On the Surface

Operating Expenses. The following table compares our operating expenses 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
Operating Expenses:
Selling, General, and Administrative $ 326,896 $ 315,582 $ 11,314 3.6%
Research and Development 33,626 33,597 29 0.1%
Restructuring Expenses 6,584 25,308 (18,724) NM
Total Operating Expenses $ 367,106 $ 374,487 $ (7,381) (2.0)%
NM – Not meaningful.
Compensation and benefit costs, fees for professional services, travel and entertainment, facilities costs, and other general and
administrative expenses are significant components of SG&A. As a percentage of total revenues, SG&A increased 10 basis points to 27.3%
for fiscal 2007 as compared to fiscal 2006. The increase reflects higher compensation and benefit costs net of lower costs associated with
consulting and marketing fees.
Research and development expenses as a percentage of total revenues decreased 10 basis points to 2.8% for fiscal 2007 as
compared to fiscal 2006. During both fiscal 2007 and fiscal 2006, research and development expenses were $33.6 million. Our research and
development initiatives continually emphasize new product development, product improvements, and the development of new
technological platform innovations. During fiscal 2007, our investments in research and development focused on, but were not limited to,
enhancing capabilities of delivery systems in the defense and industrial areas, sterile processing combination technologies, surgical tables and
accessories, and the area of emerging infectious agents such as Prions and Nanobacteria.
SG&A and research and development expenses for fiscal 2007 included $8.0 million and $0.8 million, respectively, in share-based
compensation expense as a result of the impact of the adoption of SFAS No. 123R.
Restructuring Expenses. We recognize restructuring expenses as they are incurred. We also evaluate the property, plant and equipment
associated with our restructuring actions for impairment. Asset impairment and accelerated depreciation expenses primarily relate to an
adjustment in the carrying value of the related facilities to their estimated fair value. In addition, the remaining useful lives of other property,
plant and equipment associated with the related operations were re-evaluated based on the respective plan, resulting in the acceleration of
depreciation and amortization of certain assets.
In fiscal 2007 and fiscal 2006, we recorded $4.9 million and $25.3 million in pre-tax restructuring expenses, respectively, for the
Fiscal 2006 Restructuring Plan. These restructuring expenses primarily related to the previously announced transfer of the Erie, Pennsylvania
manufacturing operations to Monterrey, Mexico and other restructuring actions, including the closure of a sales office, rationalization of
operations in Finland and the elimination of certain management positions. All such actions are intended to improve our cost structure.
These actions directly impacted more than 450 employees. Information regarding the impact of the restructuring actions on our
employee benefit plans is included in Note 10 to our consolidated financial statements titled, “Benefit Plans.”
During the third quarter of fiscal 2007, we adopted the European Restructuring Plan. As part of this plan, we closed two offices.
We also took steps to reduce the workforce in certain of our European support functions. These actions are intended to improve our cost
structure in Europe. Approximately 40 employees were directly impacted in various European locations.
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