Analyst Conference Call Summary

Cantel Medical

conference date: March 9, 2011 @ 8:00 AM Pacific Time
for quarter ending: January 31, 2011 (second quarter fiscal 2011)

Forward-looking statements

Overview: Record revenues in quarter.

Basic data (GAAP):

Revenue was $81.0 million, up 12.5% sequentially from $72.0 million and up 22% from $66.6 million in the year-earlier quarter.

Net income was $5.7 million, up 14% sequentially from $5.0 million, and up 16% from $4.9 million year-earlier.

EPS (earnings per share) were $0.33, up 14% sequentially from $0.29 and also up 14% from $0.29 year-earlier.


Does not give guidance. However, noted this was an extraordinary quarter.

Conference Highlights:

Strong results from "approach to growth which includes investing in new product development, sales and marketing programs, and acquisitions."

New endoscope reprocessors, Advantage Plus and DSD Edge, increased that segment's revenues by nearly 70% y/y. Consumable sales were also strong. Results partly from investment in U.S. sales team. Global capital spending is rebounding world wide. However, due to spike in sales to VA, equipment sales will return to normal in a few months. Larger installed base will continue to drive consumables.

Water purification and filtration segment revenues improved partly from Gambro acquisition. Up 11% y/y excluding Gambro. Again, beginning to see increase in capital equipment ordering environment. Has reached a historic high for equipment sales.

Healthcare disposables segment showed core growth, but down from last year's sales spike from the H1N1 flu scare. Acquired the sterilization monitoring business of Confirm Monitoring on February 11 (after end of quarter). Hurt by office visits fall during recession; believes will recover; meanwhile, gained market share.

Dialysis sales down 11% y/y, but margins increased.

Cash balance ended at $16.1 million, against $27.5 million in debt. Debt reduced by $5.6 million in quarter. After quarter end borrowed $7.5 million for acquisition. $8.2 million cash flow from operations.

EBITDAS was $12.8 million.

38.7% gross profit, declined y/y due to last year's H1N1 high margin sales in 2010. 10.7% operating margin.

Cost of sales was $49.6 million, leaving gross profit of $31.4 million. Operating expenses were $22.5 million consisting of: $10.8 million for sales, $10.3 million for general and administrative, and $1.4 million for research and development. Interest expense was $0.25 million. Income taxes $2.9 million.

There was some impact from the higher price of oil. Taxes reduced by new domestic production deduction and renewed R&D tax credit.

90% of revenue from U.S., 10% international. Taxes lower on international income.

New products, including consumables, are being introduced, but significant revenues not expected this year.

Focus is on continuing to grow the company profitably.


How are non-dental disposables trending? We are overwhelming in dental. We are making some early progress in medical non-dental.

International trends? Percentage of international dropped this quarter, due to strong U.S. sales. Saw growth in Asia Pacific in endoscopic processing.

Fogging system? Concentrating on sports facilities, like training rooms, and schools.

Endoscope reprocessing? New products are more complete systems, attractive to VA hospitals. Systems automatically mix and dispose of chemicals. Customers get better throughput and management in the new systems.

Endoscope sales? 85% of sterilization in U.S. currently done by reprocessors, which are often aging. People are now moving to the newer technology.

Oil price has resulted in a significant increase in resin prices; most of our chemicals are resins. Will pass on some of increase to customers. Pricing strategy depends on how high the spike goes and how long it lasts. Also increases our transportation costs.

Looking at increasing R&D spending soon. Need to bring on more sales people too.

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Copyright 2011 William P. Meyers