Operating Segments

9 Months Ended

Apr. 30, 2015

Operating Segments

Operating Segments

Note 14.Operating Segments

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 and hollow fiber membrane filtration and separation products. 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.

None of our customers accounted for 10% or more of our consolidated net sales for the nine months ended April 30, 2015.  For the nine months ended April 30, 2014, DaVita Inc. (“DaVita”), accounted for approximately 10.5%, or approximately $37,575,000, of our consolidated net sales. DaVita sales are included in our Water Purification and Filtration and Dialysis segments.

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 and disposable infection control products intended to eliminate the challenges associated with proper cleaning and high-level disinfection of numerous reusable components used in GI endoscopy procedures. Additionally, this segment includes technical maintenance service on its products.

Water Purification and Filtration, which includes water purification equipment and services, filtration and separation products and disinfectant, sterilization and decontamination products and services for the medical, pharmaceutical, biotech, beverage and commercial industrial markets.

Two customers collectively accounted for approximately 46.3% of our Water Purification and Filtration segment net sales for the nine months ended April 30, 2015.

Healthcare Disposables, which includes single-use, infection prevention and control healthcare products including face masks, sterilization pouches, towels and bibs, tray covers, saliva ejectors, germicidal wipes, plastic cups and disinfectants. This segment also manufactures and sells biological and chemical indicators for sterility assurance monitoring services in the acute-care, alternate-care and dental markets.

Four customers collectively accounted for approximately 48.9% of our Healthcare Disposables segment net sales for the nine months ended April 30, 2015.

Dialysis, which includes medical device reprocessing systems, sterilants/disinfectants, dialysate concentrates and other supplies for renal dialysis. Additionally, this segment includes technical maintenance service on its products.

DaVita accounted for approximately 29.2% of our Dialysis segment net sales for the nine months ended April 30, 2015.

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 Specialty Packaging operating segment was divested on April 7, 2015, as further described in Note 15 to the Condensed Consolidated Financial Statements.

The operating segments follow the same accounting policies used for our Condensed Consolidated Financial Statements as described in Note 2 to the 2014 Form 10-K.

Information as to operating segments is summarized below:

	Three Months Ended						Nine Months Ended
	April 30,						April 30,
	2015			2014			2015			2014
Net sales:
Endoscopy	$	63,734,000		$	47,260,000		$	178,636,000		$	135,460,000
Water Purification and Filtration	44,975,000			38,281,000			129,699,000			118,750,000
Healthcare Disposables	24,754,000			25,506,000			79,288,000			76,471,000
Dialysis	6,970,000			7,349,000			21,770,000			22,269,000
Other	1,075,000			1,662,000			4,356,000			4,422,000
Total	$	141,508,000		$	120,058,000		$	413,749,000		$	357,372,000
Operating income by segment:
Endoscopy	$	12,978,000		$	8,482,000		$	28,832,000		$	24,884,000
Water Purification and Filtration	7,540,000			6,292,000			23,317,000			19,457,000
Healthcare Disposables	3,432,000			4,262,000			14,255,000			14,544,000
Dialysis	1,620,000			1,515,000			4,551,000			5,275,000
Other	211,000			319,000			1,118,000			555,000
	25,781,000			20,870,000			72,073,000			64,715,000
General corporate expenses	(4,500,000		)	(4,044,000		)	(13,444,000		)	(11,368,000		)
Income from operations	21,281,000			16,826,000			58,629,000			53,347,000
Interest expense, net	(619,000		)	(535,000		)	(1,799,000		)	(1,809,000		)
Loss on sale of business	(2,206,000		)	—			(2,206,000		)	—
Income before income taxes	$	18,456,000		$	16,291,000		$	54,624,000		$	51,538,000