LITTLE FALLS, N.J., June 8,
2017 /PRNewswire/ -- CANTEL MEDICAL CORP. (NYSE:
CMD) reported GAAP net income of $17,511,000, or $0.42 per diluted share, on a 10.6% increase in
sales to $192,113,000 for the third
quarter ended April 30, 2017. This
compares with net income of $14,019,000, or $0.34 per diluted share, on sales of $173,703,000 for the third quarter ended
April 30, 2016.
Non-GAAP net income increased 17.2% for the third quarter ended
April 30, 2017 to $21,377,000, or $0.51 per diluted share, compared with non-GAAP
net income of $18,243,000, or
$0.44 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 very solid sales growth and
earnings performance this quarter. Our 10.6% reported sales growth
was driven by organic growth of 7.4%, acquisitions contributed 4.4%
and foreign currency impact of (1.2%). We saw record performance
internationally, where sales were up 18.1% overall, with strong
underlying organic growth. Gross margin expanded 140 basis points
to 47.6% driven by a strategic focus on driving favorable product
mix as well as our strong execution of our continuous improvement
efforts."
Hansen added, "For the third consecutive quarter, our Healthcare
Disposables segment yielded our strongest sales growth, up 21.5%
with the majority of growth driven by the Accutron acquisition.
Favorable product mix coupled with double-digit growth of our
higher margin branded portfolio drove gross margin expansion in
this segment.
Our Endoscopy segment had strong organic growth of 9.9%, which
was an excellent result given the very strong performance in the
prior year. Sales performance was led by continued growth in
consumables, chemistries, procedural products, and service, up
13.2%. In April, we successfully completed the acquisition of our
distributed endoscopy business in Australia. We look forward to future growth in
Australia as well as strengthening
our leadership in the infection prevention category in this
important market.
Overall sales in our Water Purification and Filtration segment
increased 7.4%, which is in-line with our expectations. The
continued strength of our backlog translated into solid shipments
of equipment, which drove the majority of the growth over prior
year. Order intake remained strong in the third quarter, and our
backlog ended at a record level for the fourth 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 third quarter
with cash of $30,873,000 and gross
debt of $145,000,000, while
generating adjusted EBITDAS of $38,813,000 in the quarter, up 11.5%."
Conference Call Information
The Company will hold a
conference call to discuss the results for the third quarter ended
April 30, 2017 on Thursday, June 8, 2017 at 11:00 a.m. Eastern time. In addition,
during the conference call the Company will provide financial
guidance with respect to its five-year strategic plan and for the
full fiscal year ending July 31,
2017.
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,
June 8, 2017 through midnight on August 8, 2017 by dialing 1-877-481-4010 (US
& Canada) or 1-919-882-2331
(International) and using conference ID #:10405
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
|
(In thousands, except
per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
April 30
|
|
April 30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
192,113
|
|
$
173,703
|
|
$ 564,655
|
|
$ 485,753
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
100,665
|
|
93,382
|
|
295,223
|
|
261,897
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
91,448
|
|
80,321
|
|
269,432
|
|
223,856
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Selling
|
|
30,509
|
|
26,887
|
|
85,312
|
|
70,967
|
General and
administrative
|
|
29,204
|
|
26,106
|
|
87,672
|
|
70,555
|
Research and
development
|
|
4,291
|
|
4,065
|
|
13,328
|
|
10,899
|
Total operating
expenses
|
|
64,004
|
|
57,058
|
|
186,312
|
|
152,421
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
27,444
|
|
23,263
|
|
83,120
|
|
71,435
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
1,084
|
|
871
|
|
3,303
|
|
2,487
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
26,360
|
|
22,392
|
|
79,817
|
|
68,948
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
8,849
|
|
8,373
|
|
25,436
|
|
25,286
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
17,511
|
|
$
|
14,019
|
|
$
|
54,381
|
|
$
|
43,662
|
|
|
|
|
|
|
|
|
|
Earnings per common
share - diluted
|
|
$
|
0.42
|
|
$
|
0.34
|
|
$
|
1.30
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
Dividends per common
share
|
|
$
|
-
|
|
$
|
-
|
|
$
|
0.07
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
Weighted average
shares - diluted
|
|
41,799
|
|
41,751
|
|
41,793
|
|
41,723
|
CANTEL MEDICAL
CORP.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
thousands)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
July 31,
|
|
|
2017
|
|
2016
|
Assets
|
|
|
|
|
Current assets
|
|
$
257,465
|
|
$
222,742
|
Property and equipment,
net
|
|
85,690
|
|
74,604
|
Intangible assets,
net
|
|
128,139
|
|
111,719
|
Goodwill
|
|
308,169
|
|
280,318
|
Other assets
|
|
4,919
|
|
5,149
|
|
|
$
784,382
|
|
$
694,532
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
Current
liabilities
|
|
$
107,330
|
|
$
96,335
|
Long-term debt
|
|
145,000
|
|
116,000
|
Other long-term
liabilities
|
|
28,175
|
|
27,827
|
Stockholders'
equity
|
|
503,877
|
|
454,370
|
|
|
$
784,382
|
|
$
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 and nine months ended April
30, 2017, 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 as well as
fair value adjustments and (iii) restructuring charges.
Additionally, we made adjustments to the nine months ended
April 30, 2017 to exclude
(i) costs associated with the planned retirement of our former
Chief Executive Officer and (ii) 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 and nine months ended April
30, 2016, we made adjustments to net income and diluted EPS
to exclude (i) amortization expense, (ii) significant
acquisition related items, (iii) costs associated with the
planned retirement of our former Chief Executive Officer and (iv)
with respect to the nine months ended April
30, 2016, the favorable impact of tax legislation 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 first quarter of fiscal
2017. Since these costs are atypical and masks our underlying
operating performance, we made an adjustment to our net income and
EPS 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)
In the second and third quarters of fiscal 2017, we recorded
severance and other restructuring costs, primarily in our Endoscopy
segment, to improve operating efficiencies and realign resources
for continued investment in strategic initiatives. We expect
further restructuring costs to occur in the fourth quarter of
fiscal 2017. Since restructuring costs have historically been
infrequent and masks our underlying operating performance, we have
made an adjustment to our net income and EPS to exclude such
restructuring costs to arrive at our non-GAAP financial
measures.
The consolidated effective tax rate for the nine months ended
April 30, 2017 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 in our first quarter of fiscal 2017.
Since most of our stock awards were granted annually in our first
quarter and vest on the anniversaries of the grant date, 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 our first quarter of fiscal 2017
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 prior year consolidated effective tax rate was favorably
affected by tax legislation 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 were largely unrelated to our second
quarter's income before taxes and was unrepresentative of our
normal effective tax rate, we excluded its impact on net income and
EPS for purposes of calculating these non-GAAP financial
measures.
The reconciliations
of net income to non-GAAP net income were calculated as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Nine Months
Ended
|
(Amounts in
thousands)
|
|
April 30,
|
|
April 30,
|
(Unaudited)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net Income, as
reported
|
|
$
17,511
|
|
$
14,019
|
|
$ 54,381
|
|
$ 43,662
|
Intangible
amortization (1)
|
|
3,964
|
|
3,346
|
|
11,930
|
|
9,737
|
Acquisition related
items (2)
|
|
720
|
|
1,682
|
|
1,795
|
|
3,213
|
CEO retirement costs
(1)
|
|
-
|
|
1,162
|
|
1,937
|
|
1,162
|
Restructuring costs
(1)
|
|
879
|
|
-
|
|
1,735
|
|
-
|
Income tax benefit on
above adjustments (3)
|
(1,697)
|
|
(1,966)
|
|
(5,286)
|
|
(4,198)
|
Excess tax benefit
(3)
|
|
-
|
|
-
|
|
(2,241)
|
|
-
|
Tax legislative
changes (3)
|
|
-
|
|
-
|
|
-
|
|
(800)
|
Non-GAAP net
income
|
|
$
21,377
|
|
$
18,243
|
|
$ 64,251
|
|
$ 52,776
|
|
(1) Amounts are
recorded in general and administrative expenses.
(2) For the three and
nine months ended April 30, 2017, acquisition related items of $330
and $500, respectively, were recorded in cost of sales and $390 and
$1,295 were recorded in general administrative expenses. For the
three and nine months ended April 30, 2016, acquisition related
items of $388 and $959, respectively, were recorded in cost of
sales and $1,294 and $2,254 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
|
|
Nine Months
Ended
|
|
|
April 30,
|
|
April 30,
|
(Unaudited)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Diluted EPS, as
reported
|
|
$
0.42
|
|
$
0.34
|
|
$
1.30
|
|
$
1.05
|
Intangible
amortization, net of tax
|
|
0.07
|
|
0.06
|
|
0.20
|
|
0.16
|
Acquisition related
items, net of tax
|
|
0.01
|
|
0.03
|
|
0.03
|
|
0.05
|
CEO retirement costs,
net of tax
|
|
-
|
|
0.02
|
|
0.03
|
|
0.02
|
Restructuring costs,
net of tax
|
|
0.02
|
|
-
|
|
0.03
|
|
-
|
Excess tax
benefit
|
|
-
|
|
-
|
|
(0.05)
|
|
-
|
Tax legislative
changes
|
|
-
|
|
-
|
|
—
|
|
(0.02)
|
Non-GAAP diluted
EPS
|
|
$
0.51
|
(1)
|
$
0.44
|
(1)
|
$
1.54
|
|
$
1.26
|
|
(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
|
|
Nine Months
Ended
|
(Amounts in
thousands)
|
|
April 30,
|
|
April 30,
|
(Unaudited)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
Net income, as
reported
|
|
$
17,511
|
|
$
14,019
|
|
$
54,381
|
|
$
43,662
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
1,084
|
|
871
|
|
3,303
|
|
2,487
|
Income
taxes
|
|
8,849
|
|
8,373
|
|
25,436
|
|
25,286
|
Depreciation
|
|
3,774
|
|
3,061
|
|
10,922
|
|
8,754
|
Amortization
|
|
3,964
|
|
3,346
|
|
11,930
|
|
9,737
|
Loss on disposal of
fixed assets
|
|
87
|
|
66
|
|
489
|
|
177
|
Stock-based
compensation expense
|
|
1,945
|
|
2,242
|
|
6,983
|
|
5,837
|
|
|
|
|
|
|
|
|
|
EBITDAS
|
|
37,214
|
|
31,978
|
|
113,444
|
|
95,940
|
|
|
|
|
|
|
|
|
|
Acquisition related
items
|
|
720
|
|
1,682
|
|
1,795
|
|
3,213
|
CEO retirement
costs
|
|
-
|
|
1,162
|
|
1,937
|
|
1,162
|
Restructuring
costs
|
|
879
|
|
-
|
|
1,735
|
|
-
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDAS
|
|
$
38,813
|
|
$
34,822
|
|
$
118,911
|
|
$ 100,315
|
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)
|
|
April 30,
|
|
July 31,
|
(Unaudited)
|
|
2017
|
|
2016
|
|
|
|
|
|
Long-term
debt
|
|
$
145,000
|
|
$
116,000
|
Less cash and cash
equivalents
|
|
(30,873)
|
|
(28,367)
|
Net debt
|
|
$
114,127
|
|
$
87,633
|
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 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 April 30, 2017, the reconciliation of sales growth to organic
sales growth for total net sales and net
sales of our four segments were calculated as
follows:
|
|
(Unaudited)
|
|
Net Sales
|
|
Endoscopy
Net Sales
|
|
Water
Purification
and
Filtration
Net Sales
|
|
Healthcare
Disposables
Net Sales
|
|
Dialysis
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
Sales
growth
|
|
10.6%
|
|
9.2%
|
|
7.4%
|
|
21.5%
|
|
3.5%
|
Impact due to foreign
currency translation
|
|
1.2%
|
|
2.3%
|
|
0.1%
|
|
0.0%
|
|
0.1%
|
Sales related to
acquisitions
|
|
-4.4%
|
|
-1.6%
|
|
0.0%
|
|
-20.9%
|
|
0.0%
|
Organic sales
growth
|
|
7.4%
|
|
9.9%
|
|
7.5%
|
|
0.6%
|
|
3.6%
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months
ended April 30, 2017, the reconciliation of sales growth to organic
sales growth for total net sales and net
sales of our four segments were calculated as
follows:
|
|
(Unaudited)
|
|
Net Sales
|
|
Endoscopy
Net Sales
|
|
Water
Purification
and
Filtration
Net Sales
|
|
Healthcare
Disposables
Net Sales
|
|
Dialysis
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
Sales
growth
|
|
16.2%
|
|
17.8%
|
|
9.5%
|
|
30.2%
|
|
-9.5%
|
Impact due to foreign
currency translation
|
|
1.2%
|
|
2.2%
|
|
0.1%
|
|
0.0%
|
|
0.1%
|
Sales related to
acquisitions
|
|
-5.8%
|
|
-2.9%
|
|
0.0%
|
|
-25.2%
|
|
0.0%
|
Organic sales
growth
|
|
11.6%
|
|
17.1%
|
|
9.6%
|
|
5.0%
|
|
-9.4%
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cantel-medical-reports-financial-results-for-the-third-quarter-ended-april-30-2017-300470801.html
SOURCE Cantel Medical Corp.