LITTLE FALLS, N.J.,
Sept. 29, 2016 /PRNewswire/ --
CANTEL MEDICAL CORP. (NYSE: CMN) reported record US GAAP net
income of $16,291,000, or
$0.39 per diluted share, on an 18.3%
increase in sales to a record $179,002,000 for the fourth quarter ended
July 31, 2016. This compares with net
income of $13,273,000, or
$0.32 per diluted share, on sales of
$151,255,000 for the fourth quarter
ended July 31, 2015. For the full
fiscal year ended July 31, 2016, the
Company reported record US GAAP net income of $59,953,000, or $1.44 per diluted share, on a 17.7% increase in
sales to a record $664,755,000. This
compares with net income of $47,953,000 or $1.15 per diluted share on sales of $565,004,000 for the fiscal year ended
July 31, 2015.
Non-GAAP net income increased 25.5% for the fourth quarter ended
July 31, 2016 to $20,162,000, or $0.48 per diluted share, compared with non-GAAP
net income of $16,060,000, or
$0.39 per diluted share for the same
quarter last year. For the full fiscal year ended
July 31, 2016, the Company reported a
21.5% increase in non-GAAP net income to $72,938,000, or $1.75 per diluted share. This compares with
non-GAAP net income for the full fiscal year ending July 31, 2015 of $60,039,000, or $1.44 per diluted share.
Jørgen B. Hansen, Cantel's President and Chief Executive Officer
stated, "We are pleased to report record sales and earnings
performance this quarter. Our 18.3% reported sales growth
derives from strong organic growth of 12.4%, a 0.1% decline due to
foreign currency translation, with acquisitions making up the
remaining 6.0%. The majority of this quarter's strong performance
was driven by the Endoscopy business. All three of our major
business units have benefited from significant investments in new
product development, sales expansion and marketing programs as well
as the integration of recent acquisitions. We are also pleased to
report a gross margin of 47.7% which improved approximately 220
basis points compared with the same quarter last year. This was
driven by improvement in product mix as well as our continuous
improvement efforts."
Hansen added, "Our Endoscopy segment led sales growth for the
Company this quarter with a significant year-over-year increase of
38.2%, of which 28.5% was organic. All product categories in this
segment were strong including procedure room products, reprocessing
equipment, chemical disinfectants, as well as service and spare
parts. Our exceptional growth and record sales volumes
continued to be driven by our U.S. sales and service team supported
by strong growth from our direct teams in EMEA and APAC.
Compared to the same quarter last year, sales in our Water
Purification and Filtration segment increased by 2%. Organic sales
growth was 1% with slight increases in all product categories. We
are encouraged by additional increases in orders, and our backlog
reached record levels exiting the quarter, which positions us well
for fiscal year 2017.
In our Healthcare Disposables segment, sales grew 6.5% with
modest organic growth. Dental waterline and sterility assurance
products continue to be the strongest categories. On August 1, 2016, we acquired Accutron, Inc., the
industry leading manufacturer of nitrous oxide delivery systems and
single-use nasal masks. This acquisition enabled us to expand the
dental portfolio of our Healthcare Disposables segment to include
an additional high quality branded single-use disposable product
line. In addition, this marks Cantel's first entry into the dental
equipment market, allowing the Company to increase its presence in
dental offices and offer a broader portfolio of equipment and
consumables.
Overall for Cantel, the strong revenue growth drove record net
income. We continue to have a positive outlook in terms of sales
and profit growth for fiscal year 2017. We expect to benefit from
our significant ongoing investments in our business priorities –
new product development, market expansion and strategic
acquisitions."
The Company further reported that its balance sheet at
July 31, 2016 included current assets
of $222,742,000 including cash of
$28,367,000, a current ratio of 2.3,
gross debt of $116,000,000 and
stockholders' equity of $454,370,000.
Hansen stated, "The Company has a strong balance sheet and
continues to generate significant cash flow and EBITDAS. For the
full fiscal year 2016, adjusted EBITDAS grew by 21.2% to
$137,949,000 as compared to
$113,811,000 for the full fiscal year
2015."
Conference Call Information
The Company will hold a conference call to discuss the results
for the fourth quarter and full fiscal year ended July 31, 2016 on Thursday, September 29,
2016 at 11:00 AM Eastern time. To
participate in the conference call, dial 877-407-8033 (US and
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,
September 29, 2016 through midnight on November 29, 2016 by dialing 877-660-6853 and
using conference ID # 13645489.
An audio webcast will be available via the investor relations
page of 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.
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
|
(In thousands, except
per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
July 31,
|
|
July 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
179,002
|
|
$
151,255
|
|
$ 664,755
|
|
$ 565,004
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
93,672
|
|
82,492
|
|
355,569
|
|
311,537
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
85,330
|
|
68,763
|
|
309,186
|
|
253,467
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Selling
|
|
28,095
|
|
21,793
|
|
99,062
|
|
80,787
|
General and
administrative
|
|
26,908
|
|
21,112
|
|
97,463
|
|
77,897
|
Research and
development
|
|
4,511
|
|
3,726
|
|
15,410
|
|
14,022
|
Total operating
expenses
|
|
59,514
|
|
46,631
|
|
211,935
|
|
172,706
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
25,816
|
|
22,132
|
|
97,251
|
|
80,761
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
833
|
|
565
|
|
3,320
|
|
2,364
|
Loss on sale of
business
|
|
-
|
|
-
|
|
-
|
|
2,206
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
24,983
|
|
21,567
|
|
93,931
|
|
76,191
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
8,692
|
|
8,294
|
|
33,978
|
|
28,238
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
16,291
|
|
$
13,273
|
|
$
59,953
|
|
$
47,953
|
|
|
|
|
|
|
|
|
|
Earnings per common
share - diluted
|
|
$
0.39
|
|
$
0.32
|
|
$
1.44
|
|
$
1.15
|
|
|
|
|
|
|
|
|
|
Dividends per common
share
|
|
$
0.06
|
|
$
0.05
|
|
$
0.12
|
|
$
0.10
|
|
|
|
|
|
|
|
|
|
Weighted average
shares - diluted
|
|
41,751
|
|
41,614
|
|
41,731
|
|
41,581
|
CANTEL MEDICAL
CORP.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
July 31,
|
|
|
2016
|
|
2015
|
Assets
|
|
|
|
|
Current assets
|
|
$
222,742
|
|
$
188,361
|
Property and equipment,
net
|
|
74,604
|
|
62,541
|
Intangible assets,
net
|
|
111,719
|
|
85,836
|
Goodwill
|
|
280,318
|
|
241,951
|
Other assets
|
|
5,149
|
|
5,342
|
|
|
$
694,532
|
|
$
584,031
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
Current
liabilities
|
|
$
96,335
|
|
$
70,624
|
Long-term debt
|
|
116,000
|
|
78,500
|
Other long-term
liabilities
|
|
27,827
|
|
28,274
|
Stockholders'
equity
|
|
454,370
|
|
406,633
|
|
|
$
694,532
|
|
$
584,031
|
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 accounting
principles generally accepted in the
United States ("GAAP") with certain internally driven
non-GAAP financial measures, namely (i) non-GAAP net income,
(ii) non-GAAP diluted earnings per share ("EPS"),
(iii) income before interest, taxes, depreciation,
amortization and stock-based compensation expense ("EBITDAS"),
(iv) EBITDAS adjusted for atypical items ("Adjusted EBITDAS"),
(v) net debt and (vi) organic sales growth. 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,
shareholders and other readers of our Condensed 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.
Reconciliations of Net Income and Diluted EPS
to Non-GAAP Net Income and Non-GAAP Diluted EPS
We define non-GAAP net income and non-GAAP diluted EPS as net
income and diluted EPS, respectively, adjusted to exclude
amortization, acquisition related items, significant reorganization
and restructuring charges, major tax events and other significant
items management deems atypical or non-operating in
nature.
For the three and twelve months ended July 31, 2016, we made adjustments to net income
and diluted EPS to exclude (i) amortization expense and
(ii) costs associated with the retirement of our Chief
Executive Officer. We also made adjustments to the twelve months
ended July 31, 2016 to exclude
(i) significant acquisition related items impacting current
operating performance in the first nine months of fiscal 2016
including transaction and integration charges and ongoing fair
value adjustments and (ii) the impact of favorable tax legislation
in our second quarter of fiscal 2016 to arrive at our non-GAAP
financial measures, non-GAAP net income and non-GAAP adjusted
EPS.
For the three and twelve months ended July 31, 2015, we made adjustments to net income
and diluted EPS to exclude (i) amortization expense and (ii)
significant acquisition related items impacting current operating
performance including transaction and integration charges and
ongoing fair value adjustments to arrive at our non-GAAP financial
measures, non-GAAP net income and non-GAAP EPS. We also made
adustments to the twelve months ended July
31, 2015 to exclude two items that were recorded in our
third quarter, namely the loss on sale of our Specialty Packaging
business and the impairment of an acquired license.
Amortization expense 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 all of these acquisition related items
are atypical 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.
Reconciliations of Net Income and Diluted EPS
to Non-GAAP Net Income and Non-GAAP Diluted EPS (con't)
In fiscal 2016, we announced the retirement plans of our Chief
Executive Officer and recorded the majority of the costs associated
with his retirement in our Condensed Consolidated Financial
Statements. Since these costs are atypical and masks our underlying
operating performance, we made an adjustment to our net income and
EPS for the three and twelve months ended July 31, 2016 to exclude such costs to arrive at
our non-GAAP financial measures.
Tax legislation was enacted in the
United States and internationally that enabled us to record
favorable tax benefits in our second quarter of fiscal 2016
relating to the entire calendar 2015. Since these favorable tax
benefits are largely unrelated to our current year's income before
taxes and is unrepresentative of our normal effective tax rate, we
excluded its impact on net income and EPS in the twelve months
ended July 31, 2016 for purposes of
calculating these non-GAAP financial measures to facilitate an
evaluation of our current performance and a comparison to past
performance.
On April 7, 2015, we completed the sale of our Specialty
Packaging business to a global packaging and service company.
Overall, this transaction, including costs associated with the
disposition and the recognition of a foreign currency translation
gain, resulted in a $2,206,000 loss,
or $0.04 in diluted earnings per
share, which was recorded in loss on sale of business in our
Condensed Consolidated Statements of Income in our third quarter of
fiscal 2015. Since the divestiture of a business is atypical and
non-operating in nature and the loss on sale masks our underlying
operating performance, we excluded the loss on sale of business for
purposes of calculating these non-GAAP financial measures for the
three and twelve months ended July
31, 2015.
In September 2013, we acquired a license from a third party
granting us the exclusive right to manufacture, commercialize,
distribute and sell an endoscopy product in its beginning stage of
commercialization in exchange for a series of payments, which
totaled $1,000,000. We evaluated this
long-lived asset in fiscal 2015 for potential impairment and
determined that the future use of this acquired license was
unlikely based on a recent product analysis. Accordingly, we deemed
the acquired license, together with related fixed assets of
$287,000 to be fully impaired and
recorded a loss of $1,287,000 during
the third quarter of fiscal 2015. Since the acquisition of the
license and subsequent impairment were outside our standard
endoscopy business operations, we excluded the impairment of the
acquired license 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.
The reconciliations
of net income to non-GAAP net income were calculated as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Twelve Months
Ended
|
(Amounts in
thousands)
|
|
July 31,
|
|
July 31,
|
(Unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net Income, as
reported
|
|
$
16,291
|
|
$
13,273
|
|
$
59,953
|
|
$
47,953
|
Intangible
amortization (1)
|
|
3,358
|
|
3,617
|
|
13,095
|
|
13,265
|
Acquisition related
items (2)
|
|
-
|
|
394
|
|
3,213
|
|
1,579
|
CEO retirement costs
(1)
|
|
2,325
|
|
-
|
|
3,487
|
|
-
|
Loss on sale of
business
|
|
-
|
|
-
|
|
-
|
|
2,206
|
Impairment of
acquired license (1)
|
|
-
|
|
-
|
|
-
|
|
1,287
|
Income tax benefit on
above adjustments (3)
|
|
(1,812)
|
|
(1,224)
|
|
(6,010)
|
|
(6,251)
|
Tax legislative
changes (3)
|
|
-
|
|
-
|
|
(800)
|
|
-
|
Non-GAAP net
income
|
|
$
20,162
|
|
$
16,060
|
|
$
72,938
|
|
$
60,039
|
|
|
|
|
(1)
|
Amounts are recorded
in general and administrative expenses.
|
(2)
|
For the twelve months
ended July 31, 2016, acquisition related items of $959 and $2,254
were recorded in cost of sales and general administrative expenses,
respectively. For the three and twelve months ended July 31, 2015,
acquisition related items of $30 and $1,981, respectively, were
recorded in cost of sales and $364 and ($402), respectively, were
recorded in general administrative expenses,
respectively.
|
(3)
|
Amounts are recorded
in income taxes.
|
The reconciliations
of diluted EPS to non-GAAP diluted EPS were calculated as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Twelve Months
Ended
|
|
|
July 31,
|
|
July 31,
|
(Unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Diluted EPS, as
reported
|
|
$
0.39
|
|
$
0.32
|
|
$
1.44
|
|
$
1.15
|
Intangible
amortization, net of tax
|
|
0.06
|
|
0.06
|
|
0.22
|
|
0.21
|
Acquisition related
items, net of tax
|
|
-
|
|
0.01
|
|
0.06
|
|
0.02
|
CEO retirement costs,
net of tax
|
|
0.04
|
|
-
|
|
0.05
|
|
-
|
Loss on sale of
business, net of tax
|
|
-
|
|
-
|
|
-
|
|
0.04
|
Impairment of
acquired license, net of tax
|
|
-
|
|
-
|
|
-
|
|
0.02
|
Tax legislative
changes
|
|
-
|
|
-
|
|
(0.02)
|
|
-
|
Non-GAAP diluted
EPS
|
|
$
0.48
|
(4)
|
$
0.39
|
|
$
1.75
|
|
$
1.44
|
|
|
|
|
(4)
|
The summation of each
diluted EPS does not equal the adjusted diluted EPS due to
rounding.
|
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, has on the
Company's net income. In particular, acquisitions have historically
resulted in significant increases in amortization of intangible
assets that reduce the Company's 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
atypical items as previously described as adjustments to net
income. We use Adjusted EBITDAS when evaluating the operating
performance of the Company because we believe the exclusion of such
atypical items, 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
|
|
Twelve Months
Ended
|
(Amounts in
thousands)
|
|
July 31,
|
|
July 31,
|
(Unaudited)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
Net income, as
reported
|
|
$
16,291
|
|
$
13,273
|
|
$
59,953
|
|
$
47,953
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
833
|
|
565
|
|
3,320
|
|
2,364
|
Income
taxes
|
|
8,692
|
|
8,294
|
|
33,978
|
|
28,238
|
Depreciation
|
|
3,235
|
|
3,119
|
|
11,989
|
|
10,692
|
Amortization
|
|
3,358
|
|
3,617
|
|
13,095
|
|
13,265
|
Loss on disposal of
fixed assets
|
|
376
|
|
151
|
|
553
|
|
360
|
Stock-based
compensation expense
|
|
2,524
|
|
1,513
|
|
8,361
|
|
5,867
|
|
|
|
|
|
|
|
|
|
EBITDAS
|
|
35,309
|
|
30,532
|
|
131,249
|
|
108,739
|
|
|
|
|
|
|
|
|
|
Acquisition related
items
|
|
-
|
|
394
|
|
3,213
|
|
1,579
|
CEO retirement
costs
|
|
2,325
|
|
-
|
|
3,487
|
|
-
|
Loss on sale of
business
|
|
-
|
|
-
|
|
-
|
|
2,206
|
Impairment of
acquired license
|
|
-
|
|
-
|
|
-
|
|
1,287
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDAS
|
|
$
37,634
|
|
$
30,926
|
|
$
137,949
|
|
$ 113,811
|
Reconciliation of Debt to Net Debt
We define net debt as long-term debt less cash and cash
equivalents. Each of the components of net debt appears in the
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.
The reconciliations
of debt to net debt were calculated as follows:
|
|
|
|
|
|
(Amounts in
thousands)
|
|
July 31,
|
|
July 31,
|
(Unaudited)
|
|
2016
|
|
2015
|
|
|
|
|
|
Long-term
debt
|
|
$
116,000
|
|
$
78,500
|
Less cash and cash
equivalents
|
|
(28,367)
|
|
(31,720)
|
Net debt
|
|
$
87,633
|
|
$
46,780
|
Reconciliation of Sales Growth to Organic
Sales Growth
We define organic sales as net sales, calculated according to
GAAP, less (i) the impact of foreign currency translation and
(ii) net sales related to acquired businesses during the first
twelve months of ownership and divestures during the periods being
compared. We believe that reporting organic sales growth 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 growth
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 July 31,
2016, the reconciliation of sales growth to organic sales
growth for total net sales and our three largest segments were
calculated as follows:
(Unaudited)
|
|
Net Sales
|
|
Endoscopy
Sales
|
|
Water Purification
and Filtration Sales
|
|
Healthcare
Disposables
|
|
|
|
|
|
|
|
|
|
Sales
growth
|
|
18.3%
|
|
38.2%
|
|
2.1%
|
|
6.5%
|
Impact due to foreign
currency translation
|
|
0.1%
|
|
0.7%
|
|
-0.9%
|
|
0.0%
|
Sales related to
acquisitions
|
|
-6.0%
|
|
-10.4%
|
|
0.0%
|
|
-6.3%
|
Organic sales
growth
|
|
12.4%
|
|
28.5%
|
|
1.2%
|
|
0.2%
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cantel-medical-reports-record-results-for-the-fourth-quarter-ended-july-31-2016-300336226.html
SOURCE Cantel Medical Corp.