Company Focused on Its Proprietary Infection Prevention and Control
Business CANTEL MEDICAL CORP. (NYSE:CMN) reported net income of
$3,809,000, an increase of 23%, or $0.23 per diluted share, for its
third quarter ended April 30, 2005, on sales of $50,534,000, an
increase of 8%, as compared with net income of $3,094,000, or $0.20
per diluted share, on sales of $46,898,000 for the quarter ended
April 30, 2004. Of the 8% increase in net sales, 4% was from the
Company's core businesses and 4% was from the Saf-T-Pak acquisition
in June 2004. For the nine months ended April 30, 2005, the Company
reported net income of $10,791,000, an increase of 45%, or $0.67
per diluted share, on sales of $145,412,000, an increase of 16%, as
compared with net income of $7,462,000, or $0.49 per diluted share,
on sales of $124,843,000 for the nine months ended April 30, 2004.
The Company further reported that its balance sheet at April 30,
2005 showed current assets of $84,143,000, including cash and cash
equivalents of $24,651,000, a current ratio of 2.95:1, a ratio of
funded debt to equity of .16:1 and stockholders' equity of
$103,380,000. James P. Reilly, President and Chief Executive
Officer of Cantel, commented, "We are pleased with our third
quarter results, as we exceeded our budgeted revenues and net
income, and achieved our budgeted earnings per diluted share
despite the increase in weighted average shares." Reilly added,
"With cash and cash equivalents of $24,651,000 exceeding our long
term debt of $16,500,000, strong cash flow from our existing
operations and our significant borrowing capacity, we are in an
excellent position to continue our aggressive search for
acquisitions of companies providing products and services in the
infection prevention and control markets." Canadian Distribution
Agreements; Focus on Infection Prevention and Control The Company
also announced today that it has reached an agreement in principle
with Olympus America Inc. under which, effective July 31, 2006,
Carsen Group Inc., a wholly-owned subsidiary of Cantel, will no
longer serve as the Canadian distributor of Olympus products. The
agreement in principle, which is subject to the negotiation and
execution of a definitive agreement, was reached after a series of
discussions on the future of the Carsen-Olympus relationship ended
with the decision by Olympus to grant Carsen a four-month extension
of its existing distribution agreements from the original
expiration date of March 31, 2006 and to terminate the distribution
agreements on July 31, 2006. Carsen's distribution function will
remain an important contributor to Cantel's results of operations
through the end of its fiscal year ending July 31, 2006. Olympus
will pay Cantel $6,000,000 in cash in consideration for Carsen's
transfer to Olympus of customer lists, sales records, and certain
other assets related to the sale and servicing of Olympus products
and for Carsen's release of Olympus's contractual restriction on
hiring Carsen personnel. In addition, Carsen will assist Olympus in
effecting a smooth transition of Carsen's business of distributing
and servicing Olympus products in Canada. Olympus will also acquire
Carsen's inventory of Olympus products as of July 31, 2006 under
the terms of the existing distribution agreements. Net proceeds
from the termination of Carsen's Olympus distribution business are
projected to total approximately $15,000,000. Such net proceeds
will consist of the $6,000,000 to be paid by Olympus and proceeds
from the sale of inventory and collection of receivables, less
satisfaction of liabilities, severance costs, continuing lease
obligations and other wind-down costs. Management's projection of
net proceeds is an estimate based on inventory, receivables and
liabilities at April 30, 2005 and assumptions for potential
wind-down costs, but without taking into account any Canadian or US
tax implications. Mr. Reilly said: "While we are disappointed by
Olympus's decision to bring in-house the distribution function our
Carsen Group subsidiary has been performing for Olympus, our
strategic focus in recent years has primarily been on the
development and marketing of proprietary infection prevention and
control products. The Olympus products distributed by Carsen, which
include medical equipment, scientific instruments and industrial
equipment, are not proprietary infection prevention and control
products, and therefore are outside our strategic focus. "Our
strategic commitment to infection prevention and control as the
core of our growth strategy began with our acquisition of
MediVators in 1996, continued with our acquisition of Minntech in
2001, and was further established with the acquisition in fiscal
2004 of four more infection prevention and control businesses. "We
are currently pursuing further internal development projects and
acquisition opportunities to grow our proprietary infection
prevention and control business. We believe that the cash flow
generated by our current domestic and international operations, our
strong balance sheet, and our borrowing capacity position us to
take advantage of attractive growth and value-creation
opportunities. Moreover, we intend to deploy the net proceeds from
the termination of Carsen's Olympus distribution business into
future acquisition and growth opportunities in infection prevention
and control." For the fiscal year ended July 31, 2004, total
revenues of Carsen were $48,144,000, which accounted for
approximately 28% of Cantel's consolidated revenues during that
fiscal year. Approximately 80% of Carsen's revenues were
attributable to its Olympus distribution and service businesses.
Operating income of Carsen in fiscal 2004 was $9,039,000, or
approximately 40% of Cantel's consolidated operating income before
general corporate expenses and interest expense. For the nine
months ended April 30, 2005, total revenues of Carsen were
$45,143,000, which accounted for 31% of Cantel's consolidated
revenues for that period. Approximately 80% of Carsen's revenues
were attributable to its Olympus distribution and service
businesses. Operating income of Carsen for the nine months ended
April 30, 2005 was $8,788,000, or 40% of Cantel's consolidated
operating income before general corporate expenses and interest
expense. The revenues and operating income attributable to Carsen's
business (inclusive of both Olympus and non-Olympus business, but
exclusive of the sale of MediVators reprocessors) constitute the
entire "Endoscopy and Surgical Products" reporting segment and
"Scientific Products" operating segment (included within the "All
Other" reporting segment) of Cantel. Cantel is currently evaluating
Carsen's remaining non-Olympus product lines, most of which are
aligned with Olympus products, to determine their viability without
Carsen's Olympus business. Mr. Reilly concluded: "Despite the loss
of the Olympus distribution business after July 31, 2006, we are
very confident that by continuing to focus on our infection
prevention and control strategy, the outlook for Cantel Medical,
our customers, employees and shareholders will continue to be
positive. We remain committed to building the long-term value of
Cantel Medical for our shareholders." Cantel will hold a conference
call to discuss these announcements on Thursday, June 2, 2005 at
8:30 a.m. Eastern Time. Participants on the call will include
Charles M. Diker, Chairman; James P. Reilly, President and CEO;
Andrew A. Krakauer, Executive Vice President and COO; Craig A.
Sheldon, Senior Vice President and CFO; Eric W. Nodiff, Senior Vice
President and General Counsel; William J. Vella, President of
Carsen Group Inc. and Roy K. Malkin, President of Minntech
Corporation. To participate in the conference call, dial
877-407-8035 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, June 2 at 11:00 a.m. through
midnight on June 3, by dialing 877-660-6853 and using pass code #
286 and conference ID #155577. The call will be simultaneously
broadcast live over the Internet on vcall.com at
http://www.vcall.com/CEPage.asp?ID=92242. A replay of the webcast
will be available on Vcall for 30 days. Cantel Medical Corp., a
healthcare company, is a leading provider of infection prevention
and control products, which include specialized medical device
reprocessing systems for renal dialysis and endoscopy, water
treatment systems, sterilants, diagnostic imaging and therapeutic
medical equipment primarily focused on endoscopy, hollow fiber
membrane filtration and separation technologies for medical and
non-medical applications, and specialized packaging for infectious
and biological specimens. Cantel also sells scientific
instrumentation products and provides technical maintenance
services for its products. 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. In addition, there can be no
assurance that Cantel will reach a definitive agreement with
Olympus, that Carsen will continue any portion of its non-Olympus
business, that Cantel's estimate of net proceeds from the
discontinuance of Carsen's Olympus distribution business will be
realized, that Cantel will be successful in finding suitable
acquisition candidates or in consummating any acquisition, or that
any such agreement or acquisition will be on terms favorable to
Cantel. Forward-looking statements are only predictions, and actual
events or results may differ materially from those projected or
anticipated. -0- *T CANTEL MEDICAL CORP. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (In thousands, except per share data) Three
Months Nine Months Ended Ended April 30, April 30,
----------------- ------------------- 2005 2004 2005 2004 --------
-------- --------- --------- Net sales $50,534 $46,898 $145,412
$124,843 Cost of sales 31,011 29,646 89,853 79,299 --------
-------- --------- --------- Gross profit 19,523 17,252 55,559
45,544 Operating expenses: Selling 6,007 5,316 17,229 15,017
General and administrative 5,674 5,402 16,491 13,976 Research and
development 1,103 1,100 3,109 3,273 -------- -------- ---------
--------- Total operating expenses 12,784 11,818 36,829 32,266
-------- -------- --------- --------- Income before interest and
income taxes 6,739 5,434 18,730 13,278 Interest expense - net 219
374 883 1,205 -------- -------- --------- --------- Income before
income taxes 6,520 5,060 17,847 12,073 Income taxes 2,711 1,966
7,056 4,611 -------- -------- --------- --------- Net income $3,809
$3,094 $10,791 $7,462 ======== ======== ========= =========
Earnings per common share - diluted $0.23 $0.20 $0.67 $0.49
======== ======== ========= ========= Weighted average shares -
diluted 16,521 15,322 16,194 15,080 CANTEL MEDICAL CORP. CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands) April 30, July 31, 2005
2004 --------- --------- Assets Current assets $84,143 $73,863
Property and equipment, net 23,096 22,715 Intangible assets 13,402
13,897 Goodwill 33,711 33,330 Other assets 3,006 2,562 ---------
--------- $157,358 $146,367 ========= ========= Liabilities and
stockholders' equity Current liabilities $28,536 $27,128 Long-term
liabilities 25,442 32,728 Stockholders' equity 103,380 86,511
--------- --------- $157,358 $146,367 ========= ========= *T
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