LITTLE FALLS, N.J.,
Dec. 8, 2016 /PRNewswire/ --
CANTEL MEDICAL CORP. (NYSE: CMD) reported record US GAAP net
income of $18,800,000, or
$0.45 per diluted share, on a 22.1%
increase in sales to a record $187,725,000 for the first quarter ended
October 31, 2016. This compares with
net income of $14,254,000, or
$0.34 per diluted share, on sales of
$153,779,000 for the first quarter
ended October 31, 2015.
Non-GAAP net income increased 24.6% for the first quarter ended
October 31, 2016 to $21,323,000, or $0.51 per diluted share, compared with non-GAAP
net income of $17,120,000, or
$0.41 per diluted share, for the same
quarter last year.
Jørgen B. Hansen, Cantel's President and Chief Executive Officer
stated, "We are pleased to report record sales and earnings
performance this quarter. Our 22.1% reported sales growth
stems from strong organic growth of 15.8%, acquisitions
contributing 7.2% and foreign currency translation impact of
(0.9%). All three of our major business segments had strong
performance in the first quarter. Our continued investments in new
product development, commercial programs as well as the integration
of recent acquisitions continue to drive our growth. These
investments have helped us achieve double-digit organic sales
growth in 11 of the past 13 quarters. We are also pleased to report
a gross margin of 47.7%, up 140 basis points driven by a favorable
shift in the product mix as well as our continuous improvement
efforts."
Hansen added, "The Healthcare Disposables segment yielded our
strongest sales growth, up 34.5%. Organic growth for the quarter
was 8.5%. Growth in this segment continues to be led by our branded
products which grew at 13%. We are pleased with the performance of
the recent acquisitions of the NAMSA sterility assurance portfolio
and Accutron. The integration of these businesses is progressing as
planned and we are confident they will drive organic sales growth
in future years.
Our Endoscopy segment had another record quarter with overall
growth of 31% with strong organic growth of 27.4%. All product
categories in this segment performed well. The U.S. drove
meaningful growth again, and investments in our sales force and
marketing are yielding strong returns. Also, we saw good growth
internationally where our expanded direct sales efforts are
starting to drive growth acceleration.
Sales in our Water Purification and Filtration segment increased
11.5%, all of which was organic. As we have stated in past
quarters, the strength of the overall backlog is now starting to
impact growth positively. This quarter, order intake continued to
increase and our backlog reached record levels for the second
consecutive quarter, positioning us well for the remainder of
fiscal year 2017.
The Company has a strong balance sheet and continues to generate
significant cash flow and EBITDAS. We finished the first quarter
with cash of $26,135,000 and gross
debt of $161,000,000, while
generating adjusted EBITDAS of $40,584,000 in the quarter, up 25.1%."
Conference Call Information
The Company will hold a
conference call to discuss the results for the first quarter ended
October 31, 2016 on Thursday, December 8, 2016 at 11:00 AM 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 8,
2016 through midnight on February 8,
2017 by dialing 1-877-481-4010 (US & Canada) or 1-919-882-2331 (International) and
using conference ID #:10164
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.
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
|
|
|
|
October
31,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Net sales
|
|
$
187,725
|
|
$
153,779
|
|
|
|
|
|
|
|
Cost of
sales
|
|
98,218
|
|
82,581
|
|
|
|
|
|
|
|
Gross
profit
|
|
89,507
|
|
71,198
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Selling
|
|
27,893
|
|
21,460
|
|
General and
administrative
|
|
30,003
|
|
22,197
|
|
Research and
development
|
|
4,548
|
|
3,765
|
|
Total operating
expenses
|
|
62,444
|
|
47,422
|
|
|
|
|
|
|
|
Income from
operations
|
|
27,063
|
|
23,776
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
1,093
|
|
745
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
25,970
|
|
23,031
|
|
|
|
|
|
|
|
Income
taxes
|
|
7,170
|
|
8,777
|
|
|
|
|
|
|
|
Net
income
|
|
$
18,800
|
|
$
14,254
|
|
|
|
|
|
|
|
Earnings per common
share - diluted
|
|
$
0.45
|
|
$
0.34
|
|
|
|
|
|
|
|
Dividends per common
share
|
|
$
0.07
|
|
$
0.06
|
|
|
|
|
|
|
|
Weighted average
shares - diluted
|
|
41,785
|
|
41,667
|
|
CANTEL MEDICAL
CORP.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
October
31,
|
|
July 31,
|
|
|
2016
|
|
2016
|
Assets
|
|
|
|
|
Current assets
|
|
$
231,030
|
|
$
222,742
|
Property and equipment,
net
|
|
80,488
|
|
74,604
|
Intangible assets,
net
|
|
136,941
|
|
111,719
|
Goodwill
|
|
295,791
|
|
280,318
|
Other assets
|
|
5,162
|
|
5,149
|
|
|
$
749,412
|
|
$
694,532
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
Current
liabilities
|
|
$
98,066
|
|
$
96,335
|
Long-term debt
|
|
161,000
|
|
116,000
|
Other long-term
liabilities
|
|
29,922
|
|
27,827
|
Stockholders'
equity
|
|
460,424
|
|
454,370
|
|
|
$
749,412
|
|
$
694,532
|
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. 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 months ended October 31,
2016, we made adjustments to net income and diluted EPS to
exclude (i) amortization expense, (ii) significant
acquisition related items impacting current operating performance
including legal, transaction and integration charges,
(iii) costs associated with the planned retirement of our
former Chief Executive Officer and (iv) the favorable impact of
atypical income tax benefits to arrive at our non-GAAP financial
measures, non-GAAP net income and non-GAAP diluted EPS.
For the three months ended October 31,
2015, we made adjustments to net income and diluted EPS to
exclude (i) amortization expense and (ii) significant
acquisition related items to arrive at our non-GAAP financial
measures, non-GAAP net income and non-GAAP diluted EPS.
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) prior year fair
value adjustments to contingent consideration and other contingent
liabilities resulting from acquisitions, (ii) due diligence,
integration, legal charges 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.
In fiscal 2016, we announced the retirement of our former Chief
Executive Officer and recorded costs associated with his planned
retirement in our Condensed Consolidated Financial Statements in
the second half of fiscal 2016 and the three months ended
October 31, 2016. Since these costs
are atypical and masks our underlying operating performance, we
made an adjustment to our net income and EPS for the three months
ended October 31, 2016 to exclude
such costs to arrive at our non-GAAP financial measures.
Reconciliations of Net Income and Diluted EPS
to Non-GAAP Net Income and Non-GAAP Diluted EPS (con't)
The consolidated effective tax rate for the three months ended
October 31, 2016 was favorably
affected by the recording of excess tax benefits relating to stock
awards that vested in October 2016.
As a result of the adoption of a new accounting pronouncement on
August 1, 2016, we no longer record
excess tax benefits as an increase to additional paid-in capital,
but record such excess tax benefits on a prospective basis as a
reduction of income tax expense, which amounted to $2,241,000 for the three months ended
October 31, 2016. Since most of our
stock awards vest in October annually, we do not anticipate the
recording of additional significant excess tax benefits for the
remainder of fiscal 2017. The magnitude of the impact of excess tax
benefits generated in the future, which may be favorable or
unfavorable, are dependent upon the Company's future grants of
stock-based compensation, the Company's future stock price on the
date awards vest in relation to the fair value of awards on grant
date and the exercise behavior of the Company's option holders.
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 for the three months ended October 31,
2016 for the purposes of calculating these non-GAAP
financial measures to facilitate an evaluation of our current
performance and a comparison to past performance.
The reconciliations
of net income to non-GAAP net income were calculated as
follows:
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
(Amounts in
thousands)
|
|
October
31,
|
|
|
(Unaudited)
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net Income, as
reported
|
|
$
18,800
|
|
$
14,254
|
|
|
Intangible
amortization (1)
|
|
3,909
|
|
3,094
|
|
|
Acquisition related
items (2)
|
|
1,075
|
|
934
|
|
|
CEO retirement costs
(1)
|
|
1,937
|
|
-
|
|
|
Income tax benefit on
above adjustments (3)
|
(2,157)
|
|
(1,162)
|
|
|
Excess tax benefit
(3)
|
|
(2,241)
|
|
-
|
|
|
Non-GAAP net
income
|
|
$
21,323
|
|
$
17,120
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts are
recorded in general and administrative expenses.
|
(2) For the three
months ended October 31, 2016, acquisition related items of $170
were recorded in cost of sales and $905 were recorded in general
administrative expenses. For the three months ended October 31,
2015, acquisition related items of $260 were recorded in cost of
sales and $674 were recorded in general administrative
expenses.
|
(3) Amounts are
recorded in income taxes.
|
The reconciliations
of diluted EPS to non-GAAP diluted EPS were calculated as
follows:
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
October
31,
|
|
|
(Unaudited)
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Diluted EPS, as
reported
|
|
$
0.45
|
|
$
0.34
|
|
|
Intangible
amortization, net of tax
|
|
0.07
|
|
0.05
|
|
|
Acquisition related
items, net of tax
|
|
0.02
|
|
0.02
|
|
|
CEO retirement costs,
net of tax
|
|
0.03
|
|
-
|
|
|
Excess tax
benefit
|
|
(0.05)
|
|
-
|
|
|
Non-GAAP diluted
EPS
|
|
$
0.51
|
(1)
|
$
0.41
|
|
|
|
(1) The summation of
each diluted EPS amount does not equal the non-GAAP 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
|
|
|
|
|
(Amounts in
thousands)
|
|
October
31,
|
|
|
|
|
(Unaudited)
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as
reported
|
|
$
18,800
|
|
$
14,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
1,093
|
|
745
|
|
|
|
|
Income
taxes
|
|
7,170
|
|
8,777
|
|
|
|
|
Depreciation
|
|
3,454
|
|
2,822
|
|
|
|
|
Amortization
|
|
3,909
|
|
3,094
|
|
|
|
|
Loss on disposal of
fixed assets
|
|
224
|
|
100
|
|
|
|
|
Stock-based
compensation expense
|
|
2,922
|
|
1,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAS
|
|
37,572
|
|
31,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition related
items
|
|
1,075
|
|
934
|
|
|
|
|
CEO retirement
costs
|
|
1,937
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDAS
|
|
$
40,584
|
|
$
32,446
|
|
|
|
|
|
|
|
|
|
|
|
|
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
Condensed 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)
|
|
October
31,
|
|
July 31,
|
(Unaudited)
|
|
2016
|
|
2016
|
|
|
|
|
|
Long-term
debt
|
|
$
161,000
|
|
$
116,000
|
Less cash and cash
equivalents
|
|
(26,135)
|
|
(28,367)
|
Net debt
|
|
$
134,865
|
|
$
87,633
|
Reconciliation of Sales Growth to Organic
Sales Growth
We define organic sales as net sales, calculated according to
United States 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
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, 2016, the reconciliation of sales growth to
organic sales growth
|
for total net sales
and net sales of our three largest segments were calculated as
follows:
|
|
|
(Unaudited)
|
|
Net Sales
|
|
Endoscopy
Net Sales
|
|
Water
Purification
and
Filtration
Net Sales
|
|
Healthcare
Disposables
Net Sales
|
|
|
|
|
|
|
|
|
|
Sales
growth
|
|
22.1%
|
|
31.0%
|
|
11.5%
|
|
34.5%
|
Impact due to foreign
currency translation
|
|
0.9%
|
|
2.0%
|
|
0.0%
|
|
0.0%
|
Sales related to
acquisitions
|
|
-7.2%
|
|
-5.6%
|
|
0.0%
|
|
-26.0%
|
Organic sales
growth
|
|
15.8%
|
|
27.4%
|
|
11.5%
|
|
8.5%
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cantel-medical-reports-record-results-for-the-first-quarter-ended-october-31-2016-300375061.html
SOURCE Cantel Medical Corp.