LITTLE FALLS, N.J.,
Dec. 10, 2019 /PRNewswire/ -- Cantel Medical Corp. (NYSE: CMD)
today announced financial results for its first quarter ended
October 31, 2019.
First quarter 2020 net sales were $257.2M, up 14.0% compared to the prior
year. Excluding the impact from foreign currency, net sales
increased by 14.7%, driven by organic growth of 4.8%, and the
impact from acquisitions of 9.9%.
First quarter 2020 GAAP earnings per diluted share decreased
70.3% to $0.14, compared to GAAP
earnings per diluted share of $0.46
in the prior year period. GAAP earnings per diluted share was
negatively impacted by costs related to the acquisition and
integration of Hu-Friedy.
First quarter 2020 Non-GAAP earnings per diluted share increased
4.8% to $0.65, compared to Non-GAAP earnings per diluted share
of $0.62 in the prior year
period.
With the acquisition of Hu-Friedy, the Company's balance sheet
has changed from historical trends. The first quarter ended with
cash of $49.3M and gross debt of
$911.1M, while generating adjusted
EBITDAS of $51.3M in the quarter, up
14.6%.
George Fotiades, President and
Chief Executive Officer, stated, "We are pleased to report strong
sales and earnings growth this quarter. In Dental, organic growth
increased 12.0%, while reported sales grew 76.3%, driven by the
acquisition of Hu-Friedy which closed late in the quarter. The
integration of Hu-Friedy and Crosstex is rapidly underway and we
see continued strong growth ahead. In Medical, sales increased 5.7%
organically, with total reported sales growth of 4.5%, as a result
of negative foreign currency headwinds. This lower than expected
performance in Medical reflects delayed new products launches and
increased competitive activity. We have initiated several new
growth initiatives in this business, including the launch of a new
cleaning valve, which is expected to launch in the second quarter.
Life Sciences' net sales decreased 1.1% on an organic basis, and
decreased 5.2% in total primarily driven by the sale of our High
Purity Water business in Canada."
Peter Clifford, EVP and Chief
Operating Officer, stated, "In addition, we continue to drive
productivity improvements in both our Dental and Medical
businesses. In Dental, we continue to execute on our plant
consolidation project and in Medical we have initiated our plan to
consolidate electromechanical manufacturing in Europe to our Italy headquarters site. I am looking forward
to sharing more regarding these process improvements in the next
few quarters."
Conference Call Information:
The Company will hold a
conference call to discuss the results for its first quarter ended
October 31, 2019 on Tuesday, December 10, 2019 at 8:30
a.m. Eastern Time.
To participate in the conference call, dial 1-844-602-0380
(US & Canada) or
1-862-298-0970 (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 Tuesday,
December 10, 2019 through midnight on January 9, 2020 by dialing 1-877-481-4010 (US
& Canada) or 1-919-882-2331
(International) and using conference ID #: 56794.
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, instruments and instrument
reprocessing workflow systems serving the dental industry,
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 may contain "forward-looking statements" as
that term is defined under the Private Securities Litigation Reform
Act of 1995 and other securities laws. For these statements, we
claim the protection of the safe harbor for forward-looking
statements contained in Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. These
statements are based on current expectations, estimates, or
forecasts about our businesses, the industries in which we operate,
and the current beliefs and assumptions of management; they do not
relate strictly to historical or current facts. Without limiting
the foregoing, words or phrases such as "expect," "anticipate,"
"goal," "project," "intend," "plan," "believe," "seek," "may,"
"could," "aspire," and variations of such words and similar
expressions generally identify forward-looking statements. In
addition, any statements that refer to predictions or projections
of our future financial performance, anticipated growth, strategic
objectives, performance drivers and trends in our businesses, and
other characterizations of future events or circumstances are
forward-looking statements. Readers are cautioned that these
forward-looking statements are only predictions about future
events, activities or developments and are subject to numerous
risks, uncertainties, and assumptions that are difficult to
predict. We caution that undue reliance should not be placed on
such forward-looking statements, which speak only as of the date
made. Some of the factors which could cause results to differ
from those expressed in any forward-looking statement are set forth
under Item 1A, "Risk Factors" of our 2019 Annual Report on
Form 10-K. We expressly disclaim any obligation or undertaking
to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is
based.
CANTEL MEDICAL
CORP.
Condensed
Consolidated Statements of Income
(Unaudited)
|
|
|
Three Months
Ended
|
|
October
31,
|
|
2019
|
|
2018
|
Net sales
|
$
|
257,246
|
|
|
$
|
225,589
|
|
|
|
|
|
Cost of
sales
|
141,377
|
|
|
120,340
|
|
|
|
|
|
Gross
profit
|
115,869
|
|
|
105,249
|
|
|
|
|
|
Expenses:
|
|
|
|
Selling
|
38,411
|
|
|
33,958
|
|
General and
administrative
|
55,287
|
|
|
36,535
|
|
Research and
development
|
7,747
|
|
|
7,078
|
|
Total operating
expenses
|
101,445
|
|
|
77,571
|
|
|
|
|
|
Income from
operations
|
14,424
|
|
|
27,678
|
|
|
|
|
|
Interest expense,
net
|
5,719
|
|
|
2,026
|
|
Other income,
net
|
—
|
|
|
—
|
|
|
|
|
|
Income before income
taxes
|
8,705
|
|
|
25,652
|
|
|
|
|
|
Income
taxes
|
2,938
|
|
|
6,410
|
|
|
|
|
|
Net income
|
$
|
5,767
|
|
|
$
|
19,242
|
|
|
|
|
|
Earnings per common
share - diluted
|
$
|
0.14
|
|
|
$
|
0.46
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Weighted average
shares - diluted
|
42,168,805
|
|
|
41,705,773
|
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
CANTEL MEDICAL
CORP.
Condensed
Consolidated Balance Sheets
(Unaudited)
|
|
|
October 31,
2019
|
|
July 31,
2019
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
49,285
|
|
|
$
|
44,535
|
|
Accounts receivable,
net
|
174,931
|
|
|
146,910
|
|
Inventories,
net
|
200,312
|
|
|
138,234
|
|
Prepaid expenses and
other current assets
|
25,204
|
|
|
22,117
|
|
Right-of-use assets,
net
|
51,604
|
|
|
—
|
|
Property and
equipment, net
|
227,940
|
|
|
185,242
|
|
Intangible assets,
net
|
506,877
|
|
|
141,513
|
|
Goodwill
|
655,395
|
|
|
378,109
|
|
Other
assets
|
10,029
|
|
|
9,425
|
|
Deferred income
taxes
|
4,469
|
|
|
4,281
|
|
Total
assets
|
$
|
1,906,046
|
|
|
$
|
1,070,366
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities
|
$
|
183,397
|
|
|
$
|
151,400
|
|
Long-term
debt
|
875,755
|
|
|
220,851
|
|
Deferred income
taxes
|
30,923
|
|
|
29,278
|
|
Contingent
consideration
|
35,100
|
|
|
—
|
|
Other long-term
liabilities
|
5,530
|
|
|
7,300
|
|
Long-term lease
liabilities
|
43,150
|
|
|
—
|
|
Stockholders'
equity
|
732,191
|
|
|
661,537
|
|
Total liabilities and
stockholders' equity
|
$
|
1,906,046
|
|
|
$
|
1,070,366
|
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
CANTEL MEDICAL
CORP.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Three Months Ended
October 31,
|
|
2019
|
|
2018
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
5,767
|
|
|
$
|
19,242
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
|
6,338
|
|
|
4,691
|
|
Amortization
|
6,029
|
|
|
6,041
|
|
Stock-based
compensation expense
|
2,404
|
|
|
2,576
|
|
Amortization of
right-of-use assets
|
2,722
|
|
|
—
|
|
Deferred income
taxes
|
1,454
|
|
|
(674)
|
|
Inventory step-up
amortization
|
4,772
|
|
|
—
|
|
Other non-cash items,
net
|
(548)
|
|
|
1,236
|
|
Changes in assets and
liabilities, net of effects of acquisitions/dispositions
|
(20,007)
|
|
|
(843)
|
|
Net cash provided by
operating activities
|
8,931
|
|
|
32,269
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Capital
expenditures
|
(10,390)
|
|
|
(38,834)
|
|
Acquisitions, net of
cash acquired
|
(658,932)
|
|
|
(17,000)
|
|
Net cash used in
investing activities
|
(669,322)
|
|
|
(55,834)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings of
long-term debt
|
400,000
|
|
|
—
|
|
Repayments of
long-term debt
|
(2,375)
|
|
|
(2,500)
|
|
Borrowings under
revolving credit facility
|
291,400
|
|
|
—
|
|
Repayments under
revolving credit facility
|
(10,900)
|
|
|
—
|
|
Debt issuance
costs
|
(9,234)
|
|
|
—
|
|
Finance lease
liabilities
|
(127)
|
|
|
—
|
|
Purchases of treasury
stock
|
(3,613)
|
|
|
(4,288)
|
|
Net cash provided by
(used in) financing activities
|
665,151
|
|
|
(6,788)
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(10)
|
|
|
286
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
4,750
|
|
|
(30,067)
|
|
Cash and cash
equivalents at beginning of period
|
44,535
|
|
|
94,097
|
|
Cash and cash
equivalents at end of period
|
$
|
49,285
|
|
|
$
|
64,030
|
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
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 generally
accepted accounting principles in the
United States ("GAAP") with certain non-GAAP financial
measures including (i) non-GAAP net income, (ii) non-GAAP earnings
per diluted share ("EPS"), (iii) earnings before interest, taxes,
depreciation, amortization, loss on disposal of fixed assets, and
stock-based compensation expense ("EBITDAS"), (iv) adjusted
EBITDAS, (v) net debt and (vi) organic sales. These non-GAAP
financial measures are indicators of our 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,
stockholders and other readers of our 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.
To measure earnings performance on a consistent and comparable
basis, we exclude certain items that affect comparability of
operating results and the trend of earnings. These adjustments are
irregular in timing, may not be indicative of our past and future
performance and are therefore excluded to allow investors to better
understand underlying operating trends. The following are examples
of the types of adjustments that are excluded: (i) amortization of
purchased intangible assets, (ii) acquisition-related items, (iii)
business optimization and restructuring-related charges, (iv)
certain significant and discrete tax matters and (v) other
significant items management deems irregular or non-operating in
nature.
Amortization expense of purchased intangible assets 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 reduce our 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 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 these acquisition-related items are irregular
and often mask underlying operating performance, we exclude 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.
Restructuring-related and business optimization items consist of
severance-related costs associated with work force reductions and
other restructuring-related activities. Such costs include (i)
salary continuation, (ii) bonus payments, (iii) outplacement
services, (iv) medical-related premium costs and (v) accelerated
stock-compensation costs. Since these restructuring-related and
business optimization items often mask underlying operating
performance, we exclude 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.
Excess tax benefits resulting from stock compensation are
recorded as an adjustment to income tax expense. The magnitude of
the impact of excess tax benefits generated in the future, which
may be favorable or unfavorable, are dependent upon our future
grants of equity awards, our future share price on the date awards
vest in relation to the fair value of awards on grant date and the
exercise behavior of our stock award holders. Since these tax
benefits are largely unrelated to our results and unrepresentative
of our normal effective tax rate, we excluded their impact on net
income and diluted EPS to arrive at our non-GAAP financial
measures.
During the three months ended October 31,
2018, we recorded specific discrete tax items associated
with our international operations that were unrelated to fiscal
2019. As these items were unrepresentative of our normal effective
tax rate, we excluded their impact on net income and diluted EPS
for fiscal 2019 to arrive at our non-GAAP financial measures.
During the three months ended October 31,
2018, we recorded an adjustment to a minor litigation matter
in our consolidated financial statements. Since these costs are
irregular and mask our underlying operating performance, we made an
adjustment to our net income and diluted EPS for fiscal 2019 to
exclude such costs to arrive at our non-GAAP financial
measures.
Three Months Ended October 31, 2019
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition-related items, (iii) business
optimization and restructuring-related charges and (iv) excess tax
expenses applicable to stock compensation, to arrive at our
non-GAAP financial measures, non-GAAP net income and non-GAAP
diluted EPS.
Three Months Ended October 31, 2018
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition-related items, (iii) business optimization
and restructuring-related charges, (iv) excess tax benefits
applicable to stock compensation, (v) tax matters and (vi)
litigation matters to arrive at our non-GAAP financial measures,
non-GAAP net income and non-GAAP diluted EPS.
The reconciliations of net income and diluted EPS to non-GAAP
net income and non-GAAP diluted EPS were calculated as follows:
|
Three Months Ended
October 31,
|
(Unaudited)
|
2019
|
|
2018
|
Net income/Diluted
EPS, as reported
|
$
|
5,767
|
|
|
$
|
0.14
|
|
|
$
|
19,242
|
|
|
$
|
0.46
|
|
Intangible
amortization, net of tax(1)
|
5,021
|
|
|
0.12
|
|
|
4,626
|
|
|
0.11
|
|
Acquisition-related
items, net of tax(2)
|
12,520
|
|
|
0.30
|
|
|
1,349
|
|
|
0.03
|
|
Restructuring-related
charges, net of tax(3)
|
3,352
|
|
|
0.08
|
|
|
641
|
|
|
0.02
|
|
Excess tax
benefits(4)
|
559
|
|
|
0.01
|
|
|
(997)
|
|
|
(0.02)
|
|
Tax
matters(4)
|
—
|
|
|
—
|
|
|
896
|
|
|
0.02
|
|
Litigation
matters(1)
|
—
|
|
|
—
|
|
|
134
|
|
|
—
|
|
Non-GAAP net
income/Non-GAAP diluted EPS
|
$
|
27,219
|
|
|
$
|
0.65
|
|
|
$
|
25,891
|
|
|
$
|
0.62
|
|
____________________________________________
(1)
|
Amounts were recorded
in general and administrative expenses.
|
(2)
|
For the three months
ended October 31, 2019, pre-tax acquisition-related items of
$4,771 were recorded in cost of sales and $11,806 were recorded in
general and administrative expenses. For the three months ended
October 31, 2018, pre-tax acquisition-related items of $217
were recorded in net sales, $54 were recorded in cost of sales and
$1,555 were recorded in general and administrative
expenses.
|
(3)
|
For the three months
ended October 31, 2019, pre-tax restructuring-related items of
$1,157 were recorded in cost of sales, and $4,271 were recorded in
general and administrative expenses. For the three months ended
October 31, 2018, pre-tax restructuring-related items of $166
were recorded in cost of sales and $680 were recorded in general
and administrative expenses.
|
(4)
|
Amounts were recorded
in income taxes.
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
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 have on net
income. In particular, acquisitions have historically resulted in
significant increases in amortization of purchased intangible
assets that reduce 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
non-GAAP adjustments to net income discussed above. We use adjusted
EBITDAS when evaluating operating performance because we believe
the exclusion of such adjustments, 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
October 31,
|
(Unaudited)
|
2019
|
|
2018
|
Net income, as
reported
|
$
|
5,767
|
|
|
$
|
19,242
|
|
Interest expense,
net
|
5,719
|
|
|
2,026
|
|
Income
taxes
|
2,938
|
|
|
6,410
|
|
Depreciation
|
6,338
|
|
|
4,691
|
|
Amortization
|
6,029
|
|
|
6,041
|
|
Loss on disposal of
fixed assets
|
167
|
|
|
1,053
|
|
Stock-based
compensation expense
|
2,404
|
|
|
2,576
|
|
EBITDAS
|
29,362
|
|
|
42,039
|
|
Acquisition-related
items
|
16,577
|
|
|
1,827
|
|
Restructuring-related
charges(1)
|
5,367
|
|
|
742
|
|
Litigation
matters
|
—
|
|
|
163
|
|
Adjusted
EBITDAS
|
$
|
51,306
|
|
|
$
|
44,771
|
|
________________________________________________
(1)
|
Excludes stock-based
compensation expense.
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
Net Debt
We define net debt as long-term debt less cash and cash
equivalents. Each of the components of net debt appears on our
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.
(Unaudited)
|
October 31,
2019
|
|
July 31,
2019
|
Long-term debt
(excluding debt issuance costs)
|
$
|
911,125
|
|
|
$
|
233,000
|
|
Less cash and cash
equivalents
|
(49,285)
|
|
|
(44,535)
|
|
Net debt
|
$
|
861,840
|
|
|
$
|
188,465
|
|
|
(dollar amounts
in thousands except share and per share data or as otherwise
specified)
|
Reconciliation of Net Sales Growth to Organic
Sales Growth
We define organic sales as net sales less (i) the impact of
foreign currency translation, (ii) net sales related to
acquired businesses during the first twelve months of ownership and
(iii) divestitures 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 and divestitures because the nature,
size, and number of acquisitions and divestitures 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, 2019, the
reconciliation of net sales growth to organic sales growth for
total net sales and net sales of our reportable segments were
calculated as follows:
(Unaudited)
|
|
Net Sales
|
|
Medical
Net Sales
|
|
Life
Sciences
Net Sales
|
|
Dental
Net Sales
|
|
Dialysis
Net Sales
|
Net sales
growth
|
|
14.0
|
%
|
|
4.5
|
%
|
|
(5.2)
|
%
|
|
76.3
|
%
|
|
(6.9)
|
%
|
Impact due to foreign
currency translation
|
|
0.7
|
%
|
|
1.2
|
%
|
|
0.1
|
%
|
|
—
|
%
|
|
0.1
|
%
|
Sales related to
acquisitions/divestitures
|
|
(9.9)
|
%
|
|
—
|
%
|
|
4.0
|
%
|
|
(64.3)
|
%
|
|
—
|
%
|
Organic sales
growth
|
|
4.8
|
%
|
|
5.7
|
%
|
|
(1.1)
|
%
|
|
12.0
|
%
|
|
(6.8)
|
%
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
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SOURCE Cantel Medical Corp.