##### 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 January 31, 2009
 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) o
    
    Smaller reporting company o
 o þ
  Explanatory Note:
 This Form 10-Q reflects the restatement of the Companys unaudited Condensed Consolidated
Financial Statements for the three and nine months ended 31, 2008 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 17 to the unaudited Condensed Consolidated Financial
Statements under Item 1, Financial Information herein.




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##### 



FLOW INTERNATIONAL CORPORATION
  PagePart I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Balance Sheets  January 31, 2009 and April 30, 2008
    
    
    3Condensed Consolidated Statements of Operations  Three and Nine Months Ended January
31, 2009 and 2008 (restated)
    
    
    4Condensed Consolidated Statements of Cash Flows  Nine Months Ended January 31, 2009 and
2008 (restated)
    
    
    5Condensed Consolidated Statement of Shareholders Equity and Comprehensive Income
(Loss) Nine Months Ended January 31, 2009 and 2008 (restated)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    37Part II  OTHER INFORMATION
    
    
    38Item 1. Legal Proceedings
    
    
    38Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    39Item 4. Submission of Matters to a Vote of Security Holders
    
    
    39Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    39Signatures
    
    
    40EX-31.1EX-31.2EX-32.1EX-99.1
  2




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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
   January 31,
    
    
    April 30,2009
    
    
    2008ASSETS:Current Assets:Cash and Cash Equivalents
    
    $
    13,107
    
    
    $
    29,099Restricted Cash
    
    
    403
    
    
    
    142Receivables, net
    
    
    33,202
    
    
    
    33,632Inventories
    
    
    25,037
    
    
    
    29,339Deferred Income Taxes
    
    
    10,630
    
    
    
    2,889Deferred Acquisition Costs
    
    
    12,411
    
    
    
    7,953Other Current Assets
    
    
    8,243
    
    
    
    6,456Total Current Assets
    
    
    103,033
    
    
    
    109,510Property and Equipment, net
    
    
    21,286
    
    
    
    18,790Intangible Assets, net
    
    
    4,377
    
    
    
    4,062Goodwill (Note 16)
    
    
    
    
    
    
    2,764Deferred Income Taxes
    
    
    15,461
    
    
    
    15,535Other Assets
    
    
    5,382
    
    
    
    494$
    149,539
    
    
    $
    151,155LIABILITIES AND SHAREHOLDERS EQUITY:Current Liabilities:Notes Payable
    
    $
    2,221
    
    
    $
    1,118Current Portion of Long-Term Obligations
    
    
    1,283
    
    
    
    977Accounts Payable
    
    
    14,184
    
    
    
    19,516Accrued Payroll and Related Liabilities
    
    
    5,464
    
    
    
    8,189Taxes Payable and Other Accrued Taxes
    
    
    2,352
    
    
    
    3,617Deferred Income Taxes
    
    
    564
    
    
    
    686Deferred Revenue
    
    
    3,936
    
    
    
    4,980Customer Deposits
    
    
    3,379
    
    
    
    4,549Reserve for Patent Litigation (Note 5)
    
    
    23,000
    
    
    
    Other Accrued Liabilities
    
    
    9,742
    
    
    
    9,753Total Current Liabilities
    
    
    66,125
    
    
    
    53,385Long-Term Obligations, net
    
    
    1,940
    
    
    
    2,333Deferred Income Taxes
    
    
    7,298
    
    
    
    7,787Reserve for Patent Litigation (Note 5)
    
    
    6,000
    
    
    
    Other Long-Term Liabilities
    
    
    1,410
    
    
    
    1,58682,773
    
    
    
    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, 37,652,696
and 37,589,787 shares issued and outstanding at January 31, 2009 and
April 30, 2008, respectively
    
    
    371
    
    
    
    371Capital in Excess of Par
    
    
    140,470
    
    
    
    139,007Accumulated Deficit
    
    
    (66,929
    )
    
    
    (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 $1,159 and $764
    
    
    (6,866
    )
    
    
    (5,450
    )Total Shareholders Equity
    
    
    66,766
    
    
    
    86,064$
    149,539
    
    
    $
    151,155
 
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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
   Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(Restated, see
    
    
    
    
    
    
    (Restated, seeNote 17)
    
    
    
    
    
    
    Note 17)Sales
    
    $
    48,711
    
    
    $
    65,369
    
    
    $
    166,353
    
    
    $
    180,986Cost of Sales
    
    
    29,565
    
    
    
    37,487
    
    
    
    95,436
    
    
    
    105,758Gross Margin
    
    
    19,146
    
    
    
    27,882
    
    
    
    70,917
    
    
    
    75,228Operating Expenses:Sales and Marketing
    
    
    9,996
    
    
    
    10,520
    
    
    
    31,996
    
    
    
    31,818Research and Engineering
    
    
    2,281
    
    
    
    2,163
    
    
    
    6,809
    
    
    
    6,589General and Administrative
    
    
    6,418
    
    
    
    6,346
    
    
    
    22,586
    
    
    
    25,991Provision for Patent Litigation (Note 5)
    
    
    29,000
    
    
    
    
    
    
    
    29,000
    
    
    
    Goodwill Impairment
    
    
    2,764
    
    
    
    
    
    
    
    2,764
    
    
    
    Restructuring and Other Operating Charges
    
    
    514
    
    
    
    
    
    
    
    2,394
    
    
    
    Total Operating Expenses
    
    
    50,973
    
    
    
    19,029
    
    
    
    95,549
    
    
    
    64,398Operating Income (Loss)
    
    
    (31,827
    )
    
    
    8,853
    
    
    
    (24,632
    )
    
    
    10,830Interest Income (Expense), net
    
    
    (348
    )
    
    
    37
    
    
    
    (337
    )
    
    
    301Other Income (Expense), net
    
    
    392
    
    
    
    (422
    )
    
    
    (56
    )
    
    
    (756
    )Income (Loss) Before Provision for Income Taxes
    
    
    (31,783
    )
    
    
    8,468
    
    
    
    (25,025
    )
    
    
    10,375(Provision) Benefit for Income Taxes
    
    
    11,106
    
    
    
    (2,234
    )
    
    
    6,277
    
    
    
    (1,774
    )Income (Loss) From Continuing Operations
    
    
    (20,677
    )
    
    
    6,234
    
    
    
    (18,748
    )
    
    
    8,601Income (Loss) from Operations of Discontinued
Operations, net of Income Tax of $(46), $28,
$0 and $210
    
    
    (686
    )
    
    
    55
    
    
    
    (597
    )
    
    
    418Net Income (Loss)
    
    $
    (21,363
    )
    
    $
    6,289
    
    
    $
    (19,345
    )
    
    $
    9,019Basic Income (Loss) Per Share:Income (Loss) From Continuing Operations
    
    $
    (0.55
    )
    
    $
    0.17
    
    
    $
    (0.50
    )
    
    $
    0.23Income (Loss) from Operations of
Discontinued Operations
    
    
    (0.02
    )
    
    
    .00
    
    
    
    (0.01
    )
    
    
    .01Net Income (Loss)
    
    $
    (0.57
    )
    
    $
    0.17
    
    
    $
    (0.51
    )
    
    $
    0.24Diluted Income (Loss) Per Share:Income (Loss) From Continuing Operations
    
    $
    (0.55
    )
    
    $
    0.17
    
    
    $
    (0.50
    )
    
    $
    0.23Income (Loss) from Operations of
Discontinued Operations
    
    
    (0.02
    )
    
    
    .00
    
    
    
    (0.01
    )
    
    
    .01Net Income (Loss)
    
    $
    (0.57
    )
    
    $
    0.17
    
    
    $
    (0.51
    )
    
    $
    0.24Weighted Average Shares Used in Computing
Basic and Diluted Income (Loss) Per Share:Basic
    
    
    37,639
    
    
    
    37,471
    
    
    
    37,609
    
    
    
    37,366Diluted
    
    
    37,639
    
    
    
    37,652
    
    
    
    37,609
    
    
    
    37,572
 
 4




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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
   Nine Months EndedJanuary 31,2009
    
    
    2008(Restated, seeNote 17)Cash Flows from Operating Activities:Net Income (Loss)
    
    $
    (19,345
    )
    
    $
    9,019Adjustments to Reconcile Net Income (Loss) to Cash (Used in) Operating Activities:Depreciation and Amortization
    
    
    3,210
    
    
    
    2,636Deferred Income Taxes
    
    
    (7,375
    )
    
    
    (673
    )Provision for Slow Moving and Obsolete Inventory
    
    
    199
    
    
    
    1,151Bad Debt Expense
    
    
    1,048
    
    
    
    1,652Warranty Expense
    
    
    2,423
    
    
    
    2,566Incentive Stock Compensation Expense
    
    
    1,473
    
    
    
    675Repurchase of Warrants
    
    
    
    
    
    
    629Unrealized Foreign Exchange Currency Losses (Gains)
    
    
    1,524
    
    
    
    (85
    )Provision for Patent Litigation
    
    
    29,000
    
    
    
    Goodwill Impairment
    
    
    2,764
    
    
    
    Other
    
    
    419
    
    
    
    345Changes in Operating Assets and Liabilities:Receivables
    
    
    (2,287
    )
    
    
    (8,976
    )Inventories
    
    
    1,849
    
    
    
    (3,499
    )Other Operating Assets
    
    
    (4,798
    )
    
    
    682Accounts Payable
    
    
    (5,854
    )
    
    
    (4,117
    )Accrued Payroll and Payroll Related Liabilities
    
    
    (2,319
    )
    
    
    816Deferred Revenue
    
    
    (760
    )
    
    
    2,342Customer Deposits
    
    
    (678
    )
    
    
    (581
    )Other Operating Liabilities
    
    
    (3,454
    )
    
    
    (4,786
    )Cash (Used in) Operating Activities
    
    
    (2,961
    )
    
    
    (204
    )Cash Flows From Investing Activities:Expenditures for Property and Equipment
    
    
    (6,251
    )
    
    
    (4,345
    )Expenditures for Intangible Assets
    
    
    (611
    )
    
    
    (388
    )Proceeds from Sale of Short-term Investments
    
    
    
    
    
    
    639Proceeds from Sale of Property and Equipment
    
    
    118
    
    
    
    247Payments for Pending OMAX Acquisition
    
    
    (4,182
    )
    
    
    (6,430
    )Payments for Dardi Investment
    
    
    (3,282
    )
    
    
    Restricted Cash
    
    
    (304
    )
    
    
    Cash (Used in) Investing Activities
    
    
    (14,512
    )
    
    
    (10,277
    )Cash Flows from Financing Activities:Repayments Under Notes Payable
    
    
    
    
    
    
    (5,892
    )Borrowings Under Notes Payable
    
    
    1,285
    
    
    
    460Borrowings Under Other Financing Arrangements
    
    
    1,269
    
    
    
    Repayments Under Other Financing Arrangements
    
    
    (232
    )
    
    
    Payments of Capital Lease Obligations
    
    
    (85
    )
    
    
    Payments of Long-Term Obligations
    
    
    (795
    )
    
    
    (625
    )Proceeds from Exercise of Stock Options
    
    
    
    
    
    
    1,198Payment for Warrant Repurchase
    
    
    
    
    
    
    (3,010
    )Cash Provided by (Used in) Financing Activities
    
    
    1,442
    
    
    
    (7,869
    )Effect of Changes in Exchange Rates
    
    
    39
    
    
    
    459Decrease in Cash And Cash Equivalents
    
    
    (15,992
    )
    
    
    (17,891
    )Cash and Cash Equivalents at Beginning of Period
    
    
    29,099
    
    
    
    38,288Cash and Cash Equivalents at End of Period
    
    $
    13,107
    
    
    $
    20,397Supplemental Disclosures of Noncash Investing and Financing Activities:Accounts Payable incurred to acquire Property and Equipment, and Intangible Assets
    
    
    787
    
    
    
    357Accrued Liabilities Incurred for Dardi Investment and Pending Acquisition
    
    
    551
    
    
    
    789
  5




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##### Table of Contents



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 17)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,019
    
    
    
    
    
    
    
    9,019Cumulative Translation
Adjustment, Net of Income Tax of
$288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,382
    
    
    
    2,382Total Comprehensive Income
(restated, see Note 17)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,401Cumulative effect upon adoption of
FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (543
    )
    
    
    
    
    
    
    (543
    )Exercise of Options
    
    
    252
    
    
    
    3
    
    
    
    1,195
    
    
    
    
    
    
    
    
    
    
    
    1,198Repurchase of Warrants
    
    
    
    
    
    
    
    
    
    
    (2,380
    )
    
    
    
    
    
    
    
    
    
    
    (2,380
    )Stock Compensation
    
    
    66
    
    
    
    1
    
    
    
    675
    
    
    
    
    
    
    
    
    
    
    
    676Balances, January 31, 2008
(restated, see Note 17)
    
    
    37,586
    
    
    $
    371
    
    
    $
    138,697
    
    
    $
    (60,919
    )
    
    $
    (6,573
    )
    
    $
    71,576Balances, May 1, 2008
    
    
    37,590
    
    
    $
    371
    
    
    $
    139,007
    
    
    $
    (47,584
    )
    
    $
    (5,730
    )
    
    $
    86,064Components of Comprehensive Income
(Loss):Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,345
    )
    
    
    
    
    
    
    (19,345
    )Cumulative Translation
Adjustment, Net of Income Tax of
$395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,416
    )
    
    
    (1,416
    )Total Comprehensive Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,761
    )Stock Compensation
    
    
    63
    
    
    
    0
    
    
    
    1,463
    
    
    
    
    
    
    
    
    
    
    
    1,463Balances, January 31, 2009
    
    
    37,653
    
    
    $
    371
    
    
    $
    140,470
    
    
    $
    (66,929
    )
    
    $
    (7,146
    )
    
    $
    66,766
 
 6




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##### Table of Contents



FLOW INTERNATIONAL CORPORATION
 
    Note 1  Basis of Presentation
  Long-term Obligations and Notes Payable
 Note 2  Recently Issued Accounting Pronouncements
  7




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##### Table of Contents



Note 15  Fair Value of Financial Instruments
     8




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##### Table of Contents



Note 3  Receivables, Net
  January 31, 2009
    
    
    April 30, 2008Trade Accounts Receivable
    
    $
    30,014
    
    
    $
    32,410Unbilled Revenues
    
    
    6,098
    
    
    
    4,58936,112
    
    
    
    36,999Less: Allowance for Doubtful Accounts
    
    
    (2,910
    )
    
    
    (3,367
    )$
    33,202
    
    
    $
    33,632
 Note 4  Inventories
  January 31, 2009
    
    
    April 30, 2008Raw Materials and Parts
    
    $
    14,417
    
    
    $
    19,671Work in Process
    
    
    2,035
    
    
    
    3,215Finished Goods
    
    
    8,585
    
    
    
    6,453$
    25,037
    
    
    $
    29,339
 Note 5  Other Accrued Liabilities
  Warranty Obligations
   Accrued warranty balance as of April 30, 2008
    
    $
    3,101Accruals for warranties for fiscal year 2009 sales
    
    
    2,423Warranty costs incurred in fiscal year 2009
    
    
    (2,558
    )Change due to currency fluctuations
    
    
    (123
    )Accrued warranty balance as of January 31, 2009
    
    $
    2,843
 Restructuring Charges and Other
  9




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedJanuary 31, 2009
    
    
    January 31, 2009Severance and termination benefits
    
    $
    
    
    
    $
    1,764Lease termination costs and long-lived assets impairment charge
    
    
    20
    
    
    
    136Inventory write-down
    
    
    
    
    
    
    108$
    20
    
    
    $
    2,008
  Severance &Termination
    
    
    Facility ExitBenefits
    
    
    CostsBalance, April 30, 2008
    
    $
    
    
    
    $
    Restructuring charges
    
    
    1,764
    
    
    
    136Cash payments
    
    
    (1,730
    )
    
    
    (110
    )Balance, January 31, 2009
    
    $
    34
    
    
    $
    26
  Provision for Patent Litigation
  Mergers and Investments  Commitments and Contingencies
 10




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##### Table of Contents



Note 6  Long-Term Obligations and Notes Payable
  January 31, 2009
    
    
    April 30, 2008Long-term loan
    
    $
    1,876
    
    
    $
    2,914Other financing arrangements
    
    
    1,347
    
    
    
    3963,223
    
    
    
    3,310Less current maturities
    
    
    (1,283
    )
    
    
    (977
    )Long-term obligations
    
    $
    1,940
    
    
    $
    2,333
    January 31, 2009
    
    
    April 30, 2008Revolving credit facilities in Taiwan
    
    $
    2,221
    
    
    $
    1,118
  Senior Credit Facility
 Note 14  Mergers and Investments Mergers and Investments
 Commitments and
Contingencies Mergers and Investments
 11




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##### Table of Contents



Commitments and Contingencies
  Note 7  Commitments and Contingencies
    Mergers and Investments
 12




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##### Table of Contents



Other Legal Proceedings 
 Note 8Stock-based Compensation
  13




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##### Table of Contents



Stock Options
   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
    
    
    (190,600
    )
    
    
    7.50Outstanding at January 31, 2009
    
    
    819,110
    
    
    $
    10.45
    
    
    $
    
    
    
    
    5.27Exercisable at January 31, 2009
    
    
    462,900
    
    
    $
    10.45
    
    
    $
    
    
    
    
    2.46Vested or expected to vest at January 31, 2009
    
    
    462,900
    
    
    
    10.45
    
    
    
    
    
    
    
    2.46
 Nine Months ended January 31,2009
    
    2008Total intrinsic value of options exercised
    
    $
    
    
    
    $
    1,262Total fair value of options vested
    
    $
    345
    
    
    $
    Cash received from exercise of share options
    
    $
    
    
    
    $
    1,198Tax benefit realized from stock options exercised
    
    $
    
    
    
    $
    
  Nine Months ended January 31,2009
    
    2008Options 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
    
    
    
    
    
    
    
   14




---



##### Table of Contents



Service-Based Stock Awards
   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
    
    
    (46,508
    )
    
    
    9.49Vested during the period
    
    
    (22,791
    )
    
    
    10.37Nonvested at January 31, 2009
    
    
    448,293
    
    
    $
    8.53
  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
    
    
    (24,000
    )
    
    
    13.50Vested during the period
    
    
    
    
    
    
    Nonvested at January 31, 2009
    
    
    50,500
    
    
    $
    13.50
  Note 9Basic and Diluted Income (Loss) per Share
  15




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Income (Loss) from continuing operations
    
    $
    (20,677
    )
    
    $
    6,234
    
    
    $
    (18,748
    )
    
    $
    8,601Denominator:Denominator for basic income per
shareweighted average shares outstanding
    
    
    37,639
    
    
    
    37,471
    
    
    
    37,609
    
    
    
    37,366Dilutive potential common shares from
employee stock options
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    152Dilutive potential common shares from warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dilutive potential common shares from service
and performance based stock awards
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    54Denominator for diluted incomeweighted
average shares outstanding and assumed
conversions
    
    
    37,639
    
    
    
    37,652
    
    
    
    37,609
    
    
    
    37,572Basic and diluted income (loss) from continuing
operations per share
    
    $
    (0.55
    )
    
    $
    0.17
    
    
    $
    (0.50
    )
    
    $
    0.23
  Note 10Other Income (Expense), Net
   Three Months
    
    
    Nine MonthsEnded January 31,
    
    
    Ended January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Realized Foreign Exchange Gains (Losses), net
    
    $
    206
    
    
    $
    369
    
    
    $
    674
    
    
    $
    (111
    )Unrealized Foreign Exchange Gains (Losses), net
    
    
    (581
    )
    
    
    (818
    )
    
    
    (1,524
    )
    
    
    85Premium on Repurchase of Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (629
    )Other
    
    
    767
    
    
    
    27
    
    
    
    794
    
    
    
    (101
    )$
    392
    
    
    $
    (422
    )
    
    $
    (56
    )
    
    $
    (756
    )
   Note 11  Income Taxes
  16




---



##### Table of Contents



Note 12Discontinued Operations
    Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Sales
    
    $
    190
    
    
    $
    902
    
    
    $
    1,602
    
    
    $
    3,317Income (loss) before provision for income taxes
    
    
    (732
    )
    
    
    83
    
    
    
    (597
    )
    
    
    628(Provision) benefit for income taxes
    
    
    46
    
    
    
    (28
    )
    
    
    
    
    
    
    (210
    )Income (loss) from operations of discontinued
operations
    
    $
    (686
    )
    
    $
    55
    
    
    $
    (597
    )
    
    $
    418
 17




---



##### Table of Contents



Note 13  Segment Information
    Inter-segmentStandard
    
    
    Advanced
    
    
    All Other*
    
    
    Eliminations
    
    
    TotalThree Months Ended January 31, 2009External sales
    
    $
    41,269
    
    
    $
    7,442
    
    
    $
    
    
    
    $
    
    
    
    $
    48,711Inter-segment sales
    
    
    782
    
    
    
    
    
    
    
    
    
    
    
    (782
    )Gross margin
    
    
    17,176
    
    
    
    2,189
    
    
    
    
    
    
    
    (219
    )
    
    
    19,146Operating income (loss)
    
    
    2,660
    
    
    
    628
    
    
    
    (34,896
    )
    
    
    (219
    )
    
    
    (31,827
    )Three Months Ended January 31, 2008External sales
    
    $
    57,675
    
    
    $
    7,694
    
    
    $
    
    
    
    $
    
    
    
    $
    65,369Inter-segment sales
    
    
    997
    
    
    
    
    
    
    
    
    
    
    
    (997
    )Gross margin
    
    
    28,052
    
    
    
    1,242
    
    
    
    
    
    
    
    (1,412
    )
    
    
    27,882Operating income (loss)
    
    
    14,574
    
    
    
    (1,558
    )
    
    
    (2,751
    )
    
    
    (1,412
    )
    
    
    8,853Nine Months Ended January 31, 2009External sales
    
    $
    149,898
    
    
    $
    16,455
    
    
    $
    
    
    
    $
    
    
    
    $
    166,353Inter-segment sales
    
    
    1,997
    
    
    
    
    
    
    
    
    
    
    
    (1,997
    )Gross margin
    
    
    67,669
    
    
    
    3,983
    
    
    
    
    
    
    
    (735
    )
    
    
    70,917Operating income (loss)
    
    
    22,327
    
    
    
    (3,417
    )
    
    
    (42,807
    )
    
    
    (735
    )
    
    
    (24,632
    )Nine Months Ended January 31, 2008External sales
    
    $
    158,907
    
    
    $
    22,079
    
    
    $
    
    
    
    $
    
    
    
    $
    180,986Inter-segment sales
    
    
    2,734
    
    
    
    
    
    
    
    
    
    
    
    (2,734
    )Gross margin
    
    
    74,822
    
    
    
    2,416
    
    
    
    
    
    
    
    (2,010
    )
    
    
    75,228Operating income (loss)
    
    
    32,833
    
    
    
    (5,874
    )
    
    
    (14,119
    )
    
    
    (2,010
    )
    
    
    10,830
 
 *
    
    Includes corporate overhead expenses as well as general and administrative expenses of
inactive subsidiaries that do not constitute segments.  Three Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Operating income (loss) for
reportable segments
    
    $
    (31,827
    )
    
    $
    8,853
    
    
    $
    (24,632
    )
    
    $
    10,830Interest income (expense), net
    
    
    (348
    )
    
    
    37
    
    
    
    (337
    )
    
    
    301Other income (expense), net
    
    
    392
    
    
    
    (422
    )
    
    
    (56
    )
    
    
    (756
    )Income (loss) before
provision for income taxes
    
    $
    (31,783
    )
    
    $
    8,468
    
    
    $
    (25,025
    )
    
    $
    10,375
 18




---



##### Table of Contents



Note 14Mergers and Investments
 Pending Merger with OMAX
     
    
    At closing, $62 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.
 19




---



##### Table of Contents




    
    Extension of the closing of the merger from March 31, 2009 to August 15, 2009   with
closing at the option of the Company;
    
    Payment of an additional $2 million to OMAX upon the signing of the amended Merger
Agreement, which was paid by the Company in March 2009;
    
    At closing, payment of $56.55 million, of which $15 million will be paid through the
release of the amounts held in escrow ($9 million placed into escrow upon signing of the
Option Agreement and the Merger Agreement with OMAX as detailed above and $6 million placed
into escrow upon signing of the Settlement and Cross Licensing Agreement as detailed in Note
7  Commitments and Contingenciesof the Notes to the Condensed Consolidated Financial
Statements). The Company may, at its discretion, distribute between $0 and $14 million of
this consideration in the form of Flow common stock in lieu of cash;
    
    At closing, the Company will place an $8.45 million promissory note into escrow to secure
claims by the Company for indemnification and for adjustments based on net working capital,
to be paid at the Companys option in cash or shares of Flow stock 18 months after the
closing date, net of any claims;
    
    The right to the contingent consideration of $52 million as outlined above.
    Dardi Investment:
  Note 15Fair Value of Financial Instruments
  20




---



##### Table of Contents



Fair Value Measure at January 31, 2009SignificantTotal Carrying
    
    Quoted Prices
    
    Other
    
    SignificantValue at
    
    in Active
    
    Observable
    
    UnobservableJanuary 31,
    
    Market
    
    Inputs
    
    Inputs2009
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Derivatives
    
    $
    99
    
    
    $
    
    
    
    $
    99
    
    
    $
    Liabilities:Derivatives
    
    $
    69
    
    
    $
    
    
    
    $
    69
    
    
    $
    
  Derivative Instruments:
  The Effect of Derivative Instruments on the Statement of Operationsfor the Periods Ended January 31, 2009, and 2008Three Months
    
    Nine MonthsEnded January 31,
    
    Ended January 31,Location of Gain orDerivatives not designated as hedging
    
    (Loss) Recognized ininstruments under Statement 133
    
    Income on Derivative
    
    2009
    
    2008
    
    2009
    
    2008Forward exchange forward contracts
    
    Other Income (Expense)
    
    $
    30
    
    
    $
    
    
    
    $
    1,249
    
    
    $
    
  21




---



##### Table of Contents



Fair Value of Derivative InstrumentsAsset Derivatives
    
    Liability DerivativesJanuary 31, 2009
    
    April 30, 2008
    
    January 31, 2009
    
    April 30, 2008BalanceBalance Sheet
    
    Fair
    
    Sheet
    
    Fair
    
    Balance Sheet
    
    Fair
    
    Balance Sheet
    
    FairLocation
    
    Value
    
    Location
    
    Value
    
    Location
    
    Value
    
    Location
    
    ValueDerivatives not designated as
hedging instruments under SFAS
133Forward exchange rate contracts
    
    Other Assets
    
    $
    99
    
    
    Other Assets
    
    $
    
    
    
    Other Liabilities
    
    $
    69
    
    
    Other Liabilities
    
    $
    113
 Note 16  Goodwill
    Note 17Restatement of Prior Period Financial Statements
   22




---



##### Table of Contents



Three Months Ended January 31, 2008As RestatedandReclassifiedforAs Previously
    
    
    
    
    
    DiscontinuedReported
    
    Restated
    
    Operations *Condensed Consolidated Statement
of Operations:Cost of Sales
    
    $
    38,293
    
    
    $
    38,181
    
    
    $
    37,487Gross Margin
    
    
    27,978
    
    
    
    28,090
    
    
    
    27,882Operating Income
    
    
    8,825
    
    
    
    8,937
    
    
    
    8,853Income before Tax
    
    
    8,439
    
    
    
    8,551
    
    
    
    8,468(Provision) for Income Taxes
    
    
    (2,542
    )
    
    
    (2,262
    )
    
    
    (2,234
    )Income from Continuing Operations
    
    
    5,897
    
    
    
    6,289
    
    
    
    6,234Net Income
    
    
    5,897
    
    
    
    6,289
    
    
    
    6,289
 Nine Months Ended January 31, 2008As RestatedandReclassifiedforAs Previously
    
    
    
    
    
    DiscontinuedReported
    
    Restated
    
    Operations *Condensed Consolidated Statement of
Operations:Sales
    
    $
    184,111
    
    
    $
    184,303
    
    
    $
    180,986Cost of Sales
    
    
    108,098
    
    
    
    108,060
    
    
    
    105,758Gross Margin
    
    
    76,013
    
    
    
    76,243
    
    
    
    75,228General & Administrative Expenses
    
    
    26,112
    
    
    
    26,188
    
    
    
    25,991Total Operating Expenses
    
    
    64,709
    
    
    
    64,785
    
    
    
    64,398Operating Income
    
    
    11,304
    
    
    
    11,458
    
    
    
    10,830Other Expense
    
    
    (690
    )
    
    
    (756
    )
    
    
    (756
    )Income Before Provision for Income Taxes
    
    
    10,915
    
    
    
    11,003
    
    
    
    10,375(Provision) for Income Taxes
    
    
    (2,346
    )
    
    
    (1,984
    )
    
    
    (1,774
    )Income from Continuing Operations
    
    
    8,569
    
    
    
    9,019
    
    
    
    8,601Net Income
    
    
    8,569
    
    
    
    9,019
    
    
    
    9,019
 Nine Months Ended January 31, 2008As PreviouslyReported
    
    RestatedCondensed Consolidated Statement of Cash Flows:Net Income
    
    $
    8,569
    
    
    $
    9,019Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities:Bad Debt Expense
    
    
    *
    *
    
    
    1,652Warranty Expense
    
    
    *
    *
    
    
    2,566Other
    
    
    1,144
    
    
    
    345Changes in Operating Assets and Liabilities:Receivables
    
    
    (7,160
    )
    
    
    (8,976
    )Other Operating Assets **
    
    
    500
    
    
    
    682Deferred Revenue
    
    
    2,401
    
    
    
    2,342Customer Deposits
    
    
    (647
    )
    
    
    (581
    )Other Operating Liabilities
    
    
    (2,402
    )
    
    
    (4,786
    )Cash Provided by(Used In) Operating Activities
    
    
    (62
    )
    
    
    (204
    )Decrease in Cash and Cash Equivalents
    
    
    (17,749
    )
    
    
    (17,891
    )Cash and Cash Equivalents at Beginning of Period
    
    
    38,146
    
    
    
    38,288
 
 *
    
    The Companys Condensed Consolidated Statement of Operations for the three and nine months
ended January 31, 2008 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. Note 18  Subsequent Events
 23




---



##### Table of Contents



Commitments and Contingencies Mergers and Investments; Pending Merger with
OMAX
  Long-Term Obligations and Notes
Payable
 24




---



##### 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 nine months ended January 31, 2008 as described in Note 17 to the accompanying Condensed
Consolidated Financial Statements included in Item 1. All affected amounts related to the three and
nine ended January 31, 2008 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:
 
    
    statements regarding the successful execution of our strategic initiatives;
    
    statements regarding our future business plans and growth strategy;
    
    statements regarding the realization of backlog in the Advanced segment;
    
    statements regarding the use of cash, cash needs and ability to raise capital and/or use
our credit facility;
    
    statements regarding our technological leadership position;
    
    statements regarding our intent to continue to make improvements to our system of
internal controls;
    
    statements regarding anticipated results of potential or actual litigation;
    
    statements regarding 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.
   
    
    Overview
    
    Results of Operations
    
    Liquidity and Capital Resources
    
    Off Balance Sheet Arrangements
    
    Contractual Obligations
    
    Critical Accounting Policies and Estimates
    
    Recently Issued Accounting Pronouncements
 25




---



##### Table of Contents



Overview
  
    
    expand market share in our current markets both organically and through
acquisitions;
    
    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.
       26




---



##### Table of Contents



Results of Operations
 (Tabular amounts in thousands)
 Summary Consolidated Results for the Three and Nine Months ended January 31, 2009 and 2008
 Three Months Ended January 31,
    
    Nine Months Ended January 31,2009
    
    2008
    
    %
    
    2009
    
    2008
    
    %Sales
    
    $
    48,711
    
    
    $
    65,369
    
    
    
    (25
    )%
    
    $
    166,353
    
    
    $
    180,986
    
    
    
    (8
    )%Operating Income
(Loss)
    
    
    (31,827
    )
    
    
    8,853
    
    
    NM
    
    
    (24,632
    )
    
    
    10,830
    
    
    NM
 Three Months Ended January 31,
    
    Nine Months Ended January 31,2009
    
    2008
    
    %
    
    2009
    
    2008
    
    %SalesSystems
    
    $
    33,739
    
    
    $
    48,209
    
    
    
    (30
    )%
    
    $
    115,997
    
    
    $
    130,641
    
    
    
    (11
    )%Consumable parts
    
    
    14,972
    
    
    
    17,160
    
    
    
    (13
    )%
    
    
    50,356
    
    
    
    50,345
    
    
    
    0
    %Total Sales
    
    
    48,711
    
    
    
    65,369
    
    
    
    (25
    )%
    
    
    166,353
    
    
    
    180,986
    
    
    
    (8
    )%
   Note 7: Commitments and Contingencies
 Segment Results of Operations
  27




---



##### Table of Contents



Segment Information
 Standard Segment
 Three Months Ended January 31,
    
    Nine Months Ended January 31,2009
    
    2008
    
    %
    
    2009
    
    2008
    
    %Sales
    
    $
    41,269
    
    
    $
    57,675
    
    
    
    (28
    )%
    
    $
    149,898
    
    
    $
    158,907
    
    
    
    (6
    )%% of total company sales
    
    
    85
    %
    
    
    88
    %
    
    NM
    
    
    90
    %
    
    
    88
    %
    
    NMGross Margin
    
    
    17,176
    
    
    
    28,052
    
    
    
    (39
    )%
    
    
    67,669
    
    
    
    74,822
    
    
    
    (10
    )%Gross Margin as % of sales
    
    
    42
    %
    
    
    49
    %
    
    NM
    
    
    45
    %
    
    
    47
    %
    
    NMOperating Expenses:Sales and Marketing
    
    
    9,313
    
    
    
    9,399
    
    
    
    (1
    )%
    
    
    29,871
    
    
    
    28,776
    
    
    
    4
    %Research and Engineering
    
    
    2,043
    
    
    
    1,549
    
    
    
    32
    %
    
    
    5,814
    
    
    
    4,847
    
    
    
    20
    %General and Administrative
    
    
    2,700
    
    
    
    2,530
    
    
    
    7
    %
    
    
    9,048
    
    
    
    8,366
    
    
    
    8
    %Restructuring Charges and Other
    
    
    460
    
    
    
    
    
    
    NM
    
    
    609
    
    
    
    
    
    
    NMTotal Operating Expenses
    
    
    14,516
    
    
    
    13,478
    
    
    
    8
    %
    
    
    45,342
    
    
    
    41,989
    
    
    
    8
    %Operating Income
    
    
    2,660
    
    
    
    14,574
    
    
    
    (82
    )%
    
    
    22,327
    
    
    
    32,833
    
    
    
    (32
    )%
 
 NM = Not Meaningful   
    
    Significant sales volume declines in North America and Europe which are the markets
affected the most from the current recession. These two regions had a combined decline in
sales of 32% and 11% for the three and nine months ended January 31, 2009, respectively,
over the prior year comparative period. This decline was offset by a 15% increase in
combined sales in South America and Asia Pacific regions for the nine months ended January
31, 2009, due to continued strong demand for our standard shapecutting systems in those
markets.
    
    Total systems revenue in our standard segment declined by 35% and 9% for the three and
nine months ended January 31, 2009, respectively.
    
    Consumable parts sales decreased by 13% during the three months ended January 31, 2009 as
our customers experienced lower utilization in installed systems as a result of the
prevailing weak economic conditions. Consumable parts sales were flat for the nine months
ended January 31, 2009, due to greater aftermarket sales activity in the first half of the
year.
    
    Excluding the impact of foreign currency changes, sales in the Standard segment declined
$15.4 million or 27% and $11.8 million or 7% for the three and nine months ended January 31,
2009, compared to the prior year comparative period.
  28




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##### Table of Contents




    
    A decrease in sales and marketing expenses of $86,000 and an increase of $1.1 million or 4%
for the three and nine months ended January 31, 2009, respectively. The decrease was as a
result of lower commission expense based on lower sales volume offset by the year-to-date
increase related to $0.9 million of expenses associated with the bi-annual International
Manufacturing Technology Show (IMTS) in September 2008.
    
    An increase in research and engineering expenses of $494,000 or 32% and $967,000 or 20% for
the three and nine months ended January 31, 2009, respectively. The increase for both the
current quarter and year to date is mainly attributable to increased investment in research
and development activity for new product development as well as lower reimbursements for
product development costs in the current period;
    
    An increase in general and administrative expenses of $170,000 or 7% and $682,000 or 8% for
the three and nine months ended January 31, 2009, respectively, based on investment in
personnel to support the operations of this segment;
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##### Table of Contents



Advanced Segment
 Three Months Ended January 31,
    
    Nine Months Ended January 31,2009
    
    2008
    
    %
    
    2009
    
    2008
    
    %Sales
    
    $
    7,442
    
    
    $
    7,694
    
    
    
    (3
    )%
    
    $
    16,455
    
    
    $
    22,079
    
    
    
    (26
    )%% of total company sales
    
    
    15
    %
    
    
    12
    %
    
    NM
    
    
    10
    %
    
    
    12
    %
    
    NMGross Margin
    
    
    2,189
    
    
    
    1,242
    
    
    
    76
    %
    
    
    3,983
    
    
    
    2,416
    
    
    
    65
    %Gross Margin as % of sales
    
    
    29
    %
    
    
    16
    %
    
    NM
    
    
    24
    %
    
    
    11
    %
    
    NMOperating Expenses:Sales and Marketing
    
    
    683
    
    
    
    1,121
    
    
    
    (39
    )%
    
    
    2,124
    
    
    
    3,043
    
    
    
    (30
    )%Research and Engineering
    
    
    238
    
    
    
    614
    
    
    
    (61
    )%
    
    
    995
    
    
    
    1,741
    
    
    
    (43
    )%General and
Administrative
    
    
    586
    
    
    
    1,065
    
    
    
    (45
    )%
    
    
    2,495
    
    
    
    3,506
    
    
    
    (29
    )%Restructuring Charges
and Other
    
    
    54
    
    
    
    
    
    
    NM
    
    
    1,785
    
    
    
    
    
    
    NMTotal Operating
Expenses
    
    
    1,561
    
    
    
    2,800
    
    
    
    (44
    )%
    
    
    7,399
    
    
    
    8,290
    
    
    
    (11
    )%Operating Income
    
    
    628
    
    
    
    (1,558
    )
    
    NM
    
    
    (3,417
    )
    
    
    (5,874
    )
    
    
    42
    %
 
 NM = Not Meaningful     All Other
  Three Months Ended January 31,
    
    Nine Months Ended January 31,2009
    
    2008
    
    %
    
    2009
    
    2008
    
    %General and
Administrative
    
    $
    3,132
    
    
    $
    2,751
    
    
    
    14
    %
    
    $
    11,043
    
    
    $
    14,119
    
    
    
    (22
    )%Provision for
Litigation
    
    
    29,000
    
    
    
    
    
    
    NM
    
    
    29,000
    
    
    
    
    
    
    NMGoodwill Impairment
    
    
    2,764
    
    
    
    
    
    
    NM
    
    
    2,764
    
    
    
    
    
    
    NM
  30




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##### Table of Contents



Commitments and Contingencies
 Other (Income) Expense
 Interest Income (Expense), net
 Commitments and Contingencies
 Other Income (Expense), Net
  Three Months
    
    
    Nine MonthsEnded January 31,
    
    
    Ended January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Realized Foreign Exchange Gains (Losses), net
    
    $
    206
    
    
    $
    369
    
    
    $
    674
    
    
    $
    (111
    )Unrealized Foreign Exchange Gains (Losses), net
    
    
    (581
    )
    
    
    (818
    )
    
    
    (1,524
    )
    
    
    85Premium on Repurchase of Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (629
    )Other
    
    
    767
    
    
    
    27
    
    
    
    794
    
    
    
    (101
    )$
    392
    
    
    $
    (422
    )
    
    $
    (56
    )
    
    $
    (756
    )
    Income Taxes
  31




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Liquidity and Capital Resources
 Sources of Cash
 Long-term Obligations
and Notes Payable
 Cash Generated by Operating Activities
  32




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##### Table of Contents



Available Cash and Cash Equivalents
  Credit Facilities and Debt
  Commitments and Contingencies Mergers and Investments
  Commitments and Contingencies
  33




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##### Table of Contents



Other Sources of Cash
  Uses of Cash
 Capital Expenditures
  Other Strategic Investments
  Mergers and Investments
  
    
    Extension of the closing of the merger from March 31, 2009 to August 15, 2009   with
closing at our option;
    
    Payment of an additional $2 million to OMAX upon the signing of the amended Merger
Agreement, which we paid in March 2009;
    
    At closing, payment of $56.55 million, of which $15 million will be paid through the
release of funds held in escrow ($9 million placed into escrow upon signing of the Option
Agreement and the Merger Agreement with OMAX as detailed in Note 14  Mergers and
Investmentsof the Notes to the Condensed Consolidated Financial Statements and $6 million
placed into escrow upon signing of the Settlement and Cross Licensing Agreement as detailed
in Note 7  Commitments and Contingenciesof the Notes to the Condensed Consolidated
Financial Statements). We may, at our discretion, distribute between $0 and $14 million of
this consideration in the form of Flow common stock in lieu of cash ;
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##### Table of Contents




    
    At closing, we will place an $8.45 million promissory note into escrow to secure claims
by us for indemnification and for adjustments based on net working capital, to be paid at
our option in cash or shares of Flow stock 18 months after the closing date, net of any
claims;
    
    The right to the contingent consideration of $52 million as outlined in Note 14 
Mergers and Investmentsin the Notes to the Consolidated Condensed Financial Statements.
   Repayment of Debt and Notes Payable
  Repurchase of Warrants
  Off-Balance Sheet Arrangements
  Contractual Obligations
 Mergers and Investments
 Critical Accounting Estimates and Judgments
 
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##### Table of Contents



Goodwill and Other Intangible Assets
     Recently Issued Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  36




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##### Table of Contents



Item 4. Controls and Procedures
     37




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Risks related to our External Financing
 We may not be able to obtain an amendment to our existing credit facility and may need to seek
alternative financing to fund our operations.
 Long-term Obligations
and Notes Payable
 Risks related to our Pending Merger with OMAX
 We may not be able to obtain financing on reasonable terms to consummate the merger with OMAX.
 Mergers and Investments
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##### Table of Contents



Items 2, 3, 4, and 5 are None and have been omitted.
 
 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 200299.1
    
    Debt Covenant Compliance as of January 31, 2009
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##### Table of Contents



Date: March 12, 2009
    
    /s/ Charles M. Brown

Charles M. BrownPresident and Chief Executive Officer
(Principal Executive Officer)Date: March 12, 2009
    
    /s/ Dohn R. Johnson, Jr.

Dohn R. Johnson, Jr.Corporate Controller
(Principal Financial Officer)
 40