CMD Cantel Medical Corp

Leading infection prevention and control products maker Cantel Medical (CMN) posted third-quarter 2011 (ended April 30) earnings of 29 cents per share, missing the Zacks Consensus Estimate by a couple of cents while exceeding the year-ago earnings of 25 cents. Profit climbed 18% year over year to roughly $5 million owing to record sales.

Revenues propelled 24% year over year to $82.6 million, well ahead of the Zacks Consensus Estimate of $76 million. Sales were boosted by healthy growth across the company’s key segments.

The company’s Endoscope Reprocessing business had a strong quarter with revenues catapulting 67% primarily riding on healthy shipments of its two new reprocessors (Advantage Plus and DSD Edge). The strong results underscore the company’s successful execution of its three-pronged strategy (new product development, sales and marketing programs and acquisitions) to spur growth.

Gross margin declined to 37.9% from 40.1% a year-ago due to higher cost of sales which crept up roughly 29% in the quarter. Operating expenses climbed 19% year over year to $23.7 million as the company spent more on R&D as well as selling and marketing initiatives. This has resulted in the decline in operating margin which fell to 9.3% from 10.3% a year-ago.

Cantel Medical exited the quarter with cash of roughly $16 million, down 16% year over year. Net debt more than doubled year over year to roughly $14 million.

New Jersey-based Cantel Medical, which operates through six segments, offers its infection prevention and control products to dialysis, dental, endoscope processing, water purification, therapeutic filtration and specialty packaging markets. One of the company’s competitors is Siemens (SI). 

Cantel Medical has a rich history of growth through acquisitions. The company acquired the U.S. water purification business of medical technology firm Gambro Renal Products Inc. in October 2010. Moreover, it bought, in February 2011, the sterilization monitoring business of the leading biological monitoring services provider ConFirm Monitoring Systems.

While acquisition-related costs hit Cantel Medical’s operating income across its Water Purification and Filtration and Healthcare Disposables divisions in the third quarter, the company is upbeat that the twin acquisitions will significantly contribute to earnings starting fiscal 2012. 

 
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