, Texas 76117
                 ---------------------------------------------
              (Address of principal executive offices) (zip code)

                                  817/831-3911
                                  ------------
              (Registrant's telephone number, including area code)

              ----------__________________________________________
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

                     APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
 
     Title of Each Class                        Outstanding at May 6, 1998
-------------------------------                 --------------------------
Series A Stock, $0.10 Par Value                          7,390,899
Series B Stock, $0.10 Par Value                          2,097,134
 
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------
 
 
PART I.    FINANCIAL INFORMATION                                     PAGE NUMBER
 
     Item 1.    Financial Statements
 
              Consolidated Condensed Balance Sheets                        3
              December 31, 1997 and March 31, 1998
              (unaudited)
 
              Consolidated Condensed Statements of Operations              4
              Three months ended March 31, 1998 and 1997
              (unaudited)
 
              Consolidated Condensed Statements of                         5
              Stockholders' Equity December 31, 1997 and
              Three months ended March 31, 1998 (unaudited)
 
              Consolidated Condensed Statements of Cash Flows              6
              Three months ended March 31, 1998 and 1997
              (unaudited)
 
              Notes to Consolidated Condensed Financial                    7
              Statements (unaudited)
 
     Item 2.    Management's Discussion and Analysis of                    9
              Financial Condition and Results of Operations


PART II.   OTHER INFORMATION

     Item 1.  Legal Proceedings                                           14

     Item 6.  Exhibits and Reports on Form 8-K                            14

                                      -2-
<PAGE>
 
                   STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE> 
<CAPTION> 
                                                               MARCH 31, 1998      DECEMBER 31, 1997
                                                               --------------      -----------------
                                                                (unaudited)
                           ASSETS
Current assets:
<S>                                                               <C>                   <C>
   Cash.....................................................      $    699              $    211
   Trade accounts receivable, less allowance for losses of                  
     $138 and $374 in 1998 and 1997, respectively...........         1,614                 3,158
 Costs and estimated earnings in excess of billings on                      
     long-term contracts....................................         3,432                 2,209
   Inventory (Note 3).......................................         6,501                 6,610
   Other current assets.....................................           708                   759
   Assets held for sale  (Note 6)...........................        13,448                14,735
                                                                  --------              --------
       Total current assets.................................        26,402                27,682
Property, plant and equipment...............................         2,449                 2,409
Other assets, net...........................................         1,727                 1,799
                                                                  --------              --------
                                                                  $ 30,578              $ 31,890
                                                                  ========              ========
                                                                            
              LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
   Trade accounts payable...................................      $  2,811              $  2,691
   Billings in excess of costs and estimated earnings on                    
     long-term contracts....................................            --                   133
   Other current liabilities................................         5,685                 6,322
   Customer deposits........................................           829                   802
   Advances from affiliates.................................           950                   950
   Current portion of long-term debt (Note 4)...............        15,476                27,678
                                                                  --------              --------
       Total current liabilities............................        25,751                38,576
Long-term debt..............................................        12,201                    55
Accrued pension costs.......................................         2,870                 2,870
Commitments and contingencies                                               
Stockholders' equity:                                                       
   Preferred stock, $0.10 par value, 2,000,000 shares                       
     authorized, none issued and outstanding                                
   Series A common stock, $0.10 par value, 20,000,000                       
     shares authorized, 7,391,000 shares issued and                         
     outstanding at March 31, 1998 and December 31,                         
     1997, respectively.....................................           739                   739
   Series B common stock, $0.10 par value, 6,000,000                        
     shares authorized, 2,098,000 shares issued and                         
     outstanding at March 31, 1998 and December 31,                         
     1997, respectively.....................................           210                   210
   Additional paid-in-capital...............................        39,941                39,941
   Foreign currency translation adjustment..................          (986)                 (769)
   Excess pension liability adjustment......................        (2,245)               (2,245)
   Retained (deficit).......................................       (47,903)              (47,487)
                                                                  --------              --------
       Total stockholders' equity (deficit).................       (10,244)               (9,611)
                                                                  --------              --------
                                                                  $ 30,578              $ 31,890
                                                                  ========              ========
</TABLE> 
 
           See notes to consolidated condensed financial statements.

                                      -3-
<PAGE>
 
                   STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                  (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
 
<TABLE> 
<CAPTION>  
                                                                  THREE MONTHS ENDED MARCH 31,
                                                                  ----------------------------
                                                                      1998             1997
                                                                    -------          -------
<S>                                                                 <C>              <C>
Net sales.....................................................      $ 9,697          $ 8,780
Cost of sales.................................................       (6,912)          (7,829)
                                                                    -------          -------
Gross profit..................................................        2,785              951
Selling, general and administrative expenses..................       (2,228)          (2,907)
                                                                    -------          -------
Operating income (loss).......................................          557           (1,956)
Other income (expense):                                                      
   Interest income............................................           --               12
   Interest expense...........................................         (825)          (1,064)
   Other, net.................................................         (148)               9
                                                                    -------          -------
                                                                       (973)          (1,043)
                                                                    -------          -------
Loss before income taxes......................................         (416)          (2,999)
Income tax benefit (Note 7)...................................           --               --
                                                                    -------          -------
Net loss......................................................      $  (416)         $(2,999)
                                                                    =======          =======
                                                                             
Net loss per common share - basic.............................       $(0.04)          $(0.32)
                                                                    =======          =======
                                                                             
Net loss per common share - diluted...........................       $(0.04)           $0.32
                                                                    =======          =======
                                                                             
Weighted average number of shares of common and common                       
  stock equivalents outstanding during the periods - basic....        9,488            9,451
                                                                    =======          =======
                                                                             
Weighted average number of shares of common and common                       
  stock equivalents outstanding during the periods - diluted..        9,488            9,451
                                                                    =======          =======
</TABLE> 
 
 
           See notes to consolidated condensed financial statements.

                                      -4-
<PAGE>
 
                 STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
           CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
                   FOR THE THREE MONTHS ENDED MARCH 31, 1998
                                  (UNAUDITED)
                            (AMOUNTS IN THOUSANDS)



                                                       SHARES   AMOUNT
                                                       ------  ---------
Series A Stock
   Balance, December 31, 1997........................   7,391  $    739
   Conversion of Series B stock to Series A stock....      --        --
                                                       ------  --------
   Balance, March 31, 1998...........................   7,391  $    739
                                                       ======  ========
 
Series B Stock
   Balance, December 31, 1997........................   2,098  $    210
   Conversion of Series B stock to Series A stock....      --        --
                                                       ------  --------
   Balance, March 31, 1998...........................   2,098  $    210
                                                       ======  ========
 
Additional Paid-In Capital
   Balance, December 31, 1997........................          $ 39,941
                                                               --------
   Balance, March 31, 1998...........................          $ 39,941
                                                               ========
 
Foreign Currency Adjustment
   Balance, December 31, 1997........................          $   (769)
   Translation adjustments...........................              (217)
                                                               --------
   Balance, March 31, 1998...........................          $   (986)
                                                               ========
 
Pension Liability Adjustment
   Balance, December 31, 1997........................          $ (2,245)
                                                               --------
   Balance, March 31, 1998...........................          $ (2,245)
                                                               ========
 
Retained (Deficit)
   Balance, December 31, 1997........................          $(47,487)
   Net (loss) for three months ended March 31, 1998..              (416)
                                                               --------
   Balance, March 31, 1998...........................          $(47,903)
                                                               ========
 
Stockholders' Equity (Deficit) at March 31, 1998.....          $(10,244)
                                                               ========
 
 
           See notes to consolidated condensed financial statements.

                                      -5-
<PAGE>
 
                  STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                             --------------------
                                                               1998       1997
                                                             --------  ----------
<S>                                                          <C>       <C>
Cash provided by operations:
   Net income (loss).......................................  $  (416)   $ (2,999)
 
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
   Depreciation and amortization...........................      453         927
   Other...................................................     (217)       (181)
   Changes in operating assets and liabilities:
      Trade accounts receivable............................    1,544       3,465
      Contract costs in excess of billings.................   (1,356)     (1,255)
      Inventory............................................      110         441
      Other assets.........................................    1,191       1,755
      Trade accounts payable...............................      193      (1,573)
      Other liabilities....................................     (683)       (299)
                                                             -------    --------
Total cash provided by operating activities................  $   819    $    281
                                                             -------    --------
 
Cash provided by (used in) investing activities:
 Additions to property, plant and equipment................  $  (160)   $     (7)
 Disposal of Bernal division...............................       --      14,263
                                                             -------    --------
Total cash provided by (used in) investing activities......  $  (160)   $ 14,256
                                                             -------    --------
 
Cash provided by (used in) financing activities:
 Net proceeds from (repayments of) long-term debt..........  $  (171)   $(15,863)
                                                             -------    --------
Total cash provided by (used in) financing activities......  $  (171)   $(15,863)
                                                             -------    --------
 
Increase (decrease) in cash and temporary investments......  $   488    $ (1,326)
Cash and temporary investments at beginning of period......      211       3,338
                                                             -------    --------
Cash and temporary investments at end of period............  $   699    $  2,012
                                                             =======    ========
 
Supplemental disclosure of cash flow information:
   Cash paid during the period for:
   Interest................................................  $   285    $     12
   Income taxes............................................       --          --
</TABLE> 
 
 
           See notes to consolidated condensed financial statements.

                                      -6-
<PAGE>
 
                  STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (Unaudited)



1.   The consolidated condensed balance sheet as of March 31, 1998, the
     consolidated condensed statement of stockholders' equity for the period
     ended March 31, 1998, the consolidated condensed statements of operations
     for the three months ended March 31, 1998 and 1997, and the consolidated
     condensed statements of cash flows for the three month periods then ended
     have been prepared by the Company without audit. In the opinion of
     management, all adjustments (which include only normal recurring
     adjustments) necessary to present fairly the financial position as of March
     31, 1998 and the results of operations for the three months ended March 31,
     1998 and 1997 and the cash flows for the three months ended March 31, 1998
     and 1997 have been made. The December 31, 1997 consolidated condensed
     balance sheet is derived from the audited consolidated balance sheet as of
     that date. Complete financial statements for December 31, 1997 and related
     notes thereto are included in the Company's Annual Report on Form 10-K for
     the year ended December 31, 1997 (the "1997 Form 10-K").

     The above financial statements have been prepared in accordance with the
     instructions to Form 10-Q and therefore do not include all information
     included in the 1997 Form 10-K. The results of operations for the three
     months ended March 31, 1998 and 1997 are not necessarily indicative of the
     results to be expected for the full year.

2.   The Company designs, manufactures, markets and services web-fed packaging
     and printing systems and related equipment for its customers in the
     packaging industry and in the specialty/commercial and banknote and
     securities segments of the printing industry. The Company also markets and
     manufactures high-speed digital image processing systems primarily for use
     in the banknote and security printing industry. The Company combines
     various types of equipment capable of converting and printing, among other
     items, food and beverage containers, liquid container cartons, banknotes,
     postage stamps, lottery tickets, direct mail inserts, personal checks and
     business forms. The Company's technological and engineering capabilities
     allow it to combine any of the four major printing technologies (offset,
     flexography, rotogravure and intaglio) in its systems. Complete press
     systems are capable of multiple color and multiple size printing and
     perform such related functions as numbering, punching, perforating,
     slitting, cutting, creasing, folding and stacking. The presses can be
     custom engineered for non-standard form size and special auxiliary
     functions.

                                      -7-
<PAGE>
 
3.   Inventories consist of the following:

                                    March 31,  December 31,
                                      1998        1997
                                    ---------  ------------
 
                                     (Amounts in thousands)
       Finished product........     $1,066           $1,413
       Work in progress........      1,567            2,723
       Raw materials...........      3,868            2,474
                                    ------           ------
                                    $6,501           $6,610
                                    ======           ======

4.   For a description of the status of the bank credit facility at March 31,
     1998, see "Liquidity and Capital Resources". Substantially all assets of
     the Company continue to be pledged as collateral on the Company's credit
     facilities. The senior debt is classified as a current liability at March
     31, 1998. The senior subordinated debt is classified as $4.5 million of
     current indebtedness and $12.2 million of long-term indebtedness based upon
     the terms of the restructured debt discussed in detail in "Liquidity and
     Capital Resources".

5.   As a result of the Company's continuing liquidity problems, the Company has
     been the subject of lawsuits, from time to time, with respect to the
     Company's inability to pay certain vendors on a timely basis. To date, most
     of such actions have been settled, but there can be no assurance that the
     Company, if named a defendant in such actions in the future, will be able
     to settle such claims in the future. In addition, the Company is subject to
     various claims, including product liability claims, which arise in the
     ordinary course of business, and is a party to various legal proceedings
     that constitute ordinary routine litigation incidental to the Company's
     business. A successful product liability claim brought against the Company
     in excess of its product liability coverage could have a material adverse
     effect upon the Company's business, operating results and financial
     condition.

     In management's opinion, other than with respect to collection lawsuits,
     the Company has adequate legal defenses and/or insurance coverage in
     respect to each of these legal actions and does not believe that they will
     materially affect the Company's operations, liquidity, or financial
     position. See "Legal Proceedings" herein and in the 1997 Form 10-K.

6.   A description of the Company's divestitures in 1998 and 1997 follow:

     Sale of Assets of Zerand Division in April 1998
     -----------------------------------------------

     On April 27, 1998, the Company sold substantially all the assets of the
     Zerand division to Valumaco Incorporated, a new company formed for the
     asset purchase. In addition, Valumaco Incorporated assumed certain
     liabilities of the Zerand division. The assets sold included the real
     property, platen die cutter systems, and other original Zerand products
     such as delivery equipment, wide-web rotogravure printing systems, stack
     flexographic printing systems, unwind and butt splicer systems, and related
     spare parts, accounts payable, and other assumed liabilities. Excluded from
     the proposed transaction were the System 2000 flexographic printing systems
     and the System 9000 narrow-web rotogravure printing systems produced at the
     Zerand division and related accounts receivable, inventory and engineering

                                      -8-
<PAGE>
 
     drawings. The sale price was approximately $13.7 million, which consisted
     of cash proceeds of $10.1 million, a one-year $1 million escrow "holdback",
     and the purchaser's assumption of approximately $2.6 million of certain
     liabilities of Zerand, including the accounts payable.

     This transaction resulted in an approximate $10 million reduction of the
     Company's senior debt. In 1997, Zerand contributed sales of approximately
     $11.6 million and approximately $1.8 million income before interest,
     corporate charges and taxes to the Company's financial statements. The
     Company will realize an approximate $3.6 million gain on the sale of Zerand
     assets, which will be reflected in the financial statements for the second
     quarter of 1998.

     Sale of Bernal Division in March 1997
     -------------------------------------

     In March 1997, the Company sold substantially all the assets of its Bernal
     division including the product technology and related intangibles to Bernal
     International, Inc., a new company formed for the asset purchase. The cash
     proceeds were approximately $15 million, and in addition, the purchaser
     assumed certain liabilities of Bernal, including the accounts payable. This
     transaction resulted in a $12 million permanent reduction of the Company's
     senior debt. In 1996, Bernal contributed sales of approximately $17.8
     million and approximately $0.7 million income before interest, corporate
     charges and taxes.

7.   Due to accumulated losses, there are no recoverable income taxes for the
     three months ended March 31, 1998 and 1997.

8.   In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
     of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
     ("EPS") which established new standards for computing and presenting EPS.
     SFAS No. 128 replaced the presentation of primary EPS with a presentation
     of basic EPS. Basic EPS excludes dilution and is computed by dividing
     income available to common shareholders by the weighted-average number of
     common shares outstanding for the period. Diluted EPS reflects the
     potential dilution that could occur if securities or other contracts to
     issue common stock were exercised or converted into common stock. EPS
     amounts for 1998 and 1997 have been presented and, where appropriate,
     restated to conform to the SFAS No. 128 requirements. Since the Series A
     and Series B stock have identical dividend and participation rights in the
     Company's earnings, they have been considered to be comparable in the
     calculation.


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


RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997

Sales  The Company's sales for the three months ended March 31, 1998 increased
by $0.9 million (or 10.4%) compared to sales in the same period in 1997 due
primarily to packaging systems sales 

                                      -9-
<PAGE>
 
increases ($2.0 million) offset by decreases in sales at the French service and
repair division ($0.1 million), and banknote printing equipment division ($1.0
million). Sales and gross profit in 1997 includes $0.7 million in proceeds from
the sale of certain press system contract rights. The Company sold these rights
in lieu of a long repossession and resale process. Sales included $3.6 million
of Zerand division sales in the three months ended March 31, 1998, a division
that was sold in April 1998.

Gross Profit  The Company's gross profit for the three months ended March 31,
1998 increased by   $1.8 million compared to gross profit in the same period in
1997 due primarily to increased sales volume for packaging systems and reduced
depreciation and product development costs in 1998.  Gross profit margin for
1998 increased to 28.7% of sales as compared to 10.8% for 1997.  This increase
in gross profit margin in 1998 was due primarily to higher margins on standard
products in 1998 compared to lower margins on prototype orders in 1997 and
reduced depreciation charges on assets held for sale.  Sales and gross profit in
1997 includes $0.7 million in proceeds from the sale of certain press system
contract rights.  The Company sold these rights in lieu of a long repossession
and resale process.

Selling, General and Administrative Expenses  The Company's selling, general,
and administrative expenses decreased by $0.7 million (or 23.4%)  for the three
months ended March 31, 1998 compared to the same period in 1997 due to
continuing cost reduction efforts at all divisions.  Selling, general and
administrative expenses for the three months ended March 31, 1998 were 23% of
sales compared to 33.1% of sales for the same period in 1997 due to the increase
in sales in 1998 described above and the reduction in expenses.

Other Income (Expense)   The Company's interest expense decreased by $0.2
million for the three months ended March 31, 1998 compared to the same period in
1997 due to the reduced borrowing in 1998, primarily from the $12 million in
loan payments from the sale of Bernal in March 1997.


TAX MATTERS

The Company's effective state and federal income tax rate ("effective tax rate")
was 0% for the three months ended March 31, 1998 and 1997, respectively.  Due to
continuing losses in 1998, there are no recoverable tax benefits for the three
months ended March 31, 1998.


LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY AND CAPITAL RESOURCES

As a result of its cash collections and the sale of Zerand (see Note 6 of Notes
to Consolidated Condensed Financial Statements), the Company was able to make
principal payments on its bank credit facility of approximately $10 million on
April 27, 1998.  This transaction and normal working capital advances decreased
the Company's net direct bank borrowings from $10.96 million at March 31, 1998
to $583,000 at April 27, 1998.

                                      -10-
<PAGE>
 
The Company requires capital primarily to fund its ongoing operations, to
service its existing debt and to pursue its strategic objectives including new
product development and penetration of international markets. The Company's
working capital needs typically increase because of a number of factors,
including the duration of the manufacturing process and the relatively large
size of most orders.

Net cash provided by (used in) operating activities (before working capital
requirements) was ($0.2) and ($2.2) million for the three months ended March 31,
1998 and 1997, respectively.  Working capital provided cash of $1.0 and $2.5
million for the three months ended March 31, 1998 and 1997, respectively.
During periods of lower sales such as 1997 and the first quarter of 1998, the
Company's working capital provides cash as receivables are collected and
inventory is utilized.  Alternatively, the Company's working capital needs
increase during periods of sales growth because of a number of factors,
including the duration of the manufacturing process and the relatively large
size of most orders.

On April 22, 1998 the Company and its Note Holders reached an agreement in
principle to modify the Senior Subordinated Notes, including principal of $15.3
million and interest of $2.35 million, as follows (the "Restructuring"):

     a.  A total of $4 million of 6% term notes, due December 31, 1998, to be
         collateralized by certain assets of the Company and are to be
         mandatorily pre-paid from proceeds of sale of the Hamilton Machining
         Center and/or the Hamilton production facility. Interest on these notes
         is payable monthly and increases 1% per month commencing August 1, 1998
         until maturity;

     b.  A total of $1 million of 6% term notes, due December 31, 1999, to be
         collateralized by certain assets of the Company and are to be
         mandatorily pre-paid from proceeds of the $1 million escrow amount from
         the April 1998 sale of certain Zerand assets. Interest on these notes
         is payable monthly and increases 1% per month (a) commencing October 1,
         1998 until $500,000 in principal is re-paid and (b) commencing April 1,
         1999 until maturity;

     c.  A total of $4 million of 6% term notes, due June 30, 2003 to be payable
         in principal payments of $1.33 million on each of June 30, 2001, 2002
         and 2003, with interest paid in kind until June 30, 2000, and
         thereafter in cash semi-annually. Collateral will include first liens
         on certain assets and a second lien on all remaining assets of the
         Company. An accelerated principal payment of $500,000 is due on June
         30, 2000 payable out of 50% of excess or "free" cash flow.

     d.  A total of $3 million of 6% unsecured term notes, due June 30, 2005, to
         be payable in principal payments of $1 million on June 30, 2003, 2004
         and 2005, with interest paid in kind through June 30, 2000 and
         thereafter in cash out of 50% of net income of the Company. If the
         Company pre-pays $0.5 million of these unsecured term notes before June
         30, 2003, $1.5 million of these term notes will be converted directly
         into Series A Common Stock of the Company at market price on the date
         of conversion.

                                      -11-
<PAGE>
 
     e.  A total of $5.65 million of 6% unsecured notes, due December 31, 1999,
         which will be mandatorily converted to 5.65 million shares of
         Convertible Preferred Stock (liquidation value of $1 per share) upon
         the payment of the $4 million term notes described in paragraph a.
         above, and the conversion to Convertible Preferred Stock of $1.5
         million of a Bridge Convertible Senior Secured Note described below.
         The Convertible Preferred Stock will be convertible, at the option of
         the Note Holders, to Series A Common Stock of the Company at the market
         value of the Series A Common Stock as of the date of conversion of the
         preferred stock. Cumulative dividends at 8% per annum will be paid
         after June 30, 2003 out of 50% of net income not used to pay interest
         on senior debt and the term notes described in paragraph d. above.

A summary table of required Note Holder principal payment due dates follows:

              ON OR BEFORE:        PAYMENT AMOUNT
              -------------------  --------------
              December 31, 1998..      $4,500,000
              December 31, 1999..      $  500,000
              June 30, 2001......      $1,333,333
              June 30, 2002......      $1,333,333
              June 30, 2003......      $2,333,334
              June 30, 2004......      $1,000,000
              June 30, 2005......      $1,000,000

As a condition to the implementation of the Restructuring, (a) the Company must
raise $1.5 million in the form of a Bridge Convertible Senior Secured Note,
convertible into 1.5 million shares of Convertible Preferred Stock, which in
turn is convertible into Series A Common Stock at market price on the day of
conversion, and (b) a $950,000 loan from Paul I. Stevens to the Company must be
converted into Convertible Preferred Stock of the Company on the same terms and
conditions as described in paragraph e. above.

The Company believes that its commitment to raise $1.5 million of Bridge Senior
Convertible Debt and the conversion of the $950,000 advanced to the Company by
Paul I. Stevens to Convertible Preferred Stock will enhance the Company's
ability to obtain and produce the new orders which have been forecasted.

At March 31, 1998, the Company's indebtedness was comprised primarily of a bank
credit facility and the Company's Senior Subordinated Notes due September 30,
2000.  In addition, the Company's Chairman has loaned the Company $950,000 as
described below.  As of March 31, 1998, there was outstanding $15.3 million in
Senior Subordinated Notes, bearing interest at the rate of 10.5% per annum.

Under its credit facility at March 31, 1998, the Company's maximum borrowings
were limited to a borrowing base formula, which could not exceed $11 million in
the form of direct borrowings and letters of credit.  As of March 31, 1998 there
was $10.97 million in direct borrowings and $8,600 in standby letters of credit
outstanding under the bank credit facility, with additional availability for
such borrowings of $24,000.  After the sale of Zerand, the bank credit facility
borrowings were 

                                      -12-
<PAGE>
 
$583,000, and the bank credit facility was modified to provide for a maximum of
$2 million in direct borrowings and letters of credit.

At March 31, 1998, $10.97 million of the Company's bank borrowings were at the
lender's prime rate of interest (8.50%) plus 2.0%, or a total of 10.50%
interest.  The amounts borrowed under the credit facility have been used for
working capital.

Both the agreement concerning the bank credit facility and the agreement with
the holders of the Senior Subordinated Notes provide for joint and several
guaranties by the domestic operating subsidiaries of the Company. To secure the
indebtedness and the guaranties, a first lien was granted to the lender, and a
second lien was granted to the holders of the Senior Subordinated Notes, on
substantially all the assets of the Company and its domestic divisions.

The borrowings under the bank credit facility and Senior Subordinated Notes
agreement are subject to various restrictive covenants related to financial
ratios as well as limitations on capital expenditures and additional
indebtedness. The Company is not allowed to pay dividends.

With the sale of the Zerand division, the above described Restructuring, and
assuming that one of several strategic, financial alternatives, principally the
additional sale of assets, among others presently being pursued by the Company
is consummated, management believes that cash flow from operations will be
adequate to fund its existing operations and repay scheduled indebtedness over
the next 12 months.

There can be no assurance that future sales of assets, if any, can be
successfully accomplished on terms acceptable to the Company.  Under current
circumstances, the Company's ability to continue as a going concern depends upon
the further redeployment of assets, and a return to profitable operations.  If
the Company is unsuccessful in its efforts, it may continue to be unable to meet
its obligations or fulfill the covenants in its debt agreements, as well as
other obligations, making it necessary to undertake such other actions as may be
appropriate to preserve asset values.

In addition, the Company may incur, from time to time, additional short- and
long-term bank indebtedness (under its existing credit facility or otherwise)
and may issue, in public or private transactions, its equity and debt securities
to provide additional funds necessary for the continued pursuit of the Company's
operational strategies.  The availability and terms of any such sources of
financing will depend on market and other conditions.  There can be no assurance
that such additional financing will be available or, if available, will be on
terms and conditions acceptable to the Company.  In 1996, the Company's Chairman
and Chief Executive Officer loaned the Company $950,000 for its short-term cash
requirements.  As of March 31, 1998, this loan had not been repaid.

Backlog and Orders  The Company's backlog of unfilled orders (excluding Zerand
backlog), at March 31, 1998 was approximately $8.1 million compared to $12.0
million at December 31, 1997 (excluding Zerand backlog), a decrease of (32.5%).
The backlog decrease included $3.9 million of packaging systems as compared to
year-end 1997, offset by small changes in the Company's other divisions.  The
backlog at March 31 in each of the preceding five years has ranged from a low of
$17.4 million in 1997 to a high of $68.0 million in 1995.

                                      -13-
<PAGE>
 
The reduction in backlog is the result of a reduced order flow in 1997 and 1998.
Orders for the three months ended March 31, 1998 were $1.9 million compared to
$5.4 million for the comparable period in 1997, a decrease of $3.5 million while
shipments increased $0.9 million. The Company believes the above noted reduced
order flow is the result of fluctuations in the flow of major printing and
packaging system orders, and in part to liquidity problems faced by the Company.
As a result, the Company is continuing to adjust its rate of future production
and accompanying costs to match this reduced order flow.

When sales are recorded under the completed contract method of accounting, the
Company normally experiences a six to nine month lag between the time new orders
are booked and the time they are reflected in sales and results of operations.
Larger orders, which are accounted for using the percentage of completion method
of accounting, are reflected in sales and results of operations as the project
progresses through the manufacturing cycle.


PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In 1997, the Company filed a suit seeking damages and injunctive relief against
Paul W. Bergland, a former vice-president, for, among other things, theft of
trade secrets, fraud, breach of contract, and breach of a confidential
relationship.  Discovery is ongoing.  On March 3, 1997, Bergland filed his
original answer and a counterclaim.  ConverTek, Inc., a corporation in which
Bergland claims an ownership interest, has joined the suit as a counterclaimant
against the Company.  The counterclaim alleges claims for defamation, tortious
interference with prospective business relationships and breach of contract.  It
also seeks a declaratory judgment declaring that the confidential information
agreement and agreement not to compete signed by Bergland are unenforceable.
The Company denies all liability and intends to prosecute its claims and defend
the counterclaims vigorously.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits:


EXHIBIT  NUMBER DESCRIPTION OF EXHIBIT
-------  -----------------------------
  3.1    Second Amended and Restated Certificate of Incorporation of the
          Company.(1)
  3.2    Bylaws of the Company, as amended.(2)
  4.1    Specimen of Series A Common Stock Certificate.(3)
  4.2    Specimen of Series B Common Stock Certificate.(4)
 10.1    Seventh Amendment to Credit Agreement dated December 31, 1997 by and
          between the Bank of America Texas, N.A., the Company, PMC Liquidation,
          Inc., and Printing and Packaging Equipment Finance Corporation.(*)
 10.2    Eighth Amendment to Credit Agreement dated January 23, 1998 by and
          between the Bank of America Texas, N.A., the Company, PMC Liquidation,
          Inc., and Printing and Packaging Equipment Finance Corporation.(*)

                                      -14-
<PAGE>
 
EXHIBIT  NUMBER DESCRIPTION OF EXHIBIT
-------  -----------------------------
 10.3    Ninth Amendment to Credit Agreement dated February 6, 1998 by and
          between the Bank of America Texas, N.A., the Company, PMC Liquidation,
          Inc., and Printing and Packaging Equipment Finance Corporation.(*)
 10.4    Tenth Amendment to Credit Agreement dated February 28, 1998 by and
          between the Bank of America Texas, N.A., the Company, PMC Liquidation,
          Inc., and Printing and Packaging Equipment Finance Corporation.(*)
 10.5    Eleventh Amendment to Credit Agreement dated March 31, 1998 by and
          between the Bank of America Texas, N.A., the Company, PMC Liquidation,
          Inc., and Printing and Packaging Equipment Finance Corporation.(*)
 10.6    Twelfth Amendment to Credit Agreement dated April 16, 1998 by and 
          between Bank of America Texas, N.A., the Company, PMC Liquidation,
          Inc., and Printing and Packaging Equipment Finance Corporation.(*)
 11.1    Computation of Net Income per Common Share.(*)
 27.1    Financial Data Schedule.(*)

------------------

 *   Filed herewith.
(1)  Previously filed as an exhibit to the Company's Annual Report on Form 10-K
     for the year ended December 31, 1990 and incorporated herein by reference.
(2)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (No. 33-15279) and incorporated herein by reference.
(3)  Previously filed as an exhibit to the Company's Registration Statement on
     Form S-1 (No. 33-24486) and incorporated herein by reference.
(4)  Previously filed as an exhibit to the Company's report on Form 8-A filed
     August 19, 1988 and incorporated herein by reference.


     (b)  Reports on Form 8-K.
              None.

                                      -15-
<PAGE>
 
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, Stevens
International, Inc. has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.



                                        STEVENS INTERNATIONAL, INC.



Date: May 12, 1998                      By: /s/  Paul I. Stevens
                                           ------------------------------------
                                            Paul I. Stevens
                                            Chief Executive Officer
                                            and Acting Chief Financial Officer

                                      -16-
<PAGE>
 
                                                                    EXHIBIT 11.1

                  STEVENS INTERNATIONAL, INC. AND SUBSIDIARIES
               COMPUTATIONS OF NET INCOME (LOSS) PER COMMON SHARE
                                  (UNAUDITED)
                 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                         1998       1997
                                                       ---------  ---------
Basic and diluted:
 
   Weighted average shares outstanding - basic.......     9,488      9,451
   Assumed exercise of Series A and B stock options
     (Treasury stock method).........................        --         --
                                                         ------    -------
 
Total common share equivalents - diluted.............     9,488      9,451
                                                         ======    =======
 
Net income (loss)....................................    $ (416)   $(2,999)
                                                         ======    =======
 
Per share amounts  -- Basic and fully diluted:
 
Net income (loss) - basic............................    $(0.04)   $ (0.32)
                                                         ======    =======
 
Net income (loss) - diluted..........................    $(0.04)   $ (0.32)
                                                         ======    =======

                                      -17-