LITTLE FALLS, N.J.,
Dec. 7, 2017 /PRNewswire/
-- Cantel Medical Corp. (NYSE: CMD) today announced financial
results for its first quarter ended October
31, 2017.
Jørgen B. Hansen, President and Chief Executive Officer, stated,
"We are pleased to report record sales and earnings performance
this quarter. Our 13.3% reported sales increase was driven by
organic growth of 8.6%, the impact from acquisitions of 4.3%, and a
favorable impact from foreign currency of 0.4%. We continue to
outperform internationally where sales were up 39.2% overall, and
our US business performed well given tough comparables with 6.9%
growth."
Financial Highlights:
Endoscopy sales grew 19.8%,
with strong organic growth of 10.7%, showing continued performance
versus another strong prior year quarter. Recurring revenue for
this segment was up 20.8%. In August, the Company closed the
acquisition of BHT Group, the German leader in automated endoscope
reprocessing, further expanding its global footprint.
Reported sales in Water Purification and Filtration increased
7.4%, as a strong backlog translated into increased shipments for
the quarter, which drove the majority of the growth over the prior
year. Margins expanded due to a decrease in warranty expense.
Healthcare Disposables reported strong year over year growth of
5.7%, all of which was organic. Favorable product mix coupled with
near double-digit growth of our branded portfolio drove margin
expansion in this segment.
The Company's balance sheet continues to generate significant
cash flow and EBITDAS. The first quarter ended with cash of
$37,220 and gross debt of
$168,000, while generating adjusted
EBITDAS of $44,395 in the quarter, up
10.8%.
Hansen further stated, "Based on the strong first quarter
performance and our expectations for the remainder of fiscal year
2018, we reaffirm our full year guidance, as previously stated in
our fourth quarter fiscal year 2017 earnings call."
Conference Call Information:
The Company will hold a
conference call to discuss the results for its first quarter ended
October 31, 2017 on Thursday, December 7, 2017 at 11:00
a.m. Eastern time.
To participate in the conference call, dial 1-877-407-8033
(US & Canada) or
1-201-689-8033 (International) approximately 5 to 10 minutes before
the beginning of the call. If you are unable to participate, a
digital replay of the call will be available from Thursday,
December 7, 2017 through midnight on January 7, 2018 by dialing 1-877-481-4010 (US
& Canada) or 1-919-882-2331
(International) and using conference ID #: 22864.
An audio webcast will be available via the Cantel website at
www.cantelmedical.com. A replay of the presentation will be
archived on the Cantel web site for those unable to listen live. In
addition, the Company will provide a supplemental presentation to
complement the conference call. The presentation can be accessed on
Cantel's website in the Investor Relations section under
presentations.
About Cantel Medical
Cantel Medical is a leading
global company dedicated to delivering innovative infection
prevention products and services for patients, caregivers, and
other healthcare providers which improve outcomes, enhance safety
and help save lives. Our products include specialized medical
device reprocessing systems for endoscopy and renal dialysis,
advanced water purification equipment, sterilants, disinfectants
and cleaners, sterility assurance monitoring products for hospitals
and dental clinics, disposable infection control products primarily
for dental and GI endoscopy markets, dialysate concentrates, hollow
fiber membrane filtration and separation products. Additionally, we
provide technical service for our products.
For further information, visit the Cantel website at
www.cantelmedical.com.
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements involve a number of risks and uncertainties,
including, without limitation, the risks detailed in Cantel's
filings and reports with the Securities and Exchange Commission.
Such forward-looking statements are only predictions, and actual
events or results may differ materially from those projected or
anticipated.
CANTEL MEDICAL
CORP.
|
Condensed
Consolidated Statements of Income
|
(Unaudited)
|
|
|
|
Three months ended
October 31,
|
|
2017
|
|
2016
|
Net sales
|
$
|
212,766
|
|
$
|
187,725
|
|
|
|
|
Cost of
sales
|
112,107
|
|
98,218
|
|
|
|
|
Gross
profit
|
100,659
|
|
89,507
|
|
|
|
|
Expenses:
|
|
|
|
Selling
|
31,600
|
|
27,893
|
General and
administrative
|
32,096
|
|
30,003
|
Research and
development
|
5,329
|
|
4,548
|
Total operating
expenses
|
69,025
|
|
62,444
|
|
|
|
|
Income from
operations
|
31,634
|
|
27,063
|
|
|
|
|
Interest expense,
net
|
1,189
|
|
1,093
|
Other
income
|
(1,138)
|
|
—
|
|
|
|
|
Income before income
taxes
|
31,583
|
|
25,970
|
|
|
|
|
Income
taxes
|
8,654
|
|
7,170
|
|
|
|
|
Net income
|
$
|
22,929
|
|
$
|
18,800
|
|
|
|
|
Earnings per common
share - diluted
|
$
|
0.55
|
|
$
|
0.45
|
|
|
|
|
Dividends declared
per common share
|
$
|
—
|
|
$
|
0.07
|
|
|
|
|
Weighted average
shares - diluted
|
41,813,860
|
|
41,784,896
|
CANTEL MEDICAL
CORP.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
|
October 31,
2017
|
|
July 31,
2017
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
37,220
|
|
$
|
36,584
|
Accounts receivable,
net
|
105,153
|
|
110,656
|
Inventories,
net
|
105,823
|
|
98,724
|
Prepaid expenses and
other current assets
|
19,484
|
|
11,407
|
Property and
equipment, net
|
91,487
|
|
88,338
|
Intangible assets,
net
|
138,837
|
|
124,512
|
Goodwill
|
351,818
|
|
311,445
|
Other
assets
|
5,348
|
|
4,707
|
Total
assets
|
$
|
855,170
|
|
$
|
786,373
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
$
|
109,571
|
|
$
|
106,779
|
Long-term
debt
|
168,000
|
|
126,000
|
Deferred income
taxes
|
31,375
|
|
24,714
|
Other long-term
liabilities
|
3,646
|
|
4,948
|
Stockholders'
equity
|
542,578
|
|
523,932
|
Total liabilities and
stockholders' equity
|
$
|
855,170
|
|
$
|
786,373
|
SUPPLEMENTARY INFORMATION - RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
In evaluating our operating performance, we supplement the
reporting of our financial information determined under generally
accepted accounting principles in the
United States ("GAAP") with certain non-GAAP financial
measures including (i) non-GAAP net income; (ii) non-GAAP earnings
per diluted share ("EPS"); (iii) earnings before interest, taxes,
depreciation, amortization, loss on disposal of fixed assets, and
stock-based compensation expense ("EBITDAS"); (iv) adjusted
EBITDAS; (v) net debt; and (vi) organic sales. These non-GAAP
financial measures are indicators of the Company's performance that
are not required by, or presented in accordance with, GAAP. They
are presented with the intent of providing greater transparency to
financial information used by us in our financial analysis and
operational decision-making. We believe that these non-GAAP
measures provide meaningful information to assist investors,
stockholders and other readers of our consolidated financial
statements in making comparisons to our historical operating
results and analyzing the underlying performance of our results of
operations. These non-GAAP financial measures are not intended to
be, and should not be, considered separately from, or as an
alternative to, the most directly comparable GAAP financial
measures.
To measure earnings performance on a consistent and comparable
basis, we exclude certain items that affect comparability of
operating results and the trend of earnings. These adjustments are
irregular in timing, may not be indicative of our past and future
performance and are therefore excluded to allow investors to better
understand underlying operating trends. The following are examples
of the types of adjustments that are excluded: (i) amortization of
purchased intangible assets; (ii) acquisition related items; (iii)
business optimization and restructuring-related charges; (iv)
certain significant and discrete tax matters; and (v) other
significant items management deems irregular or non-operating in
nature.
Amortization expense of purchased intangible assets is a
non-cash expense related to intangibles that were primarily the
result of business acquisitions. Our history of acquiring
businesses has resulted in significant increases in amortization of
intangible assets that reduced the Company's net income. The
removal of amortization from our overall operating performance
helps in assessing our cash generated from operations including our
return on invested capital, which we believe is an important
analysis for measuring our ability to generate cash and invest in
our continued growth.
Acquisition related items consist of (i) fair value
adjustments to contingent consideration and other contingent
liabilities resulting from acquisitions, (ii) due diligence,
integration, legal fees and other transaction costs associated with
our acquisition program and (iii) acquisition accounting
charges for the amortization of the initial fair value adjustments
of acquired inventory and deferred revenue. The adjustments of
contingent consideration and other contingent liabilities are
periodic adjustments to record such amounts at fair value at each
balance sheet date. Given the subjective nature of the assumptions
used in the determination of fair value calculations, fair value
adjustments may potentially cause significant earnings volatility
that are not representative of our operating results. Similarly,
due diligence, integration, legal and other acquisition costs
associated with our acquisition program, including acquisition
accounting charges relating to recording acquired inventory and
deferred revenue at fair market value, can be significant and also
adversely impact our effective tax rate as certain costs are often
not tax-deductible. Since these acquisition related items are
irregular and often mask underlying operating performance, we
excluded these amounts for purposes of calculating these non-GAAP
financial measures to facilitate an evaluation of our current
operating performance and a comparison to past operating
performance.
Excess tax benefits resulting from stock compensation are
recorded as a reduction of income tax expense. The magnitude of the
impact of excess tax benefits generated in the future, which may be
favorable or unfavorable, are dependent upon our future grants of
equity awards, our future share price on the date awards vest in
relation to the fair value of awards on grant date and the exercise
behavior of our stock option holders. Since these favorable tax
benefits are largely unrelated to our results and unrepresentative
of our normal effective tax rate, we excluded its impact on net
income and diluted EPS to arrive at our non-GAAP financial
measures.
In fiscal 2016, we announced the retirement plans of our former
Chief Executive Officer and recorded the majority of the costs
associated with his retirement in our consolidated financial
statements. Since these costs are irregular and mask our underlying
operating performance, we made an adjustment to our net income and
diluted EPS for the three months ended October 31, 2016 to exclude such costs to arrive
at our non-GAAP financial measures.
Three Months Ended October 31,
2017
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition related items, (iii) other business
optimization and restructuring-related charges and (iv) the
resolution of the contingent liability associated with the Jet Prep
acquisition to arrive at our non-GAAP financial measures, non-GAAP
net income and non-GAAP diluted EPS.
Three Months Ended October 31,
2016
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition related items and (iii) costs associated
with the retirement of our former Chief Executive Officer to arrive
at our non-GAAP financial measures, non-GAAP net income and
non-GAAP diluted EPS.
The reconciliations of net income and diluted EPS to non-GAAP
net income and non-GAAP diluted EPS were calculated as follows:
|
Three Months Ended
October 31,
|
|
2017
|
|
2016
|
Net income/Diluted
EPS, as reported
|
$
|
22,929
|
|
$
|
0.55
|
|
$
|
18,800
|
|
$
|
0.45
|
Intangible
amortization, net of tax(1)
|
2,869
|
|
0.07
|
|
2,748
|
|
0.07
|
Acquisition related
items, net of tax(2)
|
1,081
|
|
0.03
|
|
768
|
|
0.02
|
CEO retirement costs,
net of tax(1)
|
—
|
|
—
|
|
1,248
|
|
0.03
|
Restructuring-related
charges, net of tax(3)
|
586
|
|
0.01
|
|
—
|
|
—
|
Excess tax
benefit(4)
|
(2,286)
|
|
(0.05)
|
|
(2,241)
|
|
(0.05)
|
Resolution of Jet
Prep contingent liability(5)
|
(1,138)
|
|
(0.03)
|
|
—
|
|
—
|
Non-GAAP net
income/Non-GAAP diluted EPS
|
$
|
24,041
|
|
$
|
0.57
|
|
$
|
21,323
|
|
$
|
0.51
|
__________________________________________________
|
(1)
|
Amounts were recorded
in general and administrative expenses.
|
(2)
|
For the three months
ended October 31, 2017, pre-tax acquisition related items of $893
were recorded in cost of sales and $915 were recorded in general
and administrative expenses. For the three months ended October 31,
2016, pre-tax acquisition related items of $170 were recorded in
cost of sales and $905 were recorded in general and administrative
expenses.
|
(3)
|
For the three months
ended October 31, 2017, pre-tax restructuring-related items of $505
were recorded in cost of sales and $443 were recorded in general
and administrative expenses.
|
(4)
|
Amounts were recorded
in income taxes.
|
(5)
|
Amounts were recorded
in other income
|
Reconciliation of Net Income to EBITDAS and
Adjusted EBITDAS
We believe EBITDAS is an important valuation measurement for
management and investors given the increasing effect that non-cash
charges, such as stock-based compensation, amortization related to
acquisitions and depreciation of capital equipment have on net
income. In particular, acquisitions have historically resulted in
significant increases in amortization of purchased intangible
assets that reduce net income. Additionally, we regard EBITDAS as a
useful measure of operating performance and cash flow before the
effect of interest expense and is a complement to operating income,
net income and other GAAP financial performance measures.
We define adjusted EBITDAS as EBITDAS excluding the same
non-GAAP adjustments to net income discussed above. We use adjusted
EBITDAS when evaluating operating performance because we believe
the exclusion of such adjustments, of which a significant portion
are non-cash items, is necessary to provide the most accurate
measure of on-going core operating results and to evaluate
comparative results period over period.
The reconciliations of net income to EBITDAS and adjusted
EBITDAS were calculated as follows:
|
Three Months Ended
October 31,
|
|
2017
|
|
2016
|
Net income, as
reported
|
$
|
22,929
|
|
$
|
18,800
|
Interest expense,
net
|
1,189
|
|
1,093
|
Income
taxes
|
8,654
|
|
7,170
|
Depreciation
|
4,036
|
|
3,454
|
Amortization
|
4,048
|
|
3,909
|
Loss on disposal of
fixed assets
|
69
|
|
224
|
Stock-based
compensation expense
|
1,851
|
|
2,922
|
EBITDAS
|
42,776
|
|
37,572
|
Acquisition related
items
|
1,809
|
|
1,075
|
CEO retirement costs
(1)
|
—
|
|
1,413
|
Restructuring related
charges
|
948
|
|
—
|
Resolution of Jet
Prep contingent liability
|
(1,138)
|
|
—
|
Adjusted
EBITDAS
|
$
|
44,395
|
|
$
|
40,060
|
______________________________________________________
|
(1)
|
For comparative
purposes, we have revised the amounts associated with CEO
retirement costs for the three months ended October 31, 2016 to
exclude stock-based compensation expense which was reported in
"Stock-based compensation expense" above.
|
We define net debt as long-term debt less cash and cash
equivalents. Each of the components of net debt appears on our
consolidated balance sheets. We believe that the presentation of
net debt provides useful information to investors because we review
net debt as part of our management of our overall liquidity,
financial flexibility, capital structure and leverage.
|
October 31,
2017
|
|
July 31,
2017
|
Long-term
debt
|
$
|
168,000
|
|
$
|
126,000
|
Less cash and cash
equivalents
|
(37,220)
|
|
(36,584)
|
Net debt
|
$
|
130,780
|
|
$
|
89,416
|
Reconciliation of Net Sales Growth to Organic
Sales Growth
We define organic sales as net sales less (i) the impact of
foreign currency translation and (ii) net sales related to
acquired businesses during the first twelve months of ownership and
(iii) divestitures during the periods being compared. We believe
that reporting organic sales provides useful information to
investors by helping identify underlying growth trends in our
business and facilitating easier comparisons of our revenue
performance with prior periods. We exclude the effect of foreign
currency translation from organic sales because foreign currency
translation is not under management's control, is subject to
volatility and can obscure underlying business trends. We exclude
the effect of acquisitions because the nature, size, and number of
acquisitions can vary dramatically from period to period and can
obscure underlying business trends and make comparisons of
financial performance difficult.
For the three months ended October 31, 2017, the
reconciliation of net sales growth to organic sales growth for
total net sales and net sales of our four reportable segments were
calculated as follows:
(Unaudited)
|
|
Net Sales
|
|
Endoscopy
Net Sales
|
|
Water
Purification
and
Filtration
Net Sales
|
|
Healthcare
Disposables
Net Sales
|
|
Dialysis
Net Sales
|
Net sales
growth
|
|
13.3%
|
|
19.8%
|
|
7.4%
|
|
5.7%
|
|
9.8%
|
Impact due to foreign
currency translation
|
|
(0.4)%
|
|
(0.6)%
|
|
(0.3)%
|
|
0.0%
|
|
0.1%
|
Sales related to
acquisitions
|
|
(4.3)%
|
|
(8.5)%
|
|
0.0%
|
|
0.0%
|
|
0.0%
|
Organic sales
growth
|
|
8.6%
|
|
10.7%
|
|
7.1%
|
|
5.7%
|
|
9.9%
|
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SOURCE Cantel Medical Corp.