Analyst Conference Call Summary

Cantel Medical

conference date: March 8, 2012 @ 8:00 AM Pacific Time
for quarter ending: January 31, 2012 (Q2, second quarter fiscal 2012)

Forward-looking statements

Overview: Great Quarter.

Basic data (GAAP):

Revenue was $97.3 million, up 4% sequentially from $93.3 million and up 20% y/y from $81.0 million.

Net income was $7.3 million, up 18% sequentially from $6.2 million and up 28% from $5.7 million year-earlier.

EPS (earnings per share) were $0.27, up 17% sequentially from $0.23 (adjusted for split), and 23% up from $0.22 per share year-earlier.


Does not provide.

Conference Highlights:

Record quarter. Very optimistic outlook for future growth in infection control industry.

Endoscopy: $12.1 million in Byrne Medical (acquired August 1, 2011) sales, which will become part of Medivators. In U.S. capital equipment sales excluding Byrne dropped as expected from unusually strong 2011. Y/y sales up 49%.

6% increase in water purification business, with centralized clinic water purification systems leading. Gambro (2010 acquisition) products are selling well. Working on international sales and had some success this quarter in Americas and Middle east.

17% growth in healthcare disposables. Dental market has started to resume growth. Adding new product offerings and also selling outside the dental market. Helped by ConFirm Monitoring acquisition in February 2011.

42% gross margin. Water and disposable margins have improved.

Dialysis segment was down. Continuing to seek global growth. Now the smallest of the segments.

Cost of sales was $56.5 million, leaving $40.8 million in gross profit. Operating expenses of $27.7 million included $13.3 million for selling, $12.1 million for general and administrative, and $2.3 million for research and development. Interest expense about $1 million per quarter. Other expense of $0.6 million was an investment that was impaired. Income taxes were $4.3 million.

Failure of Congress to renew R&D tax credit had a negative impact compared to the year-earlier quarter. 97% of earnings currently come from the U.S.

$21.7 million balance of cash and equivalents. $108 million debt. Paid down $8.5 million. Net debt $86.3 million. Cash flow from operations $12.1 million. $18.6 million EBITDA. Capital expenditures 1.3 million. Dividends also $1.3 million.

We continue to develop new products and pursue acquisitions.


Revenue by segment? $40.4 million endoscopy; $25.6 million water purification; $17.9 million disposable; $9.1 million dialysis; $4.3 million other.

Competitive response to your taking share? In water we are the market leader and the market is improving; there is little competitive response. Endoscopy has aggressive companies selling endoscopy processors, competition is normal.

Endoscopy this quarter? Will see a y/y decline in equipment sales. But service business and chemistry business growth is offsetting that, plus Byrne will grow.

Water purification, international sales strategy? We have sales and management that travel to these regions and work with distributors there.

High gross margin, is it sustainable? Overriding factor is Byrne, which has higher margins. We should see margins stay in the range they are now. We are also seeing more sales of high margin products in endoscopy, and we are working to improve margins in other segments as well. But high oil prices are a negative for us, and unknowns because we have so many different market segments. Our goal is to continue to improve margins, but should at least be able to sustain this level.

Acquisitions? We are looking at some very interesting potential acquisitions. We have the capacity to borrow to do deals of significant size.



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Copyright 2012 William P. Meyers