On the Surface

International revenues for fiscal 2007 amounted to $263.9 million, an increase of $29.2 million, or 12.4%, as compared to fiscal
2006. The increase in year-over-year international revenues was attributable to a 14.9% increase in capital revenues primarily within the
European and Canadian marketplaces. Within Europe, fiscal 2007 capital revenues reflect the continued success of surgical tables and
related accessories in the Healthcare segment and increases in the Life Sciences segment’s revenues from VHP technologies and water
systems. This increase was partially offset by a decrease in Asia Pacific and Latin America capital revenues in our Life Sciences segment
during fiscal 2007. The increase in international capital revenues was supplemented by an increase of 9.4% in recurring revenue streams year
over year.
United States revenues for fiscal 2007 amounted to $933.5 million, an increase of $7.9 million, or 0.9%, as compared to fiscal
2006. United States revenues were positively impacted by a 4.1% increase in recurring revenues, which were driven by increases in service
revenues in all segments. Year over year, United States capital revenues decreased 3.9%, reflecting fluctuating demand within the Healthcare
segment for sterile processing capital products generally associated with new construction projects and as a result of the strong price
competition experienced by the Life Sciences segment for capital equipment being sold into the United States research market.
Revenues by segment are further discussed in the section of MD&A titled, “Business Segment Results of Operations.”
Gross Profit. The following table compares our gross profit for the year ended March 31, 2007 to the year ended March 31, 2006:
Years Ended March 31,
(dollars in thousands) 2007 2006
Change
Percent
Change
Gross Profit:
Product $ 319,066 $ 314,386 $ 4,680 1.5%
Service 185,741 169,799 15,942 9.4%
Total Gross Profit $ 504,807 $ 484,185 $ 20,622 4.3%
Gross Profit Percentage:
Product 41.2% 41.4%
Service 43.8% 42.4%
Total Gross Profit Percentage 42.2% 41.7%
Our gross profit (margin) is affected by the volume, pricing, and mix of sales of our products and services, as well as the costs
associated with the products and services that are sold. Our gross margin increased to 42.2% for fiscal 2007. Overall, our fiscal 2007
margins increased due to improved productivity and pricing, which more than offset increases in labor and raw material costs. Gross
margins also benefited from a shift towards higher margin recurring revenue products within the Life Sciences segment. Gross margins for
fiscal 2007 include $1.1 million in share-based compensation expense as a result of the impact of SFAS No. 123R.
The gross margins related to our operating segments are further discussed in the section of MD&A titled, “Business Segment
Results of Operations.”
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