##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended October 31, 2008
 OR
 o
    
    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
 
 WASHINGTON
    
    91-1104842(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 23500  64th Avenue South
Kent, Washington 98032
(253) 850-3500
 
 þ o
 
 Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
(Do not check if a smaller reporting company)Smaller reporting company 
o
 o þ




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##### Table of Contents



Explanatory Note:
 This Form 10-Q reflects the restatement of the Companys Condensed Consolidated Financial
Statements for the three and six months ended October 31, 2007 and related Managements Discussion
and Analysis of Financial Condition and Results of Operations in Item 2 herein. The restatement is
more fully described in Note 16 to the Condensed Consolidated Financial Statements under Item 1,
Financial Information herein.
 2




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##### 



FLOW INTERNATIONAL CORPORATION
  PagePart I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Balance Sheets   October 31, 2008 and April 30, 2008
    
    4Condensed Consolidated Statements of Income  Three and Six Months Ended October 31, 2008 and 2007
(restated)
    
    5Condensed Consolidated Statements of Cash Flows  Six Months Ended October 31, 2008 and 2007 (restated)
    
    6Condensed Consolidated Statement of Shareholders Equity and Comprehensive Income  Six Months Ended
October 31, 2008 and 2007 (restated)
    
    7Notes to Condensed Consolidated Financial Statements
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    31Item 4. Controls and Procedures
    
    32Part II  OTHER INFORMATION
    
    33Item 1. Legal Proceedings
    
    33Item 1A. Risk Factors
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    33Item 3.
Defaults Upon Senior Securities
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    33Item 5.
Other Information
    
    33Item 6. Exhibits
    
    34Signatures
    
    35EX-31.1EX-31.2EX-32.1
  3




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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
 
 October 31,
    
    
    April 30,2008
    
    
    2008ASSETS:Current Assets:Cash and Cash Equivalents
    
    $
    23,147
    
    
    $
    29,099Restricted Cash
    
    
    470
    
    
    
    142Receivables, net
    
    
    37,622
    
    
    
    33,632Inventories
    
    
    26,699
    
    
    
    29,339Deferred Income Taxes
    
    
    2,658
    
    
    
    2,889Deferred Acquisition Costs
    
    
    13,184
    
    
    
    7,953Other Current Assets
    
    
    7,202
    
    
    
    6,456Total Current Assets
    
    
    110,982
    
    
    
    109,510Property and Equipment, net
    
    
    20,715
    
    
    
    18,790Intangible Assets, net
    
    
    4,294
    
    
    
    4,062Goodwill
    
    
    2,764
    
    
    
    2,764Deferred Income Taxes
    
    
    12,182
    
    
    
    15,535Other Assets
    
    
    1,140
    
    
    
    494$
    152,077
    
    
    $
    151,155LIABILITIES AND SHAREHOLDERS EQUITY:Current Liabilities:Notes Payable
    
    $
    1,037
    
    
    $
    1,118Current Portion of Long-Term Obligations
    
    
    1,192
    
    
    
    977Accounts Payable
    
    
    21,024
    
    
    
    19,516Accrued Payroll and Related Liabilities
    
    
    7,065
    
    
    
    8,189Taxes Payable and Other Accrued Taxes
    
    
    3,341
    
    
    
    3,617Deferred Income Taxes
    
    
    572
    
    
    
    686Deferred Revenue
    
    
    5,625
    
    
    
    4,980Customer Deposits
    
    
    5,474
    
    
    
    4,549Other Accrued Liabilities
    
    
    8,745
    
    
    
    9,753Total Current Liabilities
    
    
    54,075
    
    
    
    53,385Long-Term Obligations, net
    
    
    2,211
    
    
    
    2,333Deferred Income Taxes
    
    
    7,250
    
    
    
    7,787Other Long-Term Liabilities
    
    
    1,432
    
    
    
    1,58664,968
    
    
    
    65,091Commitments and Contingencies (Note 7)Shareholders Equity:Series A 8% Convertible Preferred Stock$.01 par value, 1,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common Stock$.01 par value, 49,000,000 shares authorized, 37,597,928 and 37,589,787 shares
issued and outstanding at October 31, 2008 and April 30, 2008, respectively
    
    
    371
    
    
    
    371Capital in Excess of Par
    
    
    139,804
    
    
    
    139,007Accumulated Deficit
    
    
    (45,569
    )
    
    
    (47,584
    )Accumulated Other Comprehensive Loss:Defined Benefit Plan Obligation, net of income tax of $93 and $93
    
    
    (280
    )
    
    
    (280
    )Cumulative Translation Adjustment, net of income tax of $1,045 and $764
    
    
    (7,217
    )
    
    
    (5,450
    )Total Shareholders Equity
    
    
    87,109
    
    
    
    86,064$
    152,077
    
    
    $
    151,155
 
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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
 
 Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007(Restated, see
    
    
    
    
    
    
    (Restated, seeNote 16)
    
    
    
    
    
    
    Note 16)Sales
    
    $
    60,578
    
    
    $
    57,757
    
    
    $
    117,643
    
    
    $
    115,616Cost of Sales
    
    
    34,939
    
    
    
    33,795
    
    
    
    65,873
    
    
    
    68,351Gross Margin
    
    
    25,639
    
    
    
    23,962
    
    
    
    51,770
    
    
    
    47,265Expenses:Sales and Marketing
    
    
    11,902
    
    
    
    10,905
    
    
    
    21,999
    
    
    
    21,303Research and Engineering
    
    
    2,278
    
    
    
    2,145
    
    
    
    4,528
    
    
    
    4,425General and Administrative
    
    
    7,578
    
    
    
    7,300
    
    
    
    16,169
    
    
    
    19,562Restructuring Charges
    
    
    444
    
    
    
    
    
    
    
    1,880
    
    
    
    22,202
    
    
    
    20,350
    
    
    
    44,576
    
    
    
    45,290Operating Income
    
    
    3,437
    
    
    
    3,612
    
    
    
    7,194
    
    
    
    1,975Interest Income
    
    
    124
    
    
    
    251
    
    
    
    303
    
    
    
    442Interest Expense
    
    
    (161
    )
    
    
    (95
    )
    
    
    (291
    )
    
    
    (177
    )Other Income (Expense), net
    
    
    (842
    )
    
    
    (579
    )
    
    
    (449
    )
    
    
    (334
    )Income Before Provision for Income Taxes
    
    
    2,558
    
    
    
    3,189
    
    
    
    6,757
    
    
    
    1,906(Provision) Benefit for Income Taxes
    
    
    (2,162
    )
    
    
    (1,170
    )
    
    
    (4,831
    )
    
    
    460Income From Continuing Operations
    
    
    396
    
    
    
    2,019
    
    
    
    1,926
    
    
    
    2,366Income from Operations of Discontinued Operations,
net of Income Tax of $9, $144, $46 and $189
    
    
    16
    
    
    
    276
    
    
    
    89
    
    
    
    363Net Income
    
    $
    412
    
    
    $
    2,295
    
    
    $
    2,015
    
    
    $
    2,729Basic Income Per Share:Income From Continuing Operations
    
    $
    0.01
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.06Income from Operations of Discontinued Operations
    
    
    .00
    
    
    
    .01
    
    
    
    .00
    
    
    
    .01Net Income
    
    $
    0.01
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.07Diluted Income Per Share:Income From Continuing Operations
    
    $
    0.01
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.06Income from Operations of Discontinued Operations
    
    
    .00
    
    
    
    .01
    
    
    
    .00
    
    
    
    .01Net Income
    
    $
    0.01
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.07Weighted Average Shares Used in Computing Basic and
Diluted Income Per Share:Basic
    
    
    37,595
    
    
    
    37,326
    
    
    
    37,593
    
    
    
    37,314Diluted
    
    
    37,595
    
    
    
    37,511
    
    
    
    37,596
    
    
    
    37,540
 
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FLOW INTERNATIONAL CORPORATION
 
 
 Six Months EndedOctober 31,2008
    
    
    2007(Restated, seeNote 16)Cash Flows from Operating Activities:Net Income
    
    $
    2,015
    
    
    $
    2,729Adjustments to Reconcile Net Income to Cash Used in Operating Activities:Depreciation and Amortization
    
    
    2,097
    
    
    
    1,780Deferred Income Taxes
    
    
    3,461
    
    
    
    (1,618
    )Provision for Slow Moving and Obsolete Inventory
    
    
    121
    
    
    
    798Bad Debt Expense
    
    
    539
    
    
    
    958Warranty Expense
    
    
    1,982
    
    
    
    1,762Incentive Stock Compensation Expense
    
    
    952
    
    
    
    1,101Repurchase of Warrants
    
    
    
    
    
    
    629Unrealized Foreign Exchange Currency Losses (Gains)
    
    
    942
    
    
    
    (905
    )Other
    
    
    183
    
    
    
    892Changes in Operating Assets and Liabilities:Receivables
    
    
    (6,409
    )
    
    
    (2,130
    )Inventories
    
    
    315
    
    
    
    (4,602
    )Other Operating Assets
    
    
    (2,627
    )
    
    
    90Accounts Payable
    
    
    1,632
    
    
    
    (848
    )Accrued Payroll and Payroll Related Liabilities
    
    
    (709
    )
    
    
    (340
    )Deferred Revenue
    
    
    856
    
    
    
    1,216Customer Deposits
    
    
    1,536
    
    
    
    (1,788
    )Other Operating Liabilities
    
    
    (2,357
    )
    
    
    (1,599
    )Cash Provided by (Used in) Operating Activities
    
    
    4,529
    
    
    
    (1,875
    )Cash Flows From Investing Activities:Expenditures for Property and Equipment and Intangible Assets
    
    
    (4,942
    )
    
    
    (2,511
    )Proceeds from Sale of Short-term Investments
    
    
    
    
    
    
    650Proceeds from Sale of Property and Equipment
    
    
    118
    
    
    
    219Payments for Pending Acquisition
    
    
    (3,792
    )
    
    
    Restricted Cash
    
    
    (364
    )
    
    
    Cash Used in Investing Activities
    
    
    (8,980
    )
    
    
    (1,642
    )Cash Flows from Financing Activities:Repayments Under Notes Payable
    
    
    
    
    
    
    (5,857
    )Borrowings Under Notes Payable
    
    
    
    
    
    
    457Borrowings Under Other Financing Arrangements
    
    
    850
    
    
    
    Repayments Under Other Financing Arrangements
    
    
    (89
    )
    
    
    Payments of Capital Lease Obligations
    
    
    (71
    )
    
    
    Payments of Long-Term Obligations
    
    
    (407
    )
    
    
    (391
    )Proceeds from Exercise of Stock Options
    
    
    
    
    
    
    424Payment for Warrant Repurchase
    
    
    
    
    
    
    (3,006
    )Cash Provided by (Used in) Financing Activities
    
    
    283
    
    
    
    (8,373
    )Effect of Changes in Exchange Rates
    
    
    (1,784
    )
    
    
    530Decrease in Cash And Cash Equivalents
    
    
    (5,952
    )
    
    
    (11,360
    )Cash and Cash Equivalents at Beginning of Period
    
    
    29,099
    
    
    
    38,288Cash and Cash Equivalents at End of Period
    
    $
    23,147
    
    
    $
    26,928Supplemental Disclosures of Noncash Investing and Financing Activities:Operating Assets transferred to Property and Equipment
    
    $
    15
    
    
    $
    417Accounts Payable incurred to acquire Property and Equipment, and Intangible Assets
    
    
    959
    
    
    
    1,208Accrued Liabilities Incurred for Pending Acquisition
    
    
    1,412
    
    
    
    
 
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FLOW INTERNATIONAL CORPORATION
 
 
 AccumulatedCommon Stock
    
    
    Capital
    
    
    
    
    
    
    Other
    
    
    TotalPar
    
    
    In Excess
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Value
    
    
    of Par
    
    
    Deficit
    
    
    Loss
    
    
    EquityBalances, May 1, 2007
    
    
    37,268
    
    
    $
    367
    
    
    $
    139,207
    
    
    $
    (69,395
    )
    
    $
    (8,955
    )
    
    $
    61,224Components of Comprehensive Income:Net Income (restated, see Note 16)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,729
    
    
    
    
    
    
    
    2,729Cumulative Translation
Adjustment, Net of Income Tax of
$288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,475
    
    
    
    1,475Total Comprehensive Income
(restated, see Note 16)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,204Cumulative effect upon adoption of
FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (543
    )
    
    
    
    
    
    
    (543
    )Exercise of Options
    
    
    41
    
    
    
    1
    
    
    
    423
    
    
    
    
    
    
    
    
    
    
    
    424Repurchase of Warrants
    
    
    
    
    
    
    
    
    
    
    (2,377
    )
    
    
    
    
    
    
    
    
    
    
    (2,377
    )Stock Compensation
    
    
    20
    
    
    
    0
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    113Balances, October 31, 2007
(restated, see Note 16)
    
    
    37,329
    
    
    $
    368
    
    
    $
    137,366
    
    
    $
    (67,209
    )
    
    $
    (7,480
    )
    
    $
    63,045Balances, May 1, 2008
    
    
    37,590
    
    
    $
    371
    
    
    $
    139,007
    
    
    $
    (47,584
    )
    
    $
    (5,730
    )
    
    $
    86,064Components of Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,015
    
    
    
    
    
    
    
    2,015Cumulative Translation
Adjustment, Net of Income Tax of
$281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,767
    )
    
    
    (1,767
    )Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Stock Compensation
    
    
    8
    
    
    
    0
    
    
    
    797
    
    
    
    
    
    
    
    
    
    
    
    797Balances, October 31, 2008
    
    
    37,598
    
    
    $
    371
    
    
    $
    139,804
    
    
    $
    (45,569
    )
    
    $
    (7,497
    )
    
    $
    87,109
 
 7




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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
 
 Note 1  Basis of Presentation
  Note 2  Recently Issued Accounting Pronouncements
 Note 15  Fair Value of Financial Instruments
   8




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##### Table of Contents



Note 3  Receivables, Net
  October 31, 2008
    
    
    April 30, 2008Trade Accounts Receivable
    
    $
    35,006
    
    
    $
    32,410Unbilled Revenues
    
    
    5,606
    
    
    
    4,58940,612
    
    
    
    36,999Less: Allowance for Doubtful Accounts
    
    
    (2,990
    )
    
    
    (3,367
    )$
    37,622
    
    
    $
    33,632
 Note 4  Inventories
  October 31, 2008
    
    
    April 30, 2008Raw Materials and Parts
    
    $
    16,630
    
    
    $
    19,671Work in Process
    
    
    2,866
    
    
    
    3,215Finished Goods
    
    
    7,203
    
    
    
    6,453$
    26,699
    
    
    $
    29,339
 Note 5  Accrued Liabilities
  Warranty Obligations
  9




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##### Table of Contents



Accrued warranty balance as of April 30, 2008
    
    $
    3,101Accruals for warranties for fiscal year 2009 sales
    
    
    1,982Warranty costs incurred in fiscal year 2009
    
    
    (1,767
    )Change due to currency fluctuations
    
    
    (320
    )Accrued warranty balance as of October 31, 2008
    
    $
    2,996
 Restructuring Charges
     Three Months Ended
    
    
    Six Months EndedOctober 31, 2008
    
    
    October 31, 2008Severance and termination benefits
    
    $
    308
    
    
    $
    1,744Lease termination costs and
long-lived assets impairment
charge
    
    
    136
    
    
    
    136Inventory write-down
    
    
    
    
    
    
    108$
    444
    
    
    $
    1,988
  Severance &Termination
    
    
    Facility ExitBenefits
    
    
    CostsBalance, April 30, 2008
    
    $
    
    
    
    $
    Restructuring charges
    
    
    1,744
    
    
    
    136Cash payments
    
    
    (1,675
    )
    
    
    Balance, October 31, 2008
    
    $
    69
    
    
    $
    136
 Note 6  Long-Term Obligations and Notes Payable
  October 31, 2008
    
    
    April 30, 2008Long-term loan
    
    $
    2,317
    
    
    $
    2,914Other financing arrangements
    
    
    1,086
    
    
    
    3963,403
    
    
    
    3,310Less current maturities
    
    
    (1,192
    )
    
    
    (977
    )Long-term obligations
    
    $
    2,211
    
    
    $
    2,333
 10




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##### Table of Contents



October 31, 2008
    
    
    April 30, 2008Revolving credit facilities in Taiwan
    
    $
    1,037
    
    
    $
    1,118
  New Senior Credit Facility
 Note 14 Pending Merger with OMAX
  Note 7  Commitments and Contingencies
   11




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##### Table of Contents



Note 14: Pending Merger with OMAX
     Other Legal Proceedings 
 Note 8Stock-based Compensation
  Stock Options
  12




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##### Table of Contents



Weighted-Weighted-
    
    
    
    
    
    
    AverageAverage
    
    
    Aggregate
    
    
    RemainingNumber of
    
    
    Exercise
    
    
    Intrinsic
    
    
    ContractualOptions
    
    
    Price
    
    
    Value
    
    
    Term (Years)Outstanding at April 30, 2008
    
    
    773,500
    
    
    $
    10.53
    
    
    $
    195,801
    
    
    
    3.98Granted during the period
    
    
    236,210
    
    
    
    9.77Exercised during the period
    
    
    
    
    
    
    Expired or forfeited during the period
    
    
    (143,900
    )
    
    
    9.94Outstanding at October 31, 2008
    
    
    865,810
    
    
    $
    10.42
    
    
    $
    
    
    
    
    5.56Exercisable at October 31, 2008
    
    
    479,600
    
    
    $
    10.44
    
    
    $
    
    
    
    
    2.63Vested or expected to vest at October 31, 2008
    
    
    479,600
    
    
    
    10.44
    
    
    
    
    
    
    
    2.63
 Six Months ended October 31,2008
    
    
    2007Total intrinsic value of options exercised
    
    $
    
    
    
    $
    105Total fair value of options vested
    
    $
    345
    
    
    $
    Cash received from exercise of share options
    
    $
    
    
    
    $
    424Tax benefit realized from stock options exercised
    
    $
    
    
    
    $
    
  Six Months ended October 31,2008
    
    
    2007Options granted
    
    
    236,210
    
    
    
    200,000Weighted average grant-date fair value of stock options granted
    
    $
    5.67
    
    
    $
    6.90Assumptions:Weighted average expected volatility
    
    
    60
    %
    
    
    62
    %Risk-free interest rate
    
    
    3.09
    %
    
    
    4.98
    %Weighted average expected term (in years)
    
    
    6
    
    
    
    6Expected dividend yield
    
    
    
    
    
    
    
   Service-Based Stock Awards
  13




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##### Table of Contents



Weighted-AverageNumber of
    
    
    Grant-dateShares
    
    
    Fair ValueNonvested at April 30, 2008
    
    
    325,449
    
    
    $
    8.06Granted during the period
    
    
    192,143
    
    
    
    9.77Forfeited during the period
    
    
    (8,332
    )
    
    
    9.36Vested during the period
    
    
    (8,533
    )
    
    
    10.12Nonvested at October 31, 2008
    
    
    500,727
    
    
    $
    8.66
  Performance-Based Stock Awards
   Weighted-AverageNumber of
    
    
    Grant-dateShares
    
    
    Fair ValueNonvested at April 30, 2008
    
    
    74,500
    
    
    $
    13.50Granted during the period
    
    
    
    
    
    
    Forfeited during the period
    
    
    (4,000
    )
    
    
    13.50Vested during the period
    
    
    
    
    
    
    Nonvested at October 31, 2008
    
    
    70,500
    
    
    $
    13.50
  Note 9Basic and Diluted Income per Share
  14




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Income from continuing operations
    
    $
    396
    
    
    $
    2,019
    
    
    $
    1,926
    
    
    $
    2,366Denominator:Denominator for basic income per shareweighted average
shares outstanding
    
    
    37,595
    
    
    
    37,326
    
    
    
    37,593
    
    
    
    37,314Dilutive potential common shares from employee stock options
    
    
    
    
    
    
    128
    
    
    
    3
    
    
    
    169Dilutive potential common shares from warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dilutive potential common shares from service and
performance based stock awards
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Denominator for diluted incomeweighted average shares
outstanding and assumed conversions
    
    
    37,595
    
    
    
    37,511
    
    
    
    37,596
    
    
    
    37,540Basic and diluted income from continuing operations per share
    
    $
    0.01
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.06
  Note 10Other Income (Expense), Net
    Three Months
    
    
    Six MonthsEnded October 31,
    
    
    Ended October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Realized Foreign Exchange Gains (Losses), net
    
    $
    134
    
    
    $
    (423
    )
    
    $
    469
    
    
    $
    (481
    )Unrealized Foreign Exchange Gains (Losses), net
    
    
    (963
    )
    
    
    528
    
    
    
    (942
    )
    
    
    905Premium on Repurchase of Warrants
    
    
    
    
    
    
    (629
    )
    
    
    
    
    
    
    (629
    )Other
    
    
    (13
    )
    
    
    (55
    )
    
    
    24
    
    
    
    (129
    )$
    (842
    )
    
    $
    (579
    )
    
    $
    (449
    )
    
    $
    (334
    )
  15




---



##### Table of Contents



Note 11  Income Taxes
       Note 12Discontinued Operations
  16




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Sales
    
    $
    647
    
    
    $
    1,417
    
    
    $
    1,412
    
    
    $
    2,415Income before provision for income taxes
    
    
    25
    
    
    
    420
    
    
    
    135
    
    
    
    552Provision for income taxes
    
    
    (9
    )
    
    
    (144
    )
    
    
    (46
    )
    
    
    (189
    )Income from operations of discontinued operations
    
    $
    16
    
    
    $
    276
    
    
    $
    89
    
    
    $
    363
 Note 13  Segment Information
    Inter-segmentStandard
    
    
    Advanced
    
    
    All Other*
    
    
    Eliminations
    
    
    TotalThree Months Ended October 31, 2008External sales
    
    $
    56,069
    
    
    $
    4,509
    
    
    $
    
    
    
    $
    
    
    
    $
    60,578Inter-segment sales
    
    
    737
    
    
    
    
    
    
    
    
    
    
    
    (737
    )Gross margin
    
    
    25,343
    
    
    
    828
    
    
    
    
    
    
    
    (532
    )
    
    
    25,639Operating income (loss)
    
    
    9,336
    
    
    
    (1,503
    )
    
    
    (3,864
    )
    
    
    (532
    )
    
    
    3,437Three Months Ended October 31, 2007External sales
    
    $
    50,469
    
    
    $
    7,288
    
    
    $
    
    
    
    $
    
    
    
    $
    57,757Inter-segment sales
    
    
    924
    
    
    
    
    
    
    
    
    
    
    
    (924
    )Gross margin
    
    
    23,459
    
    
    
    934
    
    
    
    
    
    
    
    (431
    )
    
    
    23,962Operating income (loss)
    
    
    9,397
    
    
    
    (1,995
    )
    
    
    (3,359
    )
    
    
    (431
    )
    
    
    3,612Six Months Ended October 31, 2008External sales
    
    $
    108,821
    
    
    $
    8,822
    
    
    $
    
    
    
    $
    
    
    
    $
    117,643Inter-segment sales
    
    
    1,216
    
    
    
    
    
    
    
    
    
    
    
    (1,216
    )Gross margin
    
    
    50,492
    
    
    
    1,794
    
    
    
    
    
    
    
    (516
    )
    
    
    51,770Operating income (loss)
    
    
    19,755
    
    
    
    (3,970
    )
    
    
    (8,075
    )
    
    
    (516
    )
    
    
    7,194Six Months Ended October 31, 2007External sales
    
    $
    101,231
    
    
    $
    14,385
    
    
    $
    
    
    
    $
    
    
    
    $
    115,616Inter-segment sales
    
    
    1,737
    
    
    
    
    
    
    
    
    
    
    
    (1,737
    )Gross margin
    
    
    45,887
    
    
    
    1,976
    
    
    
    
    
    
    
    (598
    )
    
    
    47,265Operating income (loss)
    
    
    17,469
    
    
    
    (3,516
    )
    
    
    (11,380
    )
    
    
    (598
    )
    
    
    1,975
 
 *
    
    Includes corporate overhead expenses as well as general and administrative expenses of
inactive subsidiaries that do not constitute segments. 17




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating income for reportable segments
    
    $
    3,437
    
    
    $
    3,612
    
    
    $
    7,194
    
    
    $
    1,975Interest income
    
    
    124
    
    
    
    251
    
    
    
    303
    
    
    
    442Interest expense
    
    
    (161
    )
    
    
    (95
    )
    
    
    (291
    )
    
    
    (177
    )Other income (expense), net
    
    
    (842
    )
    
    
    (579
    )
    
    
    (449
    )
    
    
    (334
    )Income before provision for income taxes
    
    $
    2,558
    
    
    $
    3,189
    
    
    $
    6,757
    
    
    $
    1,906
 Note 14Pending Merger with OMAX
     
    
    At closing, $61 million plus the funds held in escrow  $9 million paid by the
Company upon signing the Option Agreement and the Definitive Agreement  to be paid in
cash, minus amounts to be paid by the Company at closing in satisfaction of certain
litigation fees of OMAX, and less amounts to be placed into escrow as a retention pool for
key OMAX employees that will provide such employees the equivalent of three months
salary, to be allocated upon the six month anniversary of closing;
    
    At the closing of the Merger, $8.45 million in the form of a non-negotiable
promissory note shall be withheld from the merger consideration and placed into escrow for
a period of 18 months following closing to secure claims by the Company for
indemnification and for adjustments based on net working capital;
    
    A total number of shares equal in value to $4 million will be issued by Flow at
closing based upon the closing share price for Flow common stock for the ten trading days
ending two business days before the closing;
    
    The contingent consideration in the merger consists of the right to receive up to $52
million, paid pro rata to the former OMAX shareholders on the third anniversary of the
closing of the merger, contingent upon the average daily closing share price for Flow
common stock for the six (6) months ending thirty-six (36) months after the closing of the
merger, which we refer to as the average share price. If the average share price is:
 a.
    
    less than or equal to $6.99, no additional payment or distribution shall be made;b.
    
    equal to or greater than $7.00, an additional $5 million shall be paid to the
former OMAX shareholders; orc.
    
    between $7.01 and $14.00, additional shares of Flow common stock shall be derived
on a straight line interpolation basis between $5 million and $52 million and
distributed to the former OMAX shareholders accordingly.
 18




---



##### Table of Contents



Net working capital assumed
    
    $
    8,843Property and equipment, net assumed
    
    
    1,626Net deferred tax liability and taxes payable
    
    
    (8,685
    )Acquired intangibles (1)
    
    
    31,600Settlement valuation for patent litigation (2)
    
    
    22,000Fees to OMAX attorneys (3)
    
    
    7,000Stay bonuses for OMAXs key employees (4)
    
    
    3,300Goodwill
    
    
    9,322
 
 (1)
    
    Includes existing technology, customer and distributor relationships,
non-compete agreements, production backlog, and the OMAX trade name.(2)
    
    Estimated fair value ascribed to the settlement of the litigation
between Flow and OMAX. For purposes of this preliminary allocation of
purchase price, the Company has derived an estimate of fair value
based on assumptions of (a) possible findings of infringement by both
Flow and OMAX and (b) a 50% likelihood ascribed to both OMAX and Flow
of prevailing in their respective suit and countersuit. This amount
will be expensed in the period the merger with OMAX closes.(3)
    
    Amount payable to OMAXs attorney as contingent fees related to the
litigation between Flow and OMAX described further in Note 7:
Commitments and Contingencies. This amount will be expensed in the
period the merger with OMAX closes.(4)
    
    Cash consideration placed into escrow as a retention pool for key OMAX
employees, which will provide such employees the equivalent of three
months salary to be allocated upon the six-month anniversary of
closing which will be expensed over the six-month period that it is
earned.   Note 7 Commitments and
Contingencies
  19




---



##### Table of Contents



Note 15Fair Value of Financial Instruments
      Fair Value Measure at October 31, 2008SignificantTotal Carrying
    
    Quoted Prices
    
    Other
    
    SignificantValue at
    
    in Active
    
    Observable
    
    UnobservableOctober 31,
    
    Market
    
    Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Liabilities:Derivatives
    
    $
    222
    
    
    $
    
    
    
    $
    222
    
    
    $
    
  Note 16Restatement of Prior Period Financial Statements
   20




---



##### Table of Contents



Three Months Ended October 31, 2007As RestatedandReclassifiedforAs Previously
    
    
    
    
    
    DiscontinuedReported
    
    Restated
    
    Operations *Condensed Consolidated Statement of Income:Cost of Sales
    
    $
    34,739
    
    
    $
    34,654
    
    
    $
    33,795Gross Margin
    
    
    24,435
    
    
    
    24,520
    
    
    
    23,962General & Administrative Expenses
    
    
    7,275
    
    
    
    7,360
    
    
    
    7,300Total Operating Expenses
    
    
    20,403
    
    
    
    20,488
    
    
    
    20,350
 Six Months Ended October 31, 2007As RestatedandReclassifiedforAs Previously
    
    
    
    
    
    DiscontinuedReported
    
    Restated
    
    Operations *Condensed Consolidated Statement of Income:Sales
    
    $
    117,840
    
    
    $
    118,032
    
    
    $
    115,616Cost of Sales
    
    
    69,805
    
    
    
    69,960
    
    
    
    68,351Gross Margin
    
    
    48,035
    
    
    
    48,072
    
    
    
    47,265General & Administrative Expenses
    
    
    19,691
    
    
    
    19,678
    
    
    
    19,562Total Operating Expenses
    
    
    45,556
    
    
    
    45,543
    
    
    
    45,290Operating Income
    
    
    2,479
    
    
    
    2,529
    
    
    
    1,975Other Expense
    
    
    (267
    )
    
    
    (334
    )
    
    
    (334
    )Income Before Benefit for Income Taxes
    
    
    2,477
    
    
    
    2,460
    
    
    
    1,906Benefit for Income Taxes
    
    
    196
    
    
    
    271
    
    
    
    460Income from Continuing Operations
    
    
    2,673
    
    
    
    2,731
    
    
    
    2,366Net Income
    
    
    2,673
    
    
    
    2,731
    
    
    
    2,729
 Six Months Ended October 31, 2007As PreviouslyReported
    
    RestatedCondensed Consolidated Statement of Cash Flows:Net Income
    
    $
    2,673
    
    
    $
    2,729Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:Provision for Slow Moving Inventory
    
    
    **
    
    
    
    798Bad Debt Expense
    
    
    **
    
    
    
    958Warranty Expense
    
    
    **
    
    
    
    1,762Changes in Operating Assets and Liabilities:Receivables
    
    
    (1,172
    )
    
    
    (2,130
    )Inventories
    
    
    (3,804
    )
    
    
    (4,602
    )Other Operating Assets **
    
    
    245
    
    
    
    90Other Operating Liabilities **
    
    
    236
    
    
    
    (1,599
    )Cash Used In Operating Activities
    
    
    (1,703
    )
    
    
    (1,875
    )Cash Flows from Investing Activities:Expenditures for Property and Equipment and Intangible Assets
    
    
    (2,541
    )
    
    
    (2,511
    )Cash Used In Investing Activities
    
    
    (1,672
    )
    
    
    (1,642
    )Decrease in Cash and Cash Equivalents
    
    
    (11,218
    )
    
    
    (11,360
    )Cash and Cash Equivalents at Beginning of Period
    
    
    38,146
    
    
    
    38,288
 
 *
    
    The Companys Condensed Consolidated Statement of Income for the three and six months ended
October 31, 2007 has been reclassified to reflect the results of operations of its CIS
Technical Solutions division as discontinued operations.**
    
    Prior year amounts have been conformed to current year presentation in the Condensed
Consolidated Financial Statements. 21




---



##### Table of Contents



Note 17  Subsequent Events
 Note 14: Pending Merger with OMAX
   22




---



##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 We have restated our previously issued Condensed Consolidated Financial Statements for the three
and six months ended October 31, 2007 as described in Note 16 to the accompanying Condensed
Consolidated Financial Statements included in Item 1. All affected amounts related to the three and
six ended October 31, 2007 described herein have been restated accordingly.
 Forward-looking Statements
 This managements discussion and analysis should be read in conjunction with our financial
statements and its related notes. The terms may, expect, believe, anticipate, estimate,
plan and similar expressions are intended to identify forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we
believe that the assumptions underlying our forward-looking statements are reasonable, any of the
assumptions could prove to be inaccurate. Actual results could differ materially from those
projected in these forward-looking statements for a variety of reasons. Examples of forward-looking
statements include, but are not limited to, the following:
 
    
    our belief that the strategies and actions we intend to take in fiscal year 2009 and
beyond, including increasing market awareness of waterjet technology to drive increased
market penetration and improvement of our operational efficiency, will help us achieve our
long-term goals of compound annual revenue growth rate of 10% and operating income annual
growth rate of at least 20%;
    
    our belief that we will be able to fund the commitments for inventory purchases,
including all open purchase orders, with existing cash and our cash flows from operations
in future periods
    
    our investment in the development of innovative products and services to maintain our
technological leadership position as well as enhancement of our current product lines;
    
    our intent to continue to make improvements to our system of internal controls and to
continue to make improvements in the documentation and implementation training of our
accounting policies;
    
    our plan to continue capital spending on information technology and facilities and
our expectation that the funds necessary for this will be generated internally;
    
    our expectation that for matters other than OMAX, Crucible, and Collins and Aikman,
these pending legal proceedings will not have a material adverse effect on our
consolidated financial position;
    
    our expectation that our credit line will provide us with liquidity that could be
used to make acquisitions, or fund the repurchase of shares;
    
    our belief that our existing cash, our cash from operations, and credit facilities at
October 31, 2008 are adequate to fund our operations for the next twelve months;
    
    our expectation that our unrecognized tax benefits will not change significantly
within the next twelve months.
 Additional information on these and other factors that could affect our financial results is set
forth below. Finally, there may be other factors not mentioned above or included in our SEC filings
that may cause our actual results to differ materially from those in any forward-looking statement.
You should not place undue reliance on these forward-looking statements. We assume no obligation to
update any forward-looking statements as a result of new information, future events or
developments, except as required by federal securities laws.
  23




---



##### Table of Contents




    
    Executive Summary
    
    Results of Operations
    
    Liquidity and Capital Resources
    
    Off Balance Sheet Arrangements
    
    Contractual Obligations
    
    Critical Accounting Policies and Estimates
    
    Recently Issued Accounting Pronouncements
 Executive Summary
  
    
    expand market share in our current markets;
    
    continue to identify and penetrate new markets;
    
    capitalize on the our customer relationships and business competencies;
    
    develop and market innovative products and applications; and
    
    continue to improve operating margins by focusing on operational improvements.
     Introduction of New Products
  24




---



##### Table of Contents



Exit or Disposal Activities
   Results of Operations
 (Tabular amounts in thousands)
 Summary Consolidated Results for the Three and Six Months ended October 31, 2008 and 2007
 Three Months Ended October 31,
    
    Six Months Ended October 31,2008
    
    2007
    
    %
    
    2008
    
    2007
    
    %Sales
    
    $
    60,578
    
    
    $
    57,757
    
    
    
    5
    %
    
    $
    117,643
    
    
    $
    115,616
    
    
    
    2
    %Operating Income
    
    
    3,437
    
    
    
    3,612
    
    
    
    (5
    )%
    
    
    7,194
    
    
    
    1,975
    
    
    
    264
    %
 Three Months Ended October 31,
    
    Six Months Ended October 31,2008
    
    2007
    
    %
    
    2008
    
    2007
    
    %SalesSystems
    
    $
    43,172
    
    
    $
    40,968
    
    
    
    5
    %
    
    $
    82,258
    
    
    $
    82,432
    
    
    
    0.2
    %Consumable parts
    
    
    17,406
    
    
    
    16,789
    
    
    
    4
    %
    
    
    35,385
    
    
    
    33,184
    
    
    
    7
    %
    Note 7: Commitments and
Contingencies
 25




---



##### Table of Contents



Note 14 Pending Merger
with OMAX
 Segment Results of Operations
 Note 13: Segment Information
 Standard Segment
 Three Months Ended October 31,
    
    Six Months Ended October 31,2008
    
    2007
    
    %
    
    2008
    
    2007
    
    %Sales
    
    $
    56,069
    
    
    $
    50,469
    
    
    
    11
    %
    
    $
    108,821
    
    
    $
    101,231
    
    
    
    7
    %% of total company sales
    
    
    93
    %
    
    
    87
    %
    
    NM
    
    
    93
    %
    
    
    88
    %
    
    NMGross Margin
    
    
    25,343
    
    
    
    23,459
    
    
    
    8
    %
    
    
    50,492
    
    
    
    45,887
    
    
    
    10
    %Gross Margin as % of sales
    
    
    45
    %
    
    
    47
    %
    
    NM
    
    
    46
    %
    
    
    45
    %
    
    NMOperating Expenses:Sales and Marketing
    
    
    11,049
    
    
    
    9,788
    
    
    
    13
    %
    
    
    20,632
    
    
    
    19,381
    
    
    
    7
    %Research and Engineering
    
    
    1,934
    
    
    
    1,537
    
    
    
    26
    %
    
    
    3,771
    
    
    
    3,298
    
    
    
    14
    %General and Administrative
    
    
    2,875
    
    
    
    2,737
    
    
    
    5
    %
    
    
    6,184
    
    
    
    5,739
    
    
    
    8
    %Restructuring Charges
    
    
    149
    
    
    
    
    
    
    
    100
    %
    
    
    149
    
    
    
    
    
    
    
    100
    %Total Operating Expenses
    
    
    16,007
    
    
    
    14,062
    
    
    
    14
    %
    
    
    30,737
    
    
    
    28,418
    
    
    
    8
    %Operating Income
    
    
    9,336
    
    
    
    9,397
    
    
    
    (1
    )%
    
    
    19,755
    
    
    
    17,469
    
    
    
    13
    %
 
 NM = Not Meaningful   
    
    Strong demand for our standard shapecutting systems as well as improved consumable
parts sales in the United States, South America and Asia Pacific regions, offset by a
slight decline in Europe revenues during the current quarter. The year-over-year sales
improvement was driven by strong demand for our standard shapecutting systems in all
foreign locations as a result of increased market awareness and adoption of waterjet
technology, offset by lower year-over-year sales in North America due to slowed momentum
in the first quarter of the current fiscal year. Total systems revenue in our standard
segment increased by 13% and 6% for the three and six months ended October 31, 2008,
respectively.
    
    Consumable parts sales increased 6% and 10% to $16.3 million and $33.4, respectively,
for the three and six months ended October 31, 2008, due to increased number of installed
systems in service.
    
    Excluding the impact of foreign currency changes, sales increased $5.9 million or 11%
and $3.6 million or 4% for the three and six months ended October 31, 2008 compared to the
prior year comparative period.
  26




---



##### Table of Contents




    
    An increase in sales and marketing expenses of $1.3 million or 13%, and $1.3 million
or 7% for the three and six months ended October 31, 2008, as compared to the prior year
comparative periods primarily due to higher operating expenses associated with the
bi-annual International Manufacturing Technology Show (IMTS) in September 2008, as well as
severance expenses of $210,000 recorded during the current quarter;
    
    An increase in research and engineering expenses of $397,000 or 26% and $473,000 or
14% for the three and six months ended October 31, 2008, as compared to the prior year
comparative periods, as a result of investment in research and development activity for
new product development as well as severance charges related to the streamlining of the
product development function recorded in the first quarter of fiscal year 2009;
    
    An increase in quarter-to-date general and administrative expenses of $138,000 or 5%
and 445,000 or 8% for the three and six months ended October 31, 2008, compared to the
prior year comparative periods, mainly due to investments in personnel to support
anticipated growth globally; and
    
    Excluding the impact of foreign currency changes, operating expenses increased by
$1.7 million or 12% and $1.1 million or 4% for the three months and six months ended
October 31, 2008, compared to the prior year comparative periods.
 Advanced Segment
 Three Months Ended October 31,
    
    Six Months Ended October 31,2008
    
    2007
    
    %
    
    2008
    
    2007
    
    %Sales
    
    $
    4,509
    
    
    $
    7,288
    
    
    
    (38
    )%
    
    $
    8,822
    
    
    $
    14,385
    
    
    
    (39
    )%% of total company sales
    
    
    7
    %
    
    
    13
    %
    
    NM
    
    
    7
    %
    
    
    11
    %
    
    NMGross Margin
    
    
    828
    
    
    
    934
    
    
    
    (11
    )%
    
    
    1,794
    
    
    
    1,976
    
    
    
    (9
    )%Gross Margin as % of sales
    
    
    18
    %
    
    
    13
    %
    
    NM
    
    
    20
    %
    
    
    14
    %
    
    NMOperating Expenses:Sales and Marketing
    
    
    853
    
    
    
    1,117
    
    
    
    (24
    )%
    
    
    1,366
    
    
    
    1,922
    
    
    
    (29
    )%Research and Engineering
    
    
    344
    
    
    
    608
    
    
    
    (43
    )%
    
    
    757
    
    
    
    1,127
    
    
    
    (33
    )%General and Administrative
    
    
    839
    
    
    
    1,203
    
    
    
    (30
    )%
    
    
    1,910
    
    
    
    2,443
    
    
    
    (22
    )%Restructuring Charges
    
    
    295
    
    
    
    
    
    
    
    100
    %
    
    
    1,731
    
    
    
    
    
    
    
    100
    %Total Operating Expenses
    
    
    2,331
    
    
    
    2,928
    
    
    
    (20
    )%
    
    
    5,764
    
    
    
    5,492
    
    
    
    5
    %Operating Income
    
    
    (1,503
    )
    
    
    (1,995
    )
    
    
    25
    %
    
    
    (3,970
    )
    
    
    (3,516
    )
    
    
    (13
    )%
 
 NM = Not Meaningful    
    
    Our exit from the non-waterjet automation business in September 2007, which
contributed $1.0 million and $2.8 million of sales in the prior year comparative periods,
respectively.
    
    A slowdown in our advanced cutting cells business due to the weakness in the
automotive industry.
  27




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##### Table of Contents




    
    A reduction in sales and marketing expenses of $264,000 or 24%, and $556,000 or 29%
for the three and six months ended October 31, 2008, as compared to the prior year
comparative periods primarily as a result of a lower customer support costs driven by
lower aerospace sales when compared to the prior year comparative period. The
period-over-period reduction is also attributable to a reduction of staff in conjunction
with the closure of our manufacturing facility in Burlington, Ontario, Canada based on our
plan to establish a single facility for designing and building advanced Waterjet systems
at our Jeffersonville, Indiana facility;
    
    A reduction in research and engineering costs of $264,000 or 43%, and $370,000 or 33%
for the three and six months ended October 31, 2008, as compared to the prior year
comparative periods related to lower personnel expenses related to the shutdown of the
Burlington facility;
    
    A reduction in general and administrative expenses of $364,000 or 30%, and $533,000
or 22% for the three and six months ended October 31, 2008, as compared to the prior year
comparative periods primarily attributable to a reduction of staff in conjunction with the
closure of our Burlington facility; and
    
    Restructuring charges of $295,000 and $1.7 million for the three and six months ended
October 31, 2008 were related to severance and termination benefits and lease termination
costs associated with our plan to shut down our Burlington facility.
 All Other
  Three Months Ended October 31,
    
    Six Months Ended October 31,2008
    
    2007
    
    %
    
    2008
    
    2007
    
    %General and Administrative
    
    $
    3,864
    
    
    $
    3,359
    
    
    
    15
    %
    
    $
    8,075
    
    
    $
    11,380
    
    
    
    (29
    )%
  Other (Income) Expense
 Interest Income and Interest Expense
  Other Income (Expense), Net
  Three Months
    
    
    Six MonthsEnded October 31,
    
    
    Ended October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Realized Foreign Exchange Gains (Losses), net
    
    $
    134
    
    
    $
    (423
    )
    
    $
    469
    
    
    $
    (481
    )Unrealized Foreign Exchange Gains (Losses), net
    
    
    (963
    )
    
    
    528
    
    
    
    (942
    )
    
    
    905Premium on Repurchase of Warrants
    
    
    
    
    
    
    (629
    )
    
    
    
    
    
    
    (629
    )Other
    
    
    (13
    )
    
    
    (55
    )
    
    
    24
    
    
    
    (129
    )$
    (842
    )
    
    $
    (579
    )
    
    $
    (449
    )
    
    $
    (334
    )
 28




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##### Table of Contents



Income Taxes
     Liquidity and Capital Resources
 Cash Flow Summary
  Six Months Ended October 31,2008
    
    
    2007Net Income
    
    $
    2,015
    
    
    $
    2,729Noncash charges to income
    
    
    10,277
    
    
    
    5,397Changes in working capital
    
    
    (7,763
    )
    
    
    (10,001
    )Net cash provided by (used in) operating activities
    
    
    4,529
    
    
    
    (1,875
    )Net cash used in investing activities
    
    
    (8,980
    )
    
    
    (1,642
    )Net cash provided by (used in) financing activities
    
    
    283
    
    
    
    (8,373
    )Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    (1,784
    )
    
    
    530Net decrease in cash and cash equivalents
    
    
    (5,952
    )
    
    
    (11,360
    )Cash and cash equivalents at beginning of period
    
    
    29,099
    
    
    
    38,288Ending cash balance
    
    $
    23,147
    
    
    $
    26,928
 29




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##### Table of Contents



Operating Activities
   Investing Activities
  Financing Activities
  Debt
   Sources of Liquidity
  30




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##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  Critical Accounting Estimates and Judgments
  Recently Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  31




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##### Table of Contents



Item 4. Controls and Procedures
     32




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   i)
    
    a notice received from the purchaser of our Avure Business (Purchaser) that an
ongoing tax audit in Sweden which includes information requests that pertain to periods
when the Company owned Avure Technologies AB discussed further in Note 7: Commitments
and Contingencies; andii)
    
    the current global economic crisis which could have an adverse effect on the
Companys future results of operation and cash flows;
 We have unresolved claims with the Purchaser of Avure.
 Note 7:
Commitments and Contingencies .
 The global economic crisis could adversely affect the Companys business and
financial results and have a material adverse affect on its liquidity and
capital resources.
  
 Items 2, 3, and 5 are None and have been omitted.
 
 Item 4. Submission of matters to a Vote of Security Holders.
  Name
    
    Votes For
    
    Votes Withheld
    
    AbstentionsKathryn Munro
    
    
    24,187,223
    
    
    
    11,978,500
    
    
    
    979,218Larry A. Kring
    
    
    23,742,110
    
    
    
    10,613,100
    
    
    
    58,927
 33




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##### Table of Contents



Item 6. Exhibits
 31.1
    
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
 34




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##### Table of Contents



FLOW INTERNATIONAL CORPORATIONDate: December 5, 2008

/s/
Charles M. BrownCharles M. BrownPresident and Chief Executive Officer
(Principal Executive Officer)Date: December 5, 2008

/s/
Douglas P. FletcherDouglas P. FletcherChief Financial Officer
(Principal Financial Officer) 35