LITTLE FALLS, N.J., June 4,
2020 /PRNewswire/ -- Cantel Medical Corp. (NYSE: CMD)
today announced financial results for its third quarter ended
April 30, 2020.
Third quarter 2020 net sales were $236.9M, up 3.7% compared to the prior year.
Excluding the impact from foreign currency, net sales increased by
4.2%, primarily driven by the impact from acquisitions of 15.5%
offset by an organic decline of 11.3%. The decline in organic sales
was a result of the reduction of elective procedures driven by the
worldwide COVID pandemic, which largely impacted the last five
weeks of the Company's fiscal quarter. The pandemic primarily
impacted the Company's Medical and Dental segments during this
period.
Third quarter 2020 GAAP earnings per diluted share increased
85.0% to $0.37, compared to GAAP
earnings per diluted share of $0.20
in the prior year period. While GAAP earnings per diluted share was
negatively impacted by COVID and higher amortization in the period,
the impacts were offset by a favorable fair value adjustment to a
Hu-Friedy earnout liability.
Third quarter 2020 non-GAAP earnings per diluted share decreased
70.9% to $0.16, compared to non-GAAP earnings per diluted
share of $0.55 in the prior year
period. The decrease in earnings per share was driven by the impact
from COVID, which significantly impacted the Company's Medical and
Dental segment revenue for the last five weeks of the quarter.
George Fotiades, President and
Chief Executive Officer, stated, "The impact from the COVID
pandemic has been historic for the industry, our customers,
patients and our Company. I am proud of how our Company has
operated through these challenges and expect that we will be in a
strong position to serve our customers during the recovery. Our
mission in Infection Prevention has never been more critical, as we
continue to support those on the front lines of this pandemic by
supplying much needed PPE, disinfectant chemistry, and other
infection prevention solutions to those who need it most."
With the acquisition of Hu-Friedy and the impact from COVID, the
Company's balance sheet has changed from historical trends. The
third quarter ended with cash of $115.8M and gross debt of $976.9M, while generating EBITDAS of $43.5M and adjusted EBITDAS of $31.7M in the quarter, down 23.3%.
In the weeks following the end of its third quarter, the Company
has made significant progress in solidifying its financial
position. On May 11th, 2020, the
Company entered into an agreement to amend its credit facilities
with its lender group providing ample flexibility to manage the
expected impacts of the current environment created by the COVID
pandemic. Following the amendment, the Company announced the sale
of $168M in aggregate value of its
private offering of Convertible Senior Notes due 2025. This
offering provides additional liquidity that helps enable the
Company to continue to weather the pandemic, while remaining
strongly positioned for the expected post-COVID recovery.
Third quarter financial results and key updates:
- Strong Life Sciences revenue performance with organic growth of
+7.3% for the quarter driven by COVID-related demand for portable
water systems
- Dental revenue increased 75.4%, driven by the acquisition of
Hu-Friedy, while organic revenue decreased 3.1% due to deferred
elective procedures which was slightly offset by strong performance
in face masks, face shields, surface disinfectants and wipes
- Medical revenue decreased 21.7% on an organic basis, with most
endoscopy procedures being deferred or delayed during the last five
weeks of the quarter
- Management instituted key cost and cash saving measures which
include the following:
-
- 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
- Operating Cash increased 42.4% sequentially to $49.3M, with an ending cash balance of
$115.8M
The Company further outlined that the last five weeks of
disruption due to COVID had a significant impact on their financial
results, specifically in the Medical and Dental segments. For
illustrative purposes, using the Company's second quarter results
as a comparable, non-COVID impacted quarter, the Medical segment
declined ~60% while the Dental segment declined ~55% (down ~70%
excluding PPE) in the last five weeks of the quarter. Preliminary,
unaudited May revenue results showed signs of improvement, with
Medical expected to recover to down ~40% and Dental down ~45%
compared to the same second quarter baseline. The Company expects
fourth quarter revenue to be below the third quarter, with the
expectation that daily sales rates will continue to improve through
the quarter.
Fotiades added, "While the deferral of elective procedures over
the last five weeks of our third quarter have resulted in lower
performance, we are encouraged that preliminary sales results for
May are showing signs of recovery. We continue to invest in
critical aspects of Cantel 2.0. and have been making progress on
our previously announced initiatives, which I look forward to
discussing more over the next few months."
Conference Call Information:
The Company will hold a conference call to discuss the results for
its third quarter ended April 30, 2020 on Thursday,
June 4, 2020 at 8:30 a.m. Eastern Time.
To participate in the conference call, dial 1-844-369-8770
(US & Canada) or
1-862-298-0840 (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 4, 2020 through midnight on July
3, 2020 by dialing 1-877-481-4010 (US & Canada) or 1-919-882-2331 (International) and
using conference ID #: 34733.
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 website 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.
Our estimated unaudited financial results 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..
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, the impacts and recovery from the COVID
pandemic, 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.
CANTEL MEDICAL
CORP.
|
Condensed
Consolidated Statements of Income
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
April
30,
|
|
April
30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net sales
|
$
|
236,933
|
|
|
$
|
228,552
|
|
|
$
|
782,677
|
|
|
$
|
678,679
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
135,950
|
|
|
121,675
|
|
|
443,581
|
|
|
361,878
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
100,983
|
|
|
106,877
|
|
|
339,096
|
|
|
316,801
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Selling
|
38,057
|
|
|
36,077
|
|
|
121,208
|
|
|
103,233
|
|
General and
administrative
|
32,133
|
|
|
48,634
|
|
|
149,471
|
|
|
122,527
|
|
Research and
development
|
8,349
|
|
|
7,354
|
|
|
23,953
|
|
|
22,355
|
|
Total operating
expenses
|
78,539
|
|
|
92,065
|
|
|
294,632
|
|
|
248,115
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
22,444
|
|
|
14,812
|
|
|
44,464
|
|
|
68,686
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
10,113
|
|
|
2,509
|
|
|
26,082
|
|
|
6,742
|
|
Other income,
net
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,313)
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
12,331
|
|
|
12,303
|
|
|
18,382
|
|
|
63,257
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
(3,456)
|
|
|
4,128
|
|
|
(909)
|
|
|
17,040
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
15,787
|
|
|
$
|
8,175
|
|
|
$
|
19,291
|
|
|
$
|
46,217
|
|
|
|
|
|
|
|
|
|
Earnings per common
share - diluted
|
$
|
0.37
|
|
|
$
|
0.20
|
|
|
$
|
0.46
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.11
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
Weighted average
shares - diluted
|
42,187,539
|
|
|
41,759,438
|
|
|
42,327,535
|
|
|
41,726,231
|
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
CANTEL MEDICAL
CORP.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
April 30,
2020
|
|
July 31,
2019
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
115,766
|
|
|
$
|
44,535
|
|
Accounts receivable,
net
|
147,558
|
|
|
146,910
|
|
Inventories,
net
|
185,493
|
|
|
138,234
|
|
Prepaid expenses and
other current assets
|
21,790
|
|
|
20,920
|
|
Income taxes
receivable
|
15,422
|
|
|
1,197
|
|
Right-of-use assets,
net
|
50,005
|
|
|
—
|
|
Property and
equipment, net
|
224,233
|
|
|
185,242
|
|
Intangible assets,
net
|
486,325
|
|
|
141,513
|
|
Goodwill
|
653,626
|
|
|
378,109
|
|
Other long-term
assets
|
6,722
|
|
|
9,425
|
|
Deferred income
taxes
|
5,432
|
|
|
4,281
|
|
Total
assets
|
$
|
1,912,372
|
|
|
$
|
1,070,366
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Accounts
payable
|
$
|
52,986
|
|
|
$
|
39,450
|
|
Compensation
payable
|
32,520
|
|
|
32,762
|
|
Accrued
expenses
|
39,478
|
|
|
38,545
|
|
Deferred
revenue
|
26,884
|
|
|
27,840
|
|
Current portion of
long-term debt
|
29,500
|
|
|
10,000
|
|
Income taxes
payable
|
6,298
|
|
|
2,803
|
|
Current portion of
lease liabilities
|
10,269
|
|
|
—
|
|
Long-term
debt
|
937,630
|
|
|
220,851
|
|
Deferred income
taxes
|
27,607
|
|
|
29,278
|
|
Other long-term
liabilities
|
19,030
|
|
|
7,300
|
|
Long-term lease
liabilities
|
41,701
|
|
|
—
|
|
Stockholders'
equity
|
688,469
|
|
|
661,537
|
|
Total liabilities and
stockholders' equity
|
$
|
1,912,372
|
|
|
$
|
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)
|
|
|
Nine Months Ended
April 30,
|
|
2020
|
|
2019
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
19,291
|
|
|
$
|
46,217
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
|
22,105
|
|
|
15,455
|
|
Amortization
|
23,952
|
|
|
15,508
|
|
Stock-based
compensation expense
|
8,843
|
|
|
11,885
|
|
Amortization of
right-of-use assets
|
9,162
|
|
|
—
|
|
Deferred income
taxes
|
(2,822)
|
|
|
(2,671)
|
|
Inventory step-up
amortization
|
16,700
|
|
|
—
|
|
Fair value adjustments
to contingent consideration
|
(6,423)
|
|
|
—
|
|
Other non-cash items,
net
|
3,853
|
|
|
263
|
|
Changes in assets and
liabilities, net of effects of
acquisitions/dispositions:
|
|
|
|
Accounts
receivable
|
26,990
|
|
|
(18,642)
|
|
Inventories
|
(3,514)
|
|
|
(24,671)
|
|
Prepaid expenses and
other assets
|
2,653
|
|
|
(4,929)
|
|
Accounts payable and
other liabilities
|
(8,608)
|
|
|
13,608
|
|
Income
taxes
|
(11,883)
|
|
|
(3,537)
|
|
Operating lease
liabilities
|
(7,456)
|
|
|
—
|
|
Net cash provided by
operating activities
|
92,843
|
|
|
48,486
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Capital
expenditures
|
(26,212)
|
|
|
(75,387)
|
|
Proceeds from sale of
businesses
|
2,236
|
|
|
3,053
|
|
Acquisitions, net of
cash acquired
|
(721,350)
|
|
|
(40,644)
|
|
Net cash used in
investing activities
|
(745,326)
|
|
|
(112,978)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Borrowings of
long-term debt
|
400,000
|
|
|
—
|
|
Repayments of
long-term debt
|
(12,125)
|
|
|
(12,707)
|
|
Borrowings under
revolving credit facility
|
388,900
|
|
|
50,000
|
|
Repayments under
revolving credit facility
|
(32,900)
|
|
|
(7,000)
|
|
Debt issuance
costs
|
(9,234)
|
|
|
—
|
|
Finance lease
liabilities
|
(304)
|
|
|
—
|
|
Dividends
paid
|
(4,471)
|
|
|
(4,173)
|
|
Purchases of treasury
stock
|
(3,865)
|
|
|
(4,628)
|
|
Net cash provided by
financing activities
|
726,001
|
|
|
21,492
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(2,287)
|
|
|
251
|
|
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
71,231
|
|
|
(42,749)
|
|
Cash and cash
equivalents at beginning of period
|
44,535
|
|
|
94,097
|
|
Cash and cash
equivalents at end of period
|
$
|
115,766
|
|
|
$
|
51,348
|
|
|
(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 and expenses 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 effects 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.
In April 2020, we recorded a
discrete tax benefit related to a provision under the recent
federal CARES Act, which allowed us to carryback taxable losses up
to five years. We also recorded a discrete tax benefit due to the
reversal of a valuation allowance related to a previous
acquisition. As these items were unrepresentative of our normal
effective tax rate, we excluded their impact on net income and
diluted EPS for fiscal 2020 to arrive at our non-GAAP financial
measures.
In January 2020, we completed the
disposition of a dental product line. This resulted in a pre-tax
loss of $170 through general and
administrative expenses for the nine months ended April 30, 2020. Since this loss was irregular, we
made an adjustment to our net income and diluted EPS to exclude
this loss to arrive at our non-GAAP financial measures.
During the nine months ended April 30,
2019, 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.
In November 2018, we completed the
disposition of our high purity water business in Canada. This resulted in a pre-tax gain of
$1,313 through other income, net for
the nine months ended April 30, 2019.
Since this gain was irregular, we made an adjustment to our net
income and diluted EPS to exclude this gain to arrive at our
non-GAAP financial measures.
During the nine months ended April 30,
2019, 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 April 30, 2020
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition-related items, which includes a gain from the
change in fair value of contingent consideration associated with
the Hu-Friedy acquisition, (iii) business optimization and
restructuring-related charges and (iv) tax matters to arrive at
non-GAAP net income and non-GAAP diluted EPS.
Three Months Ended April 30, 2019
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition-related items, (iii) other business
optimization and restructuring-related charges, primarily related
to organizational leadership changes (iv) an adjustment to the
excess tax effects applicable to stock compensation and (v) tax
matters to arrive at 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
April 30,
|
(Unaudited)
|
2020
|
|
2019
|
Net income/Diluted
EPS, as reported
|
$
|
15,787
|
|
|
$
|
0.37
|
|
|
$
|
8,175
|
|
|
$
|
0.20
|
|
Intangible
amortization, net of tax(1)
|
4,343
|
|
|
0.10
|
|
|
3,850
|
|
|
0.09
|
|
Acquisition-related
items, net of tax(2)
|
(12,493)
|
|
|
(0.29)
|
|
|
2,047
|
|
|
0.05
|
|
Restructuring-related
charges, net of tax(3)
|
4,439
|
|
|
0.11
|
|
|
8,401
|
|
|
0.20
|
|
Excess tax
effects(4)
|
—
|
|
|
—
|
|
|
434
|
|
|
0.01
|
|
Tax
matters(4)
|
(5,283)
|
|
|
(0.13)
|
|
|
59
|
|
|
—
|
|
Non-GAAP net
income/Non-GAAP diluted EPS
|
$
|
6,793
|
|
|
$
|
0.16
|
|
|
$
|
22,966
|
|
|
$
|
0.55
|
|
|
|
|
|
(1)
|
Amounts were recorded
in general and administrative expenses.
|
(2)
|
For the three months
ended April 30, 2020, pre-tax acquisition-related items of
$15,240 (benefit) were recorded in general and administrative
expenses. For the three months ended April 30, 2019, pre-tax
acquisition-related items of $47 were recorded in net sales, $394
were recorded in cost of sales and $2,400 were recorded in general
and administrative expenses.
|
(3)
|
For the three months
ended April 30, 2020, pre-tax restructuring-related items of
$2,022 were recorded in cost of sales and $1,797 were recorded in
general and administrative expenses. For the three months ended
April 30, 2019, pre-tax restructuring-related items of $272
were recorded in cost of sales and $9,840 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)
|
Nine Months Ended April 30, 2020
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition-related items, which includes a gain from the
change in fair value of contingent consideration associated with
the Hu-Friedy acquisition, (iii) business optimization and
restructuring-related charges, (iv) loss on disposition of product
line (v) excess tax effects applicable to stock compensation and
(vi) tax matters to arrive at non-GAAP net income and non-GAAP
diluted EPS.
Nine Months Ended April 30, 2019
We made adjustments to net income and diluted EPS to exclude
(i) amortization expense of purchased intangible assets,
(ii) acquisition-related items, (iii) other business
optimization and restructuring-related charges, (iv) litigation
matters, (v) gain on disposition of business, (vi) excess tax
effects applicable to stock compensation and (vii) tax matters to
arrive at 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:
|
Nine Months Ended
April 30,
|
(Unaudited)
|
2020
|
|
2019
|
Net income/Diluted
EPS, as reported
|
$
|
19,291
|
|
|
$
|
0.46
|
|
|
$
|
46,217
|
|
|
$
|
1.11
|
|
Intangible
amortization, net of tax(1)
|
17,331
|
|
|
0.41
|
|
|
11,928
|
|
|
0.29
|
|
Acquisition-related
items, net of tax(2)
|
18,105
|
|
|
0.42
|
|
|
4,236
|
|
|
0.10
|
|
Restructuring-related
charges, net of tax(3)
|
9,723
|
|
|
0.23
|
|
|
10,486
|
|
|
0.25
|
|
Litigation
matters(1)
|
—
|
|
|
—
|
|
|
134
|
|
|
—
|
|
Gain on disposition
of business, net of tax(4)
|
—
|
|
|
—
|
|
|
(929)
|
|
|
(0.02)
|
|
Loss on disposition
of product line, net of tax(1)
|
130
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Excess tax
effects(5)
|
559
|
|
|
0.01
|
|
|
(563)
|
|
|
(0.01)
|
|
Tax
matters(5)
|
(5,283)
|
|
|
(0.12)
|
|
|
959
|
|
|
0.02
|
|
Non-GAAP net
income/Non-GAAP diluted EPS
|
$
|
59,856
|
|
|
$
|
1.41
|
|
|
$
|
72,468
|
|
|
$
|
1.74
|
|
|
|
|
|
(1)
|
Amounts were recorded
in general and administrative expenses.
|
(2)
|
For the nine months
ended April 30, 2020, pre-tax acquisition-related items of
$16,700 were recorded in cost of sales and $8,780 were recorded in
general and administrative expenses. For the nine months ended
April 30, 2019, pre-tax acquisition-related items of $351 were
recorded in net sales, $486 were recorded in cost of sales and
$4,960 were recorded in general and administrative
expenses.
|
(3)
|
For the nine months
ended April 30, 2020, pre-tax restructuring-related items of
$4,841 were recorded in cost of sales and $8,630 were recorded in
general and administrative expenses. For the nine months ended
April 30, 2019, pre-tax restructuring-related items of $272
were recorded in cost of sales and $12,533 were recorded in general
and administrative expenses.
|
(4)
|
Amounts were recorded
in other income, net.
|
(5)
|
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
April 30,
|
|
Nine Months Ended
April 30,
|
(Unaudited)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income, as
reported
|
$
|
15,787
|
|
|
$
|
8,175
|
|
|
$
|
19,291
|
|
|
$
|
46,217
|
|
Interest expense,
net
|
10,113
|
|
|
2,509
|
|
|
26,082
|
|
|
6,742
|
|
Income
taxes
|
(3,456)
|
|
|
4,128
|
|
|
(909)
|
|
|
17,040
|
|
Depreciation
|
7,890
|
|
|
5,892
|
|
|
22,105
|
|
|
15,455
|
|
Amortization
|
8,949
|
|
|
4,956
|
|
|
23,952
|
|
|
15,508
|
|
Loss on disposal of
fixed assets
|
1,231
|
|
|
529
|
|
|
1,297
|
|
|
1,368
|
|
Stock-based
compensation expense
|
3,027
|
|
|
5,722
|
|
|
8,843
|
|
|
11,885
|
|
EBITDAS
|
43,541
|
|
|
31,911
|
|
|
100,661
|
|
|
114,215
|
|
Acquisition-related
items(1)
|
(15,595)
|
|
|
2,841
|
|
|
24,597
|
|
|
5,797
|
|
Restructuring-related
charges(1)
|
3,780
|
|
|
6,632
|
|
|
13,403
|
|
|
8,871
|
|
Gain on disposition
of business
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,313)
|
|
Loss on disposition
of product line
|
—
|
|
|
—
|
|
|
170
|
|
|
—
|
|
Litigation
matters
|
—
|
|
|
—
|
|
|
—
|
|
|
163
|
|
Adjusted
EBITDAS
|
$
|
31,726
|
|
|
$
|
41,384
|
|
|
$
|
138,831
|
|
|
$
|
127,733
|
|
|
|
|
|
(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)
|
April 30,
2020
|
|
July 31,
2019
|
Long-term debt
(excluding debt issuance costs)
|
$
|
976,875
|
|
|
$
|
233,000
|
|
Less cash and cash
equivalents
|
(115,766)
|
|
|
(44,535)
|
|
Net debt
|
$
|
861,109
|
|
|
$
|
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) dispositions 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 dispositions 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 April 30, 2020, 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
|
3.7
|
%
|
|
(22.6)
|
%
|
|
7.1
|
%
|
|
75.4
|
%
|
|
8.1
|
%
|
Impact due to foreign
currency translation
|
0.5
|
%
|
|
0.9
|
%
|
|
0.2
|
%
|
|
—
|
%
|
|
0.0
|
%
|
Sales related to
acquisitions
|
(15.5)
|
%
|
|
—
|
%
|
|
0.0
|
%
|
|
(78.5)
|
%
|
|
0.4
|
%
|
Organic sales
growth
|
(11.3)
|
%
|
|
(21.7)
|
%
|
|
7.3
|
%
|
|
(3.1)
|
%
|
|
8.5
|
%
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
For the nine months ended April 30, 2020, 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
|
15.3
|
%
|
|
(5.5)
|
%
|
|
0.1
|
%
|
|
105.3
|
%
|
|
(7.1)
|
%
|
Impact due to foreign
currency translation
|
0.5
|
%
|
|
0.8
|
%
|
|
0.0
|
%
|
|
—
|
%
|
|
0.1
|
%
|
Sales related to
acquisitions/dispositions
|
(17.6)
|
%
|
|
—
|
%
|
|
2.3
|
%
|
|
(101.8)
|
%
|
|
—
|
%
|
Organic sales
growth
|
(1.8)
|
%
|
|
(4.7)
|
%
|
|
2.4
|
%
|
|
3.5
|
%
|
|
(7.0)
|
%
|
|
(dollar amounts in
thousands except share and per share data or as otherwise
specified)
|
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SOURCE Cantel Medical Corp.