LITTLE FALLS, N.J.,
May 12, 2020 /PRNewswire/ --
CANTEL MEDICAL CORP. (NYSE: CMD) announced today several
business and financial updates in light of the ongoing COVID
pandemic.
Operating Update in Response to COVID
Given the COVID-related government lockdowns and social
distancing initiatives, the Company has seen a deferral of elective
medical and dental procedures across markets in which Cantel
operates. The Company reacted early to these headwinds to ensure
that it could protect its employees, deliver resilience across its
supply chain and best position itself for the recovery period
during which such deferred procedures will resume. Ultimately, the
Company believes that the core value proposition of its 'complete
circle of protection' offering of infection prevention solutions
are even more critical and relevant as we serve customer needs in
the post-COVID recovery.
Operationally, the Company has taken significant measures to
ensure that its supply chain remains fully operational through the
crisis, with all facilities open and manufacturing, while adhering
to local regulations. The Company has taken the following actions
to preserve cash flow through this period:
- Deployed workforce furloughs across manufacturing sites
experiencing declines in demand, along with temporary furloughs and
decreases in pay for administrative personnel
- Deferred all non-essential capital expenditures
- Cancelled all non-essential travel
- Reduced inventory in areas where demand has decreased,
including aggressive material management to limit purchasing
- Suspended any dividend through at least October 31, 2021
- Suspended and reduced executive salaries and Board of Directors
compensation
Commenting on the current situation, George Fotiades, President and CEO stated, "The
COVID pandemic has been a historic event for the industry, our
customers, the patients who benefit from our products and services
and our Company. I am proud of how our company has operated through
these challenges and believe we are well positioned for the
recovery in elective procedure volumes. The announcements today put
us in a very strong position to navigate the crisis with ample
flexibility. A key priority continues to be supporting those on the
front lines of this pandemic by supplying much needed PPE,
disinfectant chemistries and other infection prevention solutions
to those who need it most. We also continue to make important
progress on the growth initiatives of Cantel 2.0 which we presented
at our last earnings call."
Amendment of Credit Facilities to Increase Financial
Flexibility
On May 11, 2020, the Company
entered into an agreement to amend its credit facilities with its
lender group. These changes will provide Cantel with ample
flexibility to manage through the expected impacts of this
difficult operating environment, and enable the Company to be well
positioned to serve the needs of its customers in a post-COVID
environment.
The principal changes to the credit facilities include:
- Maximum Net Leverage to LTM EBITDA ratio covenant was increased
to 5.25:1.00 for the Company's fiscal quarter ending April 30, 2020;
- Maximum Net Leverage to LTM EBITDA ratio covenant was suspended
until October 31, 2021;
- Minimum Interest Coverage Ratio was suspended beginning
May 1, 2020 until October 31, 2021;
- New Minimum Liquidity and Minimum LTM EBITDA thresholds were
established until July 31, 2021;
- Increased the interest rate under the credit facilities;
and
- Limited the Company's ability to pay dividends and repurchase
common stock during the period the consolidated leverage ratio and
consolidated interest coverage ratio are suspended.
As of April 30, 2020, the Company
had a cash and cash equivalents balance of approximately
$110 million and a revolving credit
facility outstanding balance of approximately $400 million.
Revenue Update for the Fiscal Third Quarter and Withdrawn
Guidance for the Remainder of the Year
As stated previously, the government lockdowns and social
distancing initiatives related to the COVID pandemic have led to
disruption across many of the markets in which Cantel operates.
This disruption had the most pronounced impact over the last five
weeks of Cantel's third quarter, which ended April 30, 2020.
Revenue for the third quarter is estimated at $235–$237 million,
down approximately 18% sequentially vs. the prior quarter. Over the
last five weeks of the third quarter, the segments of the business
most exposed to electives procedures were down approximately 65%
versus the second quarter of fiscal year 2020. The Company expects
this recent weakness to continue into its fourth quarter, and
gradually improve as elective procedures are restored in its end
markets. The Company expects to provide a complete update of its
financial results for the third quarter on June 4, 2020.
Given the significant uncertainty related to the COVID pandemic,
the Company is also withdrawing its financial guidance for fiscal
year 2020.
Our estimated unaudited financial results as of and for the
three months ended April 30, 2020
presented above are preliminary and are subject to the close of the
quarter, completion of our quarter-end closing procedures and
further financial review. The preliminary financial and business
information presented herein has been prepared by and is the
responsibility of our management and is based upon information
available to us as of the date hereof. Our independent registered
public accounting firm has not audited, reviewed, compiled or
performed any procedures with respect to this preliminary financial
information. Accordingly, our independent registered public
accounting firm does not express an opinion or any other form of
assurance with respect thereto. These estimates are not a
comprehensive statement of our financial results for this period
and should not be viewed as a substitute for interim financial
statements prepared in accordance with generally accepted
accounting principles. Our actual results may differ from these
estimates as a result of the completion of our quarter-end closing
procedures, review adjustments and other developments that may
arise between now and the time our financial results for the period
are finalized.
As a result, investors should exercise caution in relying on
this information and should not draw any inferences from this
information regarding financial or operating data not provided.
These preliminary results as of and for the three months ended
April 30, 2020 are not necessarily
indicative of the results to be achieved for the remainder of the
fiscal year ending July 31, 2020 or
in any future period, in particular due to the impact of the
ongoing COVID pandemic. There can be no assurance that these
estimates will be realized, and estimates are subject to risks and
uncertainties, many of which are not within our control. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Risk Factors" in our Annual Report on
Form 10-K for the year ended July 31,
2019 and in our Quarterly Reports on Form 10-Q for the
quarters ended October 31, 2019 and
January 31, 2020, as further updated
by our Current Report on Form 8-K dated May
12, 2020. Investors are cautioned not to place undue
reliance on such preliminary estimates.
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 www.cantelmedical.com.
This press release contains "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, including the impacts of the COVID-19
pandemic on our operations and financial results, general economic
conditions, technological and market changes in the medical device
industry, our ability to execute on our strategy, risks associated
with operating our international business, including limited
operating experience and market recognition in new international
markets, changes in United States
healthcare policy at both the state and federal level, product
liability claims resulting from the use of products we sell and
distribute, and risks related to our intellectual property and
proprietary rights needed to maintain our competitive position. We
caution that undue reliance should not be placed on such
forward-looking statements, which speak only as of the date made.
For a further list and description of these and other important
risks and uncertainties that may affect our future operations, see
our most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission, which we may update in
Quarterly Reports on Form 10-Q we have filed or will file
hereafter, as further updated by our Current Report on Form 8-K
dated May 12, 2020. 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.
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SOURCE Cantel Medical Corp.