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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   20549
 
Form 10-Q

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2020.

or
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from            to           .
 
Commission file number:   001-31337
cmd-20200430_g1.jpg 
 Cantel Medical Corp.
(Exact name of registrant as specified in its charter)

Delaware 22-1760285
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)

150 Clove RoadLittle FallsNew Jersey07424(973)890-7220
(Address of principal executive offices)(Zip code)(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Common StockCMDNew York Stock Exchange
(Title of each class)(Trading Symbol)(Name of each exchange on which registered)

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
 
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerSmaller reporting company
Non-accelerated filerEmerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 
 
Number of shares of common stock outstanding as of May 29, 2020: 42,154,298.




Cantel Medical Corp.         2020 Third Quarter Form 10-Q
TABLE OF CONTENTS

Page No.
PART I – FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
Item 2.
Item 3.
Item 4.
PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Signatures




Cantel Medical Corp.         2020 Third Quarter Form 10-Q
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
 April 30, 2020July 31, 2019
Assets  
Cash and cash equivalents$115,766  $44,535  
Accounts receivable, net of allowance for doubtful accounts of $3,077 and $2,322
147,558  146,910  
Inventories, net185,493  138,234  
Prepaid expenses and other current assets21,790  20,920  
Income taxes receivable15,422  1,197  
Total current assets486,029  351,796  
Property and equipment, net224,233  185,242  
Right-of-use assets, net50,005  —  
Intangible assets, net486,325  141,513  
Goodwill653,626  378,109  
Other long-term assets6,722  9,425  
Deferred income taxes5,432  4,281  
Total assets$1,912,372  $1,070,366  
Liabilities and stockholders’ equity      
Accounts payable$52,986  $39,450  
Compensation payable32,520  32,762  
Accrued expenses37,564  38,545  
Deferred revenue26,884  27,840  
Current portion of long-term debt31,414  10,000  
Income taxes payable6,298  2,803  
Current portion of lease liabilities10,269  —  
Total current liabilities197,935  151,400  
Long-term debt944,011  220,851  
Deferred income taxes27,607  29,278  
Long-term lease liabilities41,701  —  
Other long-term liabilities12,649  7,300  
Total liabilities1,223,903  408,829  
Commitments and contingencies (Note 12)
Preferred Stock, par value $1.00 per share; authorized 1,000,000 shares; none issued
    
Common Stock, par value $0.10 per share; authorized 75,000,000 shares; issued 47,229,396 shares and outstanding 42,145,737 shares at April 30, 2020; issued 46,362,902 shares and outstanding 41,771,228 shares at July 31, 2019
4,679  4,636  
Additional paid-in capital240,625  204,795  
Retained earnings553,917  539,097  
Accumulated other comprehensive loss(42,092) (22,197) 
Treasury Stock; 4,645,300 shares at April 30, 2020; 4,591,674 shares at July 31, 2019
(68,660) (64,794) 
Total stockholders’ equity688,469  661,537  
Total liabilities and stockholders’ equity$1,912,372  $1,070,366  

See accompanying notes to Condensed Consolidated Financial Statements.

(dollar amounts in thousands except share and per share data or as otherwise noted) 1


Cantel Medical Corp.         2020 Third Quarter Form 10-Q
Condensed Consolidated Statements of Income
(Unaudited)

 Three Months Ended April 30,Nine Months Ended April 30,
 2020201920202019
Net sales    
Product sales$207,690  $197,478  $690,303  $587,251  
Product service29,243  31,074  92,374  91,428  
Total net sales236,933  228,552  782,677  678,679  
Cost of sales    
Product sales116,488  99,867  381,965  299,595  
Product service19,462  21,808  61,616  62,283  
Total cost of sales135,950  121,675  443,581  361,878  
Gross profit100,983  106,877  339,096  316,801  
Expenses:  
Selling38,057  36,077  121,208  103,233  
General and administrative32,133  48,634  149,471  122,527  
Research and development8,349  7,354  23,953  22,355  
Total operating expenses78,539  92,065  294,632  248,115  
Income from operations22,444  14,812  44,464  68,686  
Interest expense, net10,113  2,509  26,082  6,742  
Other income, net      (1,313) 
Income before income taxes12,331  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:    
Basic$0.37  $0.20  $0.46  $1.11  
Diluted$0.37  $0.20  $0.46  $1.11  
Dividends per common share$  $  $0.11  $0.10  
 
See accompanying notes to Condensed Consolidated Financial Statements.

(dollar amounts in thousands except share and per share data or as otherwise noted) 2


Cantel Medical Corp.         2020 Third Quarter Form 10-Q
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended April 30,Nine Months Ended April 30,
 2020201920202019
Net income$15,787  $8,175  $19,291  $46,217  
Other comprehensive loss:    
Foreign currency translation(6,053) (3,168) (2,261) (8,808) 
Interest rate swap, net of tax(19,125) 609  (17,634) 609  
Total other comprehensive loss:(25,178) (2,559) (19,895) (8,199) 
Comprehensive (loss) income$(9,391) $5,616  $(604) $38,018  

See accompanying notes to Condensed Consolidated Financial Statements.

(dollar amounts in thousands except share and per share data or as otherwise noted) 3


Cantel Medical Corp.         2020 Third Quarter Form 10-Q
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
 Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury stock,
at cost
Total Stockholders’ Equity
 SharesAmount
Balance, July 31, 201941,771,228  $4,636  $204,795  $539,097  $(22,197) $(64,794) $661,537  
Repurchases of shares(49,614) —  —  —  —  (3,613) (3,613) 
Stock-based compensation—  —  2,404  —  —  —  2,404  
Issuance of shares751,471  75  59,925  —  —  —  60,000  
Equity vests/option exercises104,686  11  908  —  —  —  919  
Cancellations of restricted stock(946) —  —  —  —  —    
Net income—  —  —  5,767  —  —  5,767  
Other comprehensive income—  —  —  —  5,177  —  5,177  
Balance, October 31, 201942,576,825  $4,722  $268,032  $544,864  $(17,020) $(68,407) $732,191  
Repurchases of shares(1,218) —  —  —  —  (87) (87) 
Stock-based compensation—  —  3,412  —  —  —  3,412  
Issuance of shares—  —  (5,608) —  —  —  (5,608) 
Equity vests/option exercises3,900  —  1  —  —  —  1  
Cancellations of restricted stock(232) —  —  —  —  —    
Dividends—  —  —  (4,471) —  —  (4,471) 
Net loss—  —  —  (2,263) —  —  (2,263) 
Other comprehensive income—  —  —  —  106  —  106  
Balance, January 31, 202042,579,275  $4,722  $265,837  $538,130  $(16,914) $(68,494) $723,281  
Repurchases of shares(441,153) (44) (28,235) —  —  (166) (28,445) 
Stock-based compensation—  —  3,027  —  —  —  3,027  
Equity vests/option exercises7,615  1  (4) —  —  —  (3) 
Net income—  —  —  15,787  —  —  15,787  
Other comprehensive loss—  —  —  —  (25,178) —  (25,178) 
Balance, April 30, 202042,145,737  $4,679  $240,625  $553,917  $(42,092) $(68,660) $688,469  

See accompanying notes to Condensed Consolidated Financial Statements.

(dollar amounts in thousands except share and per share data or as otherwise noted) 4


Cantel Medical Corp.         2020 Third Quarter Form 10-Q
 Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury stock,
at cost
Total Stockholders’ Equity
 SharesAmount
Balance, July 31, 201841,706,084  $4,624  $184,212  $491,540  $(11,456) $(60,053) $608,867  
Repurchases of shares(37,802) —  —  —  —  (4,288) (4,288) 
Stock-based compensation—  —  2,576  —  —  —  2,576  
Equity vests/option exercises53,320  7  948  —  —  —  955  
Cancellations of restricted stock(286) —  —  —  —  —    
Net income—  —  —  19,242  —  —  19,242  
Cumulative impact of ASC 606 adoption—  —  —  865  —  —  865  
Other—  —  (634) —  —  —  (634) 
Other comprehensive loss—  —  —  —  (5,223) —  (5,223) 
Balance, October 31, 201841,721,316  $4,631  $187,102  $511,647  $(16,679) $(64,341) $622,360  
Repurchases of shares(880) —  —  —  —  (67) (67) 
Stock-based compensation—  —  3,587  —  —  —  3,587  
Equity vests/option exercises1,857  —  —  —  —  —  —  
Cancellations of restricted stock(1,107) —  —  —  —  —    
Dividends on common stock—  —  —  (4,173) —  —  (4,173) 
Net income—  —  —  18,800  —  —  18,800  
Other—  —  1,513  —  —  —  1,513  
Other comprehensive loss—  —  —  —  (417) —  (417) 
Balance, January 31, 201941,721,186  $4,631  $192,202  $526,274  $(17,096) $(64,408) $641,603  
Issuance of shares42,705  4  3,193  —  —  —  3,197  
Repurchases of shares(3,712) —  —  —  —  (273) (273) 
Stock-based compensation—  —  5,722  —  —  —  5,722  
Equity vests/option exercises5,875  1  (1) —  —  —    
Cancellations of restricted stock(137) —  —  —  —  —    
Net income—  —  —  8,175  —  —  8,175  
Other comprehensive loss—  —  —  —  (2,559) —  (2,559) 
Balance, April 30, 201941,765,917  $4,636  $201,116  $534,449  $(19,655) $(64,681) $655,865  

See accompanying notes to Condensed Consolidated Financial Statements.


(dollar amounts in thousands except share and per share data or as otherwise noted) 5


Cantel Medical Corp.         2020 Third Quarter Form 10-Q
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months Ended April 30,
 20202019
Cash flows from operating activities  
Net income$19,291  $46,217  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation22,105  15,455  
Amortization23,952  15,508  
Stock-based compensation expense8,843  11,885  
Amortization of right-of-use assets9,162  —  
Deferred income taxes(2,822) (2,671) 
Inventory step-up amortization16,700    
Fair value adjustments to contingent consideration(6,423)   
Other non-cash items, net3,853  263  
Changes in assets and liabilities, net of effects of acquisitions/dispositions:      
Accounts receivable26,990  (18,642) 
Inventories(3,514) (24,671) 
Prepaid expenses and other assets2,653  (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 activities92,843  48,486  
Cash flows from investing activities      
Capital expenditures(26,212) (75,387) 
Proceeds from sale of businesses2,236  3,053  
Acquisitions, net of cash acquired(