Information as to Operating Segments and Foreign and Domestic Operations

12 Months Ended

Jul. 31, 2013

Information as to Operating Segments and Foreign and Domestic Operations

Information as to Operating Segments and Foreign and Domestic Operations

18. Information as to Operating Segments and Foreign and Domestic Operations

Cantel Medical is a leading global company dedicated to delivering innovative infection prevention and control 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, dialysate concentrates, hollow fiber membrane filtration and separation products, and specialty packaging for infectious and biological specimens. Additionally, we provide technical service for our products.

In accordance with FASB ASC Topic 280, “Segment Reporting,” (“ASC 280”), we have determined our reportable business segments based upon an assessment of product types, organizational structure, customers and internally prepared financial statements. The primary factors used by us in analyzing segment performance are net sales and operating income.

During the fourth quarter of fiscal 2013, we changed our internal reporting processes by combining our Therapeutic Filtration and Chemistries operating segments, previously reported in the Other reporting segment, with our Water Purification and Filtration reporting segment to reflect the way the Company, through its executive management, manages, allocates resources and measures the performance of its businesses. All periods presented have been restated to reflect these changes.

None of our customers accounted for 10% or more of our consolidated net sales during fiscals 2013, 2012 and 2011, except for DaVita Inc. (“DaVita”) in fiscals 2013 and 2012, which accounted for approximately 10.4%, or approximately $44,204,000, in fiscal 2013 and approximately 10.2%, or $39,300,000, in fiscal 2012, of our consolidated net sales. In fiscal 2013, Davita accounted for approximately 23.9% and 36.4% of our net sales in our Water Purification and Filtration and Dialysis segments, respectively.

The Company’s segments are as follows:

Endoscopy, which includes medical device reprocessing systems, disinfectants, detergents and other supplies used to high-level disinfect flexible endoscopes. This segment also offers disposable infection control products intended to eliminate the challenges associated with proper cleaning and high-level disinfection of numerous reusable components used in gastrointestinal (GI) endoscopy procedures. Additionally, this segment includes technical maintenance service on its products.

Water Purification and Filtration, which includes water purification equipment design and manufacturing, project management, installation, maintenance, deionization and mixing systems, as well as hollow fiber membrane filtration and separation technologies for high-purity fluid and separation applications for healthcare (with a large concentration in dialysis), pharmaceutical, biotechnology, research, beverage, semiconductor and other commercial industries. Additionally, this segment includes sterilants, disinfectants and decontamination services used in various applications for infection prevention and control.

DaVita and another large dialysis provider accounted for approximately 23.9% and 24.6%, respectively, of our Water Purification and Filtration segment net sales for fiscal 2013. Combined, these two customers accounted for approximately 18.2% of our consolidated net sales in fiscal 2013.

Healthcare Disposables, which includes single-use infection prevention and control products used principally in the dental market such as face masks, sterilization pouches, patient towels and bibs, self-sealing sterilization pouches, tray covers, surface barriers including eyewear, aprons and gowns, disinfectants, germicidal wipes, hand care products, gloves, sponges, cotton products, cups, needles and syringes, scalpels and blades, and saliva evacuators and ejectors. This segment also manufactures and provides biological and chemical indicators for sterility assurance monitoring services in the acute-care, alternate-care and dental markets.

Four customers collectively accounted for approximately 54.0% of our Healthcare Disposables segment net sales and approximately 11.6% of our consolidated net sales in fiscal 2013.

Dialysis, which includes disinfection/sterilization reprocessing equipment, sterilants, supplies and concentrates related to hemodialysis treatment of patients with acute kidney failure or chronic kidney failure associated with end-stage renal disease. Additionally, this segment includes technical maintenance service on its products.

Other

In accordance with quantitative thresholds established by ASC 280, the Specialty Packaging operating segment is reported in the Other reporting segment.

Specialty Packaging, which includes specialty packaging and thermal control products, as well as related compliance training, for the safe transport of infectious and biological specimens and thermally sensitive pharmaceutical, medical and other products.

The operating segments follow the same accounting policies used for our Consolidated Financial Statements as described in Note 2.

Information as to operating segments is summarized below:

	Year Ended July 31,
	2013			2012			2011
Net sales:
Endoscopy	$	160,317,000		$	153,224,000		$	102,484,000
Water Purification and Filtration	134,196,000			114,609,000			104,308,000
Healthcare Disposables	90,904,000			76,229,000			70,202,000
Dialysis	33,148,000			35,644,000			38,055,000
Other	6,461,000			6,784,000			6,602,000
Total	$	425,026,000		$	386,490,000		$	321,651,000
	Year Ended July 31,
	2013			2012			2011
Operating income:
Endoscopy	$	32,361,000		$	31,083,000		$	12,419,000
Water Purification and Filtration	16,381,000			9,819,000			7,408,000
Healthcare Disposables	17,576,000			12,437,000			9,572,000
Dialysis	8,705,000			8,366,000			9,750,000
Other	857,000			1,065,000			1,125,000
	75,880,000			62,770,000			40,274,000
General corporate expenses	(12,692,000		)	(10,646,000		)	(8,938,000		)
Interest expense, net	(2,834,000		)	(3,650,000		)	(874,000		)
Other expense	—			(605,000		)	—
Income before income taxes	$	60,354,000		$	47,869,000		$	30,462,000

	July 31,
	2013		2012		2011
Identifiable assets:
Endoscopy	$	157,340,000	$	153,994,000	$	46,735,000
Water Purification and Filtration	123,454,000		112,432,000		112,561,000
Healthcare Disposables	137,577,000		100,569,000		104,443,000
Dialysis	24,394,000		25,793,000		27,038,000
Other	10,078,000		10,944,000		11,350,000
General corporate, including cash and cash equivalents	34,828,000		31,080,000		19,316,000
Total	$	487,671,000	$	434,812,000	$	321,443,000
	Year Ended July 31,
	2013		2012		2011
Capital expenditures:
Endoscopy	$	3,058,000	$	2,356,000	$	1,133,000
Water Purification and Filtration	2,319,000		1,656,000		2,232,000
Healthcare Disposables	699,000		795,000		1,136,000
Dialysis	576,000		583,000		652,000
Other	30,000		97,000		666,000
General corporate	63,000		15,000		16,000
Total	$	6,745,000	$	5,502,000	$	5,835,000
	Year Ended July 31,
	2013		2012		2011
Depreciation and amortization:
Endoscopy	$	6,374,000	$	6,060,000	$	1,096,000
Water Purification and Filtration	3,866,000		3,807,000		3,726,000
Healthcare Disposables	5,500,000		4,490,000		5,923,000
Dialysis	1,188,000		1,230,000		1,365,000
Other	321,000		326,000		307,000
General corporate	14,000		12,000		29,000
Total	$	17,263,000	$	15,925,000	$	12,446,000

Information as to geographic areas (including net sales which represent the geographic area from which the Company derives its net sales from external customers) is summarized below:

	Year Ended July 31,
	2013		2012		2011
Net sales:
United States	$	357,378,000	$	329,261,000	$	270,341,000
Canada	18,732,000		15,646,000		15,635,000
Asia/Pacific	21,895,000		16,323,000		14,551,000
Europe/Africa/Middle East	23,415,000		21,691,000		17,608,000
Latin America/South America	3,606,000		3,569,000		3,516,000
Total	$	425,026,000	$	386,490,000	$	321,651,000
	July 31,
	2013		2012		2011
Total long-lived assets:
United States	$	47,043,000	$	43,353,000	$	33,477,000
Canada	1,236,000		1,365,000		1,689,000
Asia/Pacific	1,030,000		1,130,000		905,000
Europe	155,000		106,000		87,000
Total	49,464,000		45,954,000		36,158,000
Goodwill and intangible assets, net	287,547,000		254,966,000		173,961,000
Total	$	337,011,000	$	300,920,000	$	210,119,000