Information as to Operating Segments and Foreign and Domestic Operations

12 Months Ended

Jul. 31, 2016

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 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 during fiscals 2016, 2015 and 2014, except for DaVita Inc. (“DaVita”), which accounted for approximately 10.0% of our consolidated net sales in fiscal 2014. Net sales to DaVita were $48,620,000 in fiscal 2014.

The Company’s segments are as follows:

Endoscopy,  which includes medical device reprocessing systems, disinfectants, detergents and other supplies used to high-level disinfect rigid endoscopes, flexible endoscopes and other instrumentation and disposable infection control products intended to reduce the challenges associated with proper cleaning and high-level disinfection of numerous reusable components used in gastrointestinal (GI) endoscopy procedures. In September 2015, this segment commenced the sale of endoscope transport and storage systems, and a number of endoscopy consumable accessories. Additionally, this segment performs 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 43.7% of our Water Purification and Filtration segment net sales in fiscal 2016.

Healthcare Disposables,  which includes single-use, infection prevention healthcare products including face masks, sterilization pouches, towels and bibs, tray covers, saliva ejectors, plastic cups, germicidal wipes and disinfectants, as well as products 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 (medical device, life science and other manufacturers) markets. In August 2016, this segment commenced the manufacture and sale of nitrous oxide conscious sedation equipment and related single-use disposable nasal masks.

Four customers collectively accounted for approximately 49.1% of our Healthcare Disposables segment net sales in fiscal 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.

Fresenius and DaVita accounted for approximately 42.6% of our Dialysis segment net sales in fiscal 2016.

Other

In addition, we had another operating segment through April 7, 2015, known as Specialty Packaging.  This segment 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 19 to the Consolidated Financial Statements.

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,
	2016		2015		2014
Net sales:
Endoscopy	$	341,752,000	$	248,654,000	$	190,440,000
Water Purification and Filtration		177,669,000		173,834,000		159,505,000
Healthcare Disposables		112,584,000		106,920,000		101,809,000
Dialysis		32,750,000		31,240,000		30,926,000
Other		—		4,356,000		6,069,000
Total	$	664,755,000	$	565,004,000	$	488,749,000

	Year Ended July 31,
	2016		2015		2014
Operating income:
Endoscopy	$	61,021,000	$	40,863,000	$	34,194,000
Water Purification and Filtration		30,620,000		30,606,000		25,750,000
Healthcare Disposables		24,486,000		19,904,000		18,720,000
Dialysis		7,907,000		6,749,000		7,547,000
Other		—		1,118,000		815,000
		124,034,000		99,240,000		87,026,000
General corporate expenses		(26,783,000)		(18,479,000)		(16,098,000)
Income from operations		97,251,000		80,761,000		70,928,000
Interest expense, net		(3,320,000)		(2,364,000)		(2,317,000)
Other expense		—		(2,206,000)		—
Income before income taxes	$	93,931,000	$	76,191,000	$	68,611,000

	Year Ended July, 31
	2016		2015		2014
Identifiable assets:
Endoscopy	$	347,107,000	$	238,799,000	$	203,582,000
Water Purification and Filtration		137,731,000		138,069,000		126,397,000
Healthcare Disposables		157,918,000		145,391,000		138,240,000
Dialysis		20,147,000		26,452,000		25,420,000
Other		—		—		9,316,000
General corporate, including cash and cash equivalents		31,629,000		35,320,000		33,190,000
Total	$	694,532,000	$	584,031,000	$	536,145,000

	Year Ended July, 31
	2016		2015		2014
Capital expenditures:
Endoscopy	$	11,299,000	$	7,042,000	$	6,820,000
Water Purification and Filtration		3,376,000		2,984,000		3,318,000
Healthcare Disposables		2,606,000		1,587,000		1,367,000
Dialysis		667,000		894,000		1,444,000
Other		—		19,000		34,000
General corporate		941,000		234,000		558,000
Total	$	18,889,000		12,760,000		13,541,000

	Year Ended July, 31
	2016		2015		2014
Depreciation and amortization:
Endoscopy	$	14,333,000	$	10,729,000	$	7,001,000
Water Purification and Filtration		5,441,000		5,257,000		4,416,000
Healthcare Disposables		4,361,000		6,354,000		5,968,000
Dialysis		681,000		1,382,000		1,142,000
Other		—		78,000		294,000
General corporate		268,000		157,000		65,000
Total	$	25,084,000	$	23,957,000	$	18,886,000

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
	2016		2015		2014
Net sales:
United States	$	515,055,000	$	447,848,000	$	403,892,000
Europe/Africa/Middle East		88,355,000		62,193,000		32,634,000
Asia/Pacific		33,374,000		28,529,000		24,736,000
Canada		20,975,000		19,306,000		20,729,000
Latin America/South America		6,996,000		7,128,000		6,758,000
Total	$	664,755,000	$	565,004,000	$	488,749,000

	July 31,
	2016		2015		2014
Total long-lived assets:
United States	$	62,820,000	$	57,080,000	$	53,221,000
Europe/Africa/Middle East		14,863,000		9,122,000		2,275,000
Asia/Pacific		1,607,000		1,081,000		1,112,000
Canada		463,000		600,000		1,029,000
Total		79,753,000		67,883,000		57,637,000
Goodwill and intangible assets, net		392,037,000		327,787,000		314,599,000
Total	$	471,790,000	$	395,670,000	$	372,236,000