Operating Segments

9 Months Ended

Apr. 30, 2016

Operating Segments

Operating Segments

Note 15.Operating Segments

Cantel 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, 2016 and 2015. 

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 reduce the challenges with proper cleaning and high-level disinfection of numerous reusable components used in GI endoscopy procedures. This segment recently commenced the sale of endoscope transport and storage systems, a comprehensive range of endoscopy consumable accessories, and OEM mobile medical carts. 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 disinfectants, sterilization and decontamination products and services for the medical, pharmaceutical, biotech, beverage and commercial industrial markets.

Two customers collectively accounted for approximately 43.9% of our Water Purification and Filtration segment net sales for the nine months ended April 30, 2016.

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, as well as a filter system for maintaining safe dental unit waterlines. This segment also manufactures and sells biological and chemical indicators for sterility assurance monitoring services in the acute-care, alternate-care, dental and industrial markets.

Four customers collectively accounted for approximately 50.2% of our Healthcare Disposables segment net sales for the nine months ended April 30, 2016.

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.

Two customers accounted for approximately 42.3% of our Dialysis segment net sales for the nine months ended April 30, 2016.

Other, which included specialty packaging and thermal control products, as well as related compliance training, for the transport of infectious and biological specimens and thermally sensitive pharmaceutical, medical and other products. The Specialty Packaging operating segment, which comprised the Other reporting segment for financial reporting purposes, was divested on April 7, 2015 as further described in Note 16 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 2015 Form 10-K.

Information as to operating segments is summarized below:

	Three Months Ended				Nine Months Ended
	April 30,				April 30,
	2016		2015		2016		2015
Net sales:
Endoscopy	$	91,892,000	$	63,734,000	$	244,992,000	$	178,636,000
Water Purification and Filtration		44,645,000		44,975,000		132,609,000		129,699,000
Healthcare Disposables		29,779,000		24,754,000		83,157,000		79,288,000
Dialysis		7,387,000		6,970,000		24,995,000		21,770,000
Other		—		1,075,000		—		4,356,000
Total	$	173,703,000	$	141,508,000	$	485,753,000	$	413,749,000

	Three Months Ended				Nine Months Ended
	April 30,				April 30,
	2016		2015		2016		2015
Operating income:
Endoscopy	$	16,279,000	$	12,978,000	$	43,402,000	$	28,832,000
Water Purification and Filtration		6,934,000		7,540,000		22,336,000		23,317,000
Healthcare Disposables		6,162,000		3,432,000		18,195,000		14,255,000
Dialysis		1,795,000		1,620,000		6,216,000		4,551,000
Other		—		211,000		—		1,118,000
		31,170,000		25,781,000		90,149,000		72,073,000
General corporate expenses		(7,907,000)		(4,500,000)		(18,714,000)		(13,444,000)
Income from operations		23,263,000		21,281,000		71,435,000		58,629,000
Interest expense, net		(871,000)		(619,000)		(2,487,000)		(1,799,000)
Other expense		—		(2,206,000)		—		(2,206,000)
Income before income taxes	$	22,392,000	$	18,456,000	$	68,948,000	$	54,624,000