Analyst Conference Call Summary

Cantel Medical

conference date: December 8, 2011 @ 8:00 AM Pacific Time
for quarter ending: October 31, 2011 (Q1, first quarter fiscal 2012)

Forward-looking statements

Overview: Record quarter.

Basic data (GAAP):

Revenue was $93.3 million, up 8% sequentially from $86.0 million, and up 29% from $72.0 million in the year-earlier quarter.

Net income was $6.2 million, up 32% sequentially from $4.7 million, and up 24% from $5.0 million year-earlier.

EPS (earnings per share) were $0.35, up 30% sequentially from $0.27 and up 21% from $0.29 year-earlier.


none specific. "We have a strong and growing company."

Conference Highlights:

Results confirm "the continued success of our three prong approach to growth which includes investing in new product development, sales and marketing programs, and acquisitions."

Endoscopy had outstanding quarter. Excluding Byrne Medical (acquired August 1) had a 25% increase in sales. Strongest performance was capital equipment in the U.S. Disinfectant container product line grew by over 40%. Consumable parts, services and accessories grew by 25%. Capital equipment sales expected to return to a more normal growth pattern in 2012, but overall profits should continue to ramp. Byrne Medical had a 30% y/y increase in sales to $11.5 million. Already accretive to earnings and cash flow.

Water Purification and Filtration segment had 21% higher sales, led by capital equipment in the U.S. Includes 25% growth service and 10% growth in consumables. Gambrel acquisition sales have expanded. Margins have improved.

12% growth of Health Care Disposables, with 6% of that from core growth and 6% from Confirm acquisition.

Dialysis sales declined 7% mainly due to less sales of low margin dialysis concentrate. Still has a 24% operating margin.

Core revenue growth 9.5% overall, excluding all three acquisitions.

Some costs were acquisition related, and so will not recur, but there will be continuing amortization from acquisitions.

EBITDA was $14.7 million, up from $10.8 million year-earlier.

Cash balance ended at $19.6 million, up $1.2 million sequentially from $18.4 million. $116.5 million in debt. Paid off $5.5 million of debt. $7.7 million cash flow from operations.

Cost of sales was $55.3 million, leaving gross profit of $38.0 million. Operating Expenses were $27.2 million consisting of: $12.9 million selling, $12.1 million general and administrative, and $2.1 million for research and development. Interest expense was $1.0 million. Income taxes $3.6 million.

98% of income is from U.S., which is highest tax rate district. Also failure of Congress to pass a new R&D credit increases rate. Already at highest U.S. rate.

10Q will be filed with SEC on Monday with more details.

Has credit available to continue to make acquisitions.

Increased dividend to $0.14 per share annually, paid semi-annually.


Revenue by segment? Will be in 10Q. Endoscopy $36.0 million. Water Purification $25.0 million. Health Care Disposables $19.4 million. Dialysis $9.2 million. Other $3.7 million.

More normal levels of endoscopy equipment sales? Market accelerated last year for specific reasons discussed in prior quarters. Market is really growing at 7 to 8%, so we would return to that type of growth rate. Disposables can continue to grow faster.

Margins? Still working on gross margins in water purification and endoscopy consumables. But not a dramatic increase, rather slow and steady.

New products in 2012? In water we are just ramping heated portable products and Gambrel designs. New Byrne Medical products launched recently.

One time costs in quarter? Acquisition $626 thousand. Fair value adjustments due to Byrne Medical related to contingent relations, but was a positive $0.5 million. So they roughly offset each other.

Selling and G&A costs going forward? Could use roughly the same percentages going forward.

Recruiting for a couple of international sales positions. Only small increases in sales force likely in 2012.

We are still growing faster than the overall market in dental supplies, should continue at 3 to 5% faster than market growth.

Orders are still strong for endoscopy equipment, but probably driven by February cutoff date. Should go back to more normal growth in third and fourth quarters.

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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2011 William P. Meyers