10-Q

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, 2019.

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

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 Road, Little Falls, New Jersey	07424	(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 Stock	CMD	New 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 filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐  Emerging 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 31, 2019: 41,766,952.

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

TABLE OF CONTENTS

		Page No.
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets (unaudited)	1
	Condensed Consolidated Statements of Income (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)	4
	Condensed Consolidated Statements of Cash Flows (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		33

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements

Condensed Consolidated Balance Sheets

(Unaudited)

	April 30, 2019			July 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	51,348		$	94,097
Accounts receivable, net of allowance for doubtful accounts of $1,609 and $1,149	142,504			118,642
Inventories, net	134,193			107,592
Prepaid expenses and other current assets	23,018			17,912
Income taxes receivable	1,483			—
Total current assets	352,546			338,243
Property and equipment, net	173,070			111,417
Intangible assets, net	148,075			137,361
Goodwill	378,144			368,027
Other assets	7,337			5,749
Deferred income taxes	3,621			2,911
Total assets	$	1,062,793		$	963,708
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	50,537		$	34,258
Compensation payable	29,665			30,595
Accrued expenses	33,412			28,525
Deferred revenue	26,635			28,614
Current portion of long-term debt	10,000			10,000
Income taxes payable	819			2,791
Total current liabilities	151,068			134,783
Long-term debt	223,214			187,302
Deferred income taxes	25,663			27,624
Other long-term liabilities	6,983			5,132
Total liabilities	406,928			354,841
Commitments and contingencies (Note 11)
Stockholders’ equity:
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 46,356,251 shares and outstanding 41,765,917 shares as of April 30, 2019; issued 46,243,582 shares and outstanding 41,706,084 shares as of July 31, 2018	4,636			4,624
Additional paid-in capital	201,116			184,212
Retained earnings	534,449			491,540
Accumulated other comprehensive loss	(19,655		)	(11,456		)
Treasury Stock, at cost; 4,590,334 shares as of April 30, 2019; 4,537,498 shares as of July 31, 2018	(64,681		)	(60,053		)
Total stockholders’ equity	655,865			608,867
Total liabilities and stockholders’ equity	$	1,062,793		$	963,708

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.                                 2019 Third Quarter Form 10-Q

Condensed Consolidated Statements of Income

(Unaudited) 

	Three Months Ended April 30,				Nine Months Ended April 30,
	2019		2018		2019			2018
Net sales
Product sales	$	197,478	$	189,861	$	587,251		$	564,310
Product service	31,074		27,407		91,428			78,758
Total net sales	228,552		217,268		678,679			643,068
Cost of sales
Product sales	99,867		93,762		299,595			283,005
Product service	21,808		18,832		62,283			53,495
Total cost of sales	121,675		112,594		361,878			336,500
Gross profit	106,877		104,674		316,801			306,568
Expenses:
Selling	36,077		33,252		103,233			95,774
General and administrative	48,634		37,784		122,527			102,068
Research and development	7,354		6,571		22,355			17,543
Total operating expenses	92,065		77,607		248,115			215,385
Income from operations	14,812		27,067		68,686			91,183
Interest expense, net	2,509		1,498		6,742			3,822
Other income, net	—		—		(1,313		)	(1,138		)
Income before income taxes	12,303		25,569		63,257			88,499
Income taxes	4,128		6,833		17,040			14,346
Net income	$	8,175	$	18,736	$	46,217		$	74,153
Earnings per common share:
Basic	$	0.20	$	0.45	$	1.11		$	1.78
Diluted	$	0.20	$	0.45	$	1.11		$	1.77
Dividends per common share	$	—	$	—	$	0.10		$	0.09

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.                                 2019 Third Quarter Form 10-Q

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Net income	$	8,175		$	18,736		$	46,217		$	74,153
Other comprehensive (loss) income:
Foreign currency translation	(3,168		)	(6,538		)	(8,808		)	4,608
Interest rate swap	609			—			609			—
Total other comprehensive (loss) income:	(2,559		)	(6,538		)	(8,199		)	4,608
Comprehensive income	$	5,616		$	12,198		$	38,018		$	78,761

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.                                 2019 Third Quarter Form 10-Q

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury stock, at cost			Total Stockholders’ Equity
	Number of Shares Outstanding
			Amount
Balance, July 31, 2018	41,706,084		$	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 vestings/option exercises	53,320		7		948			—			—			—			955
Cancellations of restricted stock	(286	)	—		—			—			—			—			—
Dividends on common stock	—		—		—			—			—			—			—
Net income	—		—		—			19,242			—			—			19,242
Cumulative impact of 606 adoption	—		—		—			865			—			—			865
Other	—		—		(634		)	—			—			—			(634		)
Other comprehensive loss	—		—		—			—			(5,223		)	—			(5,223		)
Balance, October 31, 2018	41,721,316		$	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 vestings/option exercises	1,857		—		—			—			—			—			—
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, 2019	41,721,186		$	4,631	$	192,202		$	526,274		$	(17,096	)	$	(64,408	)	$	641,603
Issuance of shares	42,705		4		3,193			—			—			—			3,197
Repurchases of shares	(3,712	)	—		—			—			—			(273		)	(273		)
Stock-based compensation	—		—		5,722			—			—			—			5,722
Equity vestings/option exercises	5,875		1		(1		)	—			—			—			—
Cancellations of restricted stock	(137	)	—		—			—			—			—			—
Dividends on common stock	—		—		—			—			—			—			—
Net income	—		—		—			8,175			—			—			8,175
Other comprehensive income	—		—		—			—			(2,559		)	—			(2,559		)
Balance, April 30, 2019	41,765,917		$	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) 4

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury stock, at cost			Total Stockholders’ Equity
	Number of Shares Outstanding
			Amount
Balance, July 31, 2017	41,728,934		$	4,619		$	174,602		$	407,590		$	(9,900	)	$	(52,979	)	$	523,932
Repurchases of shares	(52,008	)	—			—			—			—			(5,822		)	(5,822		)
Stock-based compensation	—		—			1,851			—			—			—			1,851
Equity vestings/option exercises	42,168		5			874			—			—			—			879
Cancellations of restricted stock	(1,315	)	—			—			—			—			—			—
Dividends on common stock	—		—			—			—			—			—			—
Net income	—		—			—			22,929			—			—			22,929
Other	88,100		10			32			—			—			—			42
Other comprehensive loss	—		—			—			—			(1,233		)	—			(1,233		)
Balance, October 31, 2017	41,805,879		$	4,634		$	177,359		$	430,519		$	(11,133	)	$	(58,801	)	$	542,578
Repurchases of shares	(1,272	)	—			—			—			—			(131		)	(131		)
Stock-based compensation	—		—			2,739			—			—			—			2,739
Equity vestings/option exercises	—		—			—			—			—			—			—
Cancellations of restricted stock	(1,604	)	—			—			—			—			—			—
Dividends on common stock	—		—			—			(3,545		)	—			—			(3,545		)
Net income	—		—			—			32,488			—			—			32,488
Other	(88,100	)	(10		)	(15		)	—			—			—			(25		)
Other comprehensive loss	—		—			—			—			12,379			—			12,379
Balance, January 31, 2018	41,714,903		4,624			180,083			459,462			1,246			(58,932		)	586,483
Repurchases of shares	(2,336	)	—			—			—			—			(264		)	(264		)
Stock-based compensation	—		—			2,443			—			—			—			2,443
Equity vestings/option exercises	620		—			—			—			—			—			—
Cancellations of restricted stock	(3,482	)	—			—			—			—			—			—
Net income	—		—			—			18,736			—			—			18,736
Other	(370	)	(578		)	1,025			(1		)	—			—			446
Other comprehensive income	—		—			—			—			(6,538		)	—			(6,538		)
Balance, April 30, 2018	41,709,335		$	4,046		$	183,551		$	478,197		$	(5,292	)	$	(59,196	)	$	601,306

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.                                 2019 Third Quarter Form 10-Q

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended April 30,
	2019			2018
Cash flows from operating activities
Net income	$	46,217		$	74,153
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	15,455			12,816
Amortization	15,508			12,892
Stock-based compensation expense	11,885			7,033
Deferred income taxes	(2,671		)	(7,499		)
Other non-cash items, net	263			586
Changes in assets and liabilities, net of effects of acquisitions/dispositions:
Accounts receivable	(18,642		)	892
Inventories	(24,671		)	(9,791		)
Prepaid expenses and other assets	(4,929		)	(7,256		)
Accounts payable and other liabilities	13,608			13,859
Income taxes	(3,537		)	(7,682		)
Net cash provided by operating activities	48,486			90,003
Cash flows from investing activities
Capital expenditures	(75,387		)	(23,772		)
Proceeds from sale of business	3,053			—
Acquisitions, net of cash acquired	(40,644		)	(84,595		)
Net cash used in investing activities	(112,978		)	(108,367		)
Cash flows from financing activities
Repayments of long-term debt	(12,707		)	—
Borrowings under revolving credit facility	50,000			82,300
Repayments under revolving credit facility	(7,000		)	(39,300		)
Dividends paid	(4,173		)	(3,546		)
Purchases of treasury stock	(4,628		)	(6,216		)
Net cash provided by financing activities	21,492			33,238
Effect of exchange rate changes on cash and cash equivalents	251			458
(Decrease) increase in cash and cash equivalents	(42,749		)	15,332
Cash and cash equivalents at beginning of period	94,097			36,584
Cash and cash equivalents at end of period	$	51,348		$	51,916

See accompanying notes to Condensed Consolidated Financial Statements.

(dollar amounts in thousands except share and per share data or as otherwise noted) 6

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Notes to Condensed Consolidated Financial Statements (unaudited).

1.    Basis of Presentation

Throughout this document, references to “Cantel,” “us,” “we,” “our,” and the “Company” are references to Cantel Medical Corp. and its subsidiaries, except where the context makes it clear the reference is to Cantel itself and not its subsidiaries.

During the first quarter of fiscal 2019, we changed the names of our reportable segments to better align with our key customers and the markets we serve. This decision resulted in a change from a financial reporting perspective as the industrial biological and chemical indicator business has moved from the Dental segment to the Life Sciences segment. Prior year segment disclosures have been recast to conform to the current year presentation. See Note 15, “Reportable Segments.”

Cantel is a leading provider of infection prevention products and services in the healthcare market, specializing in the following reportable segments: Medical, Life Sciences, Dental and Dialysis. Most of our equipment, consumables and supplies are used to help prevent the occurrence or spread of infections.

The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles for interim financial reporting and the requirements of Form 10-Q and Rule 10.01 of Regulation S-X. Accordingly, they do not include certain information and note disclosures required by generally accepted accounting principles for annual financial reporting and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Annual Report of Cantel Medical Corp. on Form 10-K for the fiscal year ended July 31, 2018 (the “2018 Form 10-K”) and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. The unaudited interim financial statements reflect all adjustments (of a normal and recurring nature) which management considers necessary for a fair presentation of the results of operations for these periods. The results of operations for the interim periods are not necessarily indicative of the results for the full year. The Condensed Consolidated Balance Sheet at July 31, 2018 was derived from the audited Consolidated Balance Sheet of Cantel at that date. Certain prior year amounts have been reclassified to conform to the current year presentation.

Subsequent Events

We performed a review of events subsequent to April 30, 2019 through the date of issuance of the accompanying unaudited consolidated interim financial statements.

2.           Accounting Pronouncements

Newly Adopted Accounting Standards

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities,” (“ASU 2017-12”) to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), including interim periods within that reporting period. We early adopted ASU 2017-12 effective August 1, 2018. The adoption of ASU 2017-12 did not have a material impact on our financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09, “(Topic 718) Scope of Modification Accounting,” (“ASU 2017-09”) to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019), including interim periods within that reporting period. Accordingly, we adopted ASU 2017-09 on August 1, 2018. The adoption of ASU 2017-09 did not have a material impact on our financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15, “(Topic 230) Classification of Certain Cash Receipts and Cash Payments,” (“ASU 2016-15”). This guidance makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019). Accordingly, we adopted ASU 2016-15 on August 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition” (“ASC 605”). ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract.

(dollar amounts in thousands except share and per share data or as otherwise noted) 7

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to fiscal years beginning after December 15, 2017 (our fiscal year 2019), including interim periods within that reporting period. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2016-12”), which provided narrow scope improvements and practical expedients relating to ASU 2014-09. We adopted the collective standard (“ASC 606”) on August 1, 2018. See Note 5, “Revenue Recognition” for a discussion of the impact and required disclosures.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-15,“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. The adoption of ASU 2018-15 is not expected to have a material impact on our financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-13,“Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”) to modify the disclosure requirements on fair value measurements in ASC 820, “Fair Value Measurement”. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. The adoption of ASU 2018-13 is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2018, the FASB issued ASU 2018-02,“Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”) to allow for the reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Tax Cuts and Jobs Act enacted in December 2017. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), including interim periods within that reporting period. The adoption of ASU 2018-02 is not expected to have a material impact on our financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-04, “(Topic 350) Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”) to simplify the test for goodwill impairment. The revised guidance eliminates the existing Step 2 of the goodwill impairment test which required an entity to compute the implied fair value of its goodwill at the testing date in order to measure the amount of the impairment charge when the fair value of the reporting unit failed Step 1 of the goodwill impairment test. The guidance will be applied on a prospective basis on or after the effective date. ASU 2017-04 is effective for fiscal years beginning after December 31, 2019 (our fiscal year 2021) and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, “(Topic 842) Leases,” (“ASU 2016-02”). The new guidance requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. ASU 2016-02 is effective for fiscal years beginning after December 31, 2018 (our fiscal year 2020), including interim periods within that reporting period. Early adoption is permitted as of the beginning of an interim or annual period. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11, “Leases (Topic 842) Targeted Improvements,” in December 2018, the FASB issued ASU 2018-20, “Narrow-Scope Improvements for Lessors” andin March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements.” These ASUs provide adjustments relating to ASU 2016-02 and improvements to comparative reporting requirements for initial adoption and for separating components of a contract for lessors. We are currently in the process of evaluating the impact of the collective standard (“ASC 842”) on our financial position, results of operations and cash flows.

3. Acquisitions

Fiscal 2019

Omnia: On February 1, 2019, we purchased all of the issued and outstanding stock of Omnia S.p.A. (“Omnia”), an Italian-based market leader in dental surgical consumables solutions, for total consideration (net of cash acquired), excluding acquisition-related costs, of $19,808, consisting of $16,597 of cash and $3,211 of stock consideration, plus additional earn-outs ranging from zero to a maximum of $5,800, which is payable upon the achievement of certain performance-based financial targets. Omnia’s business consists of a wide-ranging portfolio of sutures, irrigation tubing and customized dental surgical procedure kits, with a focus on procedure room set-up and cross-contamination prevention, and is included in our Dental segment.

(dollar amounts in thousands except share and per share data or as otherwise noted) 8

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

CES business: On August 1, 2018, we acquired certain net assets of Stericycle Inc. related to its controlled environmental solutions business (“CES business”) for total cash consideration, excluding acquisition-related costs, of $17,047. The CES business is a leading provider of testing and certification, environmental monitoring and decontamination services for clean rooms and other controlled environments to ensure safety, regulatory compliance and quality control, and is included in our Life Sciences segment.

Fiscal 2018

Aexis: On March 21, 2018, we purchased all of the issued and outstanding stock of Aexis Medical BVBA (“Aexis”) for total consideration, excluding acquisition-related costs, of $21,600, consisting of $20,308 of cash consideration (net of cash acquired), plus contingent consideration ranging from zero to a maximum of $1,850, which is payable upon the achievement of certain purchase order targets through March 21, 2020. Aexis specializes in advanced software solutions focused on the tracking and monitoring of instrument reprocessing for hospitals and healthcare professionals, and is included in our Medical segment.

BHT Group: On August 23, 2017, we purchased all of the issued and outstanding stock of BHT Hygienetechnik Holding GmbH (“BHT Group”), a leader in the German market in automated endoscope reprocessing and related equipment and services for total consideration (net of cash acquired), excluding acquisition related costs, of $60,216. BHT Group consists of a portfolio of high-quality automatic endoscope reprocessors, advanced endoscope storage and drying cabinets (products globally distributed by our Company prior to the acquisition under an agreement with BHT Group), washer-disinfectors for central sterile applications, associated technical service and parts as well as flexible endoscope repair services. BHT Group is included in our Medical segment.

The following table presents our purchase price allocations of our material acquisitions:

	2019					2018
Purchase Price Allocation	Omnia			CES Business(1)		Aexis			BHT Group
	(Preliminary)			(Preliminary)		(Final)			(Final)
Purchase Price:
Cash paid	$	16,597		$	17,047	$	20,308		$	60,216
Fair value of contingent consideration	—			—		1,292			—
Common stock issued	3,211			—		—			—
Total	$	19,808		$	17,047	$	21,600		$	60,216
Allocation:
Property and equipment	1,285			539		130			835
Amortizable intangible assets:
Customer relationships	9,259			8,100		1,800			12,500
Technology	1,600			—		4,600			6,200
Brand names	1,600			—		—			—
Goodwill	9,101			6,137		17,092			40,934
Deferred income taxes	—			—		(1,639		)	(5,881		)
Other working capital	2,170			2,271		909			5,628
Contingent consideration	—			—		(1,292		)	—
Long-term debt	(5,207		)	—		—			—
Total	$	19,808		$	17,047	$	21,600		$	60,216

_______________________________________________

(1) The excess purchase price over net assets acquired was assigned to goodwill, all of which is deductible for income tax purposes.

Unaudited Pro Forma Summary of Operations

The acquisitions above, both individually and in the aggregate, were not material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.

(dollar amounts in thousands except share and per share data or as otherwise noted) 9

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

4.Stock-Based Compensation

2016 Equity Incentive Plan

At April 30, 2019, 281,044 nonvested restricted stock awards were outstanding under the 2016 plan. No options were outstanding under the 2016 plan. At April 30, 2019, 793,110 shares were collectively available for issuance pursuant to restricted stock and other stock awards, stock options and stock appreciation rights.

2006 Equity Incentive Plan

The 2006 Plan was terminated on January 7, 2016 in conjunction with the adoption of the 2016 Plan. At April 30, 2019, options to purchase 40,000 shares of common stock were outstanding under the 2006 Plan. No additional awards will be granted under this plan.

The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2019		2018		2019		2018
Cost of sales	$	245	$	167	$	769	$	463
Operating expenses:
Selling	538		559		1,684		1,188
General and administrative(1)	4,874		1,641		9,249		5,231
Research and development	65		76		183		151
Total operating expenses	5,477		2,276		11,116		6,570
Stock-based compensation expense	$	5,722	$	2,443	$	11,885	$	7,033

_______________________________________________

(1) The increase in stock-based compensation expense primarily relates to the accelerated vesting of awards resulting from organizational leadership changes. 

At April 30, 2019, total unrecognized stock-based compensation expense related to total nonvested stock options and restricted stock awards was $15,427 with a remaining weighted average period of 14 months over which such expense is expected to be recognized.

We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions:

	Nine Months Ended April 30,
	2019		2018
Volatility of common stock	27.54	%	26.60	%
Average volatility of peer companies	36.55	%	33.72	%
Average correlation coefficient of peer companies	27.18	%	32.26	%
Risk-free interest rate	2.93	%	1.62	%

A summary of nonvested stock award activity for the nine months ended April 30, 2019 follows:

	Number of Time-based Awards		Number of Performance-based Awards		Number of Market-based Awards		Number of Total Awards		Weighted Average Fair Value
July 31, 2018	168,320		26,076		17,710		212,106		$	88.87
Granted	143,144		35,981		25,320		204,445		$	88.48
Vested(1)	(95,459	)	(12,742	)	(4,335	)	(112,536	)	$	79.53
Forfeited	(10,251	)	(7,034	)	(5,686	)	(22,971	)	$	98.73
April 30, 2019	205,754		42,281		33,009		281,044		$	91.86

_______________________________________________

(1) The aggregate fair value of all nonvested stock awards which vested was approximately $8,952.

(dollar amounts in thousands except share and per share data or as otherwise noted) 10

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

A summary of stock option activity for the nine months ended April 30, 2019 follows:

	Number of shares		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2018	70,000		$	38.60
Exercised	(30,000	)	$	31.81
Outstanding at April 30, 2019	40,000		$	43.70	0.82	$	1,010
Exercisable at April 30, 2019	40,000		$	43.70	0.82	$	1,010

During the nine months ended April 30, 2019, 5,000 options vested, with an aggregate fair value of approximately $277. During the nine months ended April 30, 2019, 30,000 options were exercised, with an aggregate fair value of approximately $1,787. At April 30, 2019, all outstanding options were vested.

Excess tax benefits arise when the ultimate tax effect of the deduction for tax purposes is greater than the income tax benefit on stock-based compensation. For the nine months ended April 30, 2019, income tax deductions of $2,465 were generated, of which $1,902 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $563 was recorded as a reduction in income tax expense. For the nine months ended April 30, 2018, income tax deductions of $3,406 were generated, of which $1,394 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $2,012 was recorded as a reduction in income tax expense.

5.    Revenue Recognition

Adoption of “Revenue from Contracts with Customers (ASC 606)”

We adopted ASC 606, effective August 1, 2018, using the modified retrospective method applied to those contracts which were not completed as of August 1, 2018. Results for reporting beginning after August 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and will continue to be reported in accordance with our historic accounting under ASC 605.

Due to the cumulative impact of adopting ASC 606, we recorded a net increase of $865 to opening retained earnings, net of tax, as of August 1, 2018. The impact is primarily related to the timing of revenue recognition for the shipment of products in both our Medical and Life Sciences segments where risk of loss provisions are present (“synthetic FOB destination”). The new standard does not require us to defer revenue for these products and allows us to recognize revenue at the time of shipment. The cumulative adjustment to retained earnings also includes the impact of the change in timing of revenue recognition associated with software licensing arrangements in our Medical segment. Additionally, revenue related to software renewals was historically recognized on a ratable basis over the license period. Under ASC 606, the license is considered functional intellectual property, and is considered to be transferred to the customer at a point in time, specifically, at the start of each annual renewal period. As a result, revenue related to our annual software license renewals has been accelerated.

Revenue Recognition

A portion of our medical, life sciences and dialysis sales include multiple performance obligations, whereby revenue is allocated to the equipment, installation and consumable components based upon their relative standalone selling prices, which includes comparable historical transactions of similar equipment, installation and consumables sold as stand-alone components. Revenue on capital equipment and consumables is recognized when control of the equipment or consumable transfers to the customer, which is generally driven by the underlying shipping terms of the transaction. Revenue on the installation component is recognized when the installation is complete. The most significant judgments related to these arrangements include identifying the various performance obligations of these arrangements and determining the relative standalone selling price of each performance obligation.

With respect to certain of our customers, rebates are provided. Such rebates, which consist primarily of volume rebates, are provided for as a reduction of sales at the time of revenue recognition. Such allowances are determined based on estimated projections of sales volume for the entire rebate periods. If it becomes known that sales volume to customers will deviate from original projections, the rebate provisions originally established would be adjusted accordingly. We also offer certain volume-based rebates to our distribution customers, which we record as variable consideration when calculating the transaction price. We use information available at the time and our historical experience with each customer to estimate the rebate amount by applying the expected value method.

(dollar amounts in thousands except share and per share data or as otherwise noted) 11

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

The following table gives information as to the net sales disaggregated by geography and product line:

	Three Months Ended April 30,				Nine Months Ended April 30,
Net sales by geography	2019		2018(1)		2019		2018(1)
United States	$	163,367	$	159,375	$	497,469	$	478,024
Europe/Africa/Middle East	39,949		33,702		106,278		94,254
Asia/Pacific	15,140		14,341		46,476		41,190
Canada	8,555		7,842		24,064		24,638
Latin America/South America	1,541		2,008		4,392		4,962
Total	$	228,552	$	217,268	$	678,679	$	643,068
Net sales by product line
Capital equipment	$	51,351	$	58,935	$	166,870	$	177,175
Consumables	144,515		130,155		417,067		385,963
Product service	31,074		27,407		91,428		78,758
All other(2)	1,612		771		3,314		1,172
Total	$	228,552	$	217,268	$	678,679	$	643,068

_______________________________________________

(1) As noted above, prior year amounts have not been adjusted under the modified retrospective method.

(2) Primarily includes software licensing revenues.

Remaining Performance Obligations

At April 30, 2019, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $66,534, primarily within the Medical segment. We expect to recognize revenue on approximately 60% of these remaining performance obligations over the remainder of fiscal 2019 and fiscal 2020. These performance obligations primarily reflect the future product service revenues for multi-period service arrangements.

Contract Liabilities

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. Our contract liabilities arise primarily in the Medical and Life Sciences segments when payment is received upfront for various multi-period extended service arrangements. We expect to recognize substantially all of this revenue over the next twelve months.

A summary of contract liabilities activity for the nine months ended April 30, 2019 follows:

	Contract Liabilities
Balance, August 1, 2018	$	29,015
Revenue deferred in current year	48,589
Deferred revenue recognized	(49,710		)
Foreign currency translation	(435		)
Balance, April 30, 2019	27,459
Contract liabilities included in Other long-term liabilities	(824		)
Deferred revenue	$	26,635

Practical Expedients and Policy Elections

As part of the cost to obtain a contract, we may pay incremental commissions to sales employees upon entering into a sales contract. Under ASC 606, we have elected to expense these costs as incurred when the period of benefit is less than one year. For certain multi-period contracts, we capitalize these amounts as contract costs, and amortize them based on the contract duration to which the assets relate, which ranges from two to five years. The amounts at April 30, 2019, were not material. For certain international contracts with distributors, we recognize a receivable at the point in time in which we have an unconditional right to payment. Most customers are required to pay a portion of the transaction price in advance and the remaining balance within 30 days of

(dollar amounts in thousands except share and per share data or as otherwise noted) 12

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

receiving the related products. Accordingly, we have elected to use the practical expedient which allows us to ignore the possible existence of a significant financing component within these contracts.

As a policy, for shipping and handling costs incurred after the customer has obtained control of a good, we will continue to treat these costs as a fulfillment cost rather than as an additional promised service. Additionally, in certain U.S. states, we are required to collect sales taxes from our customers, and in certain international jurisdictions, we are required to collect value added taxes. The tax collected is recorded as a liability until remitted to the taxing authority.

6.    Inventories, Net

A summary of inventories is as follows:

	April 30, 2019			July 31, 2018
Raw materials and parts	$	68,557		$	49,054
Work-in-process	4,816			13,189
Finished goods	70,887			53,948
Reserve for excess and obsolete inventory	(10,067		)	(8,599		)
Total	$	134,193		$	107,592

7.    Derivatives

Foreign Currency

In order to hedge against the impact of fluctuations in the value of the Euro, British Pound, Canadian dollar, Australian dollar and Singapore dollar relative to the U.S. dollar on the conversion of such net assets into the functional currencies, we enter into short-term forward contracts to purchase Euros, British Pounds, Canadian dollars, Australian dollars and Singapore dollars, which contracts are one-month in duration. These short-term contracts are designated as fair value hedge instruments. These foreign currency forward contracts are continually replaced with new one-month contracts as long as we have significant net assets that are denominated and ultimately settled in currencies other than each entity’s functional currency. Gains and losses related to hedging contracts to buy Euros, British Pounds, Canadian dollars, Australian dollars and Singapore dollars forward are immediately realized within general and administrative expenses due to the short-term nature of such contracts. We do not currently hedge against the impact of fluctuations in the value of the Chinese Renminbi and Sri Lankan Rupee relative to the U.S. dollar because the overall foreign currency exposure relating to these currencies is not material.

There were six foreign currency forward contracts with an aggregate notional value of $61,447 and $30,159 at April 30, 2019 and July 31, 2018, respectively, which covered certain assets and liabilities that were denominated in currencies other than each entity’s functional currency. For the nine months ended April 30, 2019 and 2018, the settlements of our forward contracts resulted in immaterial amounts of currency conversion gains and losses on the hedged items in the aggregate.

Variable Rate Borrowings

In order to hedge against the impact of fluctuations in the interest rate associated with our variable rate borrowings, on April 9, 2019, we entered into two interest rate swaps with a combined notional value of $150,000, expiring on June 28, 2023. The swaps fixed interest rates at 2.45%. At April 30, 2019, we had an asset of $751 recorded in other assets, and a liability of $142 recorded in accrued expenses, which represent the fair value of the interest rate swaps. The fair value of these interest rate swaps is subject to movements in LIBOR and will fluctuate in future periods.

8.    Fair Value Measurements

Fair Value Hierarchy

We apply the provisions of ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”), for our financial assets and liabilities that are re-measured and reported at fair value each reporting period and our nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. We define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

(dollar amounts in thousands except share and per share data or as otherwise noted) 13

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Our financial assets that are re-measured at fair value on a recurring basis include money market funds that are classified as cash and cash equivalents in the consolidated balance sheets. These money market funds are classified within Level 1 of the fair value hierarchy and are valued using quoted market prices for identical assets.

For the Aexis acquisition, additional purchase price payments ranging from zero to $1,850 are contingent upon the achievement of certain purchase order targets through March 21, 2020. We estimated the original fair value of the contingent consideration using the weighted probabilities of the possible contingent payments. At the date of acquisition, we estimated the original fair value of the contingent consideration to be $1,292. We are required to reassess the fair value of contingent payments on a periodic basis. The significant inputs used in these estimates include numerous possible scenarios for the payments based on the contractual terms of the contingent consideration, for which probabilities are assigned to each scenario. Given the short term nature of the financial instrument, the contingent consideration is not discounted to present value. Although we believe our assumptions are reasonable, different assumptions or changes in the future may result in different estimated amounts.

In connection with the Jet Prep Ltd. (“Jet Prep”) acquisition in fiscal 2014, we assumed a contingent obligation payable to the Israeli Government based on future sales. This fair value measurement was based on significant inputs not observed in the market and thus represent Level 3 measurements. In November 2017, the Israeli Government formally notified us that they would forgive any future amounts payable due to our decision to exit the Jet Prep business. During the first quarter of fiscal 2018, we reduced the fair value of this obligation to zero. See Note 11, “Commitments and Contingencies.”

The fair values of our financial instruments measured on a recurring basis were categorized as follows:

	April 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money markets	$	104	$	—	$	—	$	104
Other Assets:
Interest rate swap	—		751		—		751
Total assets	$	104	$	751	$	—	$	855
Liabilities:
Accrued expenses:
Interest rate swap	—		142		—		142
Other long-term liabilities:
Contingent consideration	—		—		1,374		1,374
Total liabilities	$	—	$	142	$	1,374	$	1,516

	July 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money markets	$	104	$	—	$	—	$	104
Total assets	$	104	$	—	$	—	$	104
Liabilities:
Other long-term liabilities:
Contingent consideration	—		—		1,298		1,298
Total liabilities	$	—	$	—	$	1,298	$	1,298

(dollar amounts in thousands except share and per share data or as otherwise noted) 14

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:

	Aexis Contingent Consideration
Balance, July 31, 2018	$	1,298
Net activity	76
Balance, April 30, 2019	$	1,374

Disclosure of Fair Value of Financial Instruments

At April 30, 2019 and July 31, 2018, the carrying amounts for cash and cash equivalents (excluding money markets), accounts receivable and accounts payable approximated fair value due to the short maturity of these instruments. At April 30, 2019 and July 31, 2018, the carrying value of our outstanding borrowings under our credit facility approximated the fair value of these obligations as the respective borrowing rates reflect prevailing market interest rates.

9. Intangibles and Goodwill

Our intangible assets consist of the following:

	April 30, 2019							July 31, 2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships(1)	$	144,003	$	(49,042	)	$	94,961	$	133,347	$	(45,618	)	$	87,729
Technology(1)	59,652		(21,722		)	37,930		54,585		(19,836		)	34,749
Brand names(1)	8,462		(3,116		)	5,346		8,141		(3,857		)	4,284
Non-compete agreements(1)	2,880		(1,604		)	1,276		3,060		(1,628		)	1,432
Patents and other registrations	3,103		(1,236		)	1,867		2,826		(1,179		)	1,647
	218,100		(76,720		)	141,380		201,959		(72,118		)	129,841
Trademarks and tradenames	6,695		—			6,695		7,520		—			7,520
Total intangible assets	$	224,795	$	(76,720	)	$	148,075	$	209,479	$	(72,118	)	$	137,361

_______________________________________________

(1) During the nine months ended April 30, 2019, we wrote off $10,127 of fully amortized intangible assets.

Amortization expense related to intangible assets was $15,508 and $12,892 for the nine months ended April 30, 2019 and 2018, respectively. We expect to recognize an additional $5,547 of amortization expense related to intangible assets for the remainder of fiscal 2019, and thereafter $18,382, $18,051, $17,252, $16,222 and $15,352 of amortization expense for fiscal years 2020, 2021, 2022, 2023 and 2024, respectively.

Goodwill changed during the nine months ended April 30, 2019 as follows:

	Medical			Life Sciences			Dental			Dialysis		Total Goodwill
Balance, July 31, 2018	$	186,690		$	58,925		$	114,279		$	8,133	$	368,027
Acquisitions	—			6,137			9,101			—		15,238
Divestitures	—			(491		)	—			—		(491		)
Foreign currency translation	(4,244		)	(176		)	(210		)	—		(4,630		)
Balance, April 30, 2019	$	182,446		$	64,395		$	123,170		$	8,133	$	378,144

(dollar amounts in thousands except share and per share data or as otherwise noted) 15

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

10.    Financing Arrangements

Our long-term debt consists of the following:

	April 30, 2019			July 31, 2018
Revolving credit loans outstanding	$	43,000		$	—
Tranche A term loan outstanding	192,500			200,000
Unamortized debt issuance costs	(2,286		)	(2,698		)
Total long-term debt, net of unamortized debt issuance costs	233,214			197,302
Current portion of long-term debt	(10,000		)	(10,000		)
Long-term debt, net of unamortized debt issuance costs and excluding current portion	$	223,214		$	187,302

On June 28, 2018, we entered into a Fourth Amended and Restated Credit Agreement (the “2018 Credit Agreement”). The 2018 Agreement refinances our credit facility under the Third Amended and Restated Credit Agreement (the “Existing Credit Agreement”) dated March 4, 2014, to include a $200,000 tranche A term loan and a $400,000 revolving credit facility. Subject to the satisfaction of certain conditions precedent, including the consent of the lenders, we may from time to time increase our borrowing capacity under the revolving credit facility or tranche A term loan by an aggregate amount not to exceed $300,000. The 2018 Credit Agreement expires on June 28, 2023. Additionally, subject to certain restrictions and conditions (i) any of our domestic or foreign subsidiaries may become borrowers and (ii) borrowings may occur in multi-currencies.

At April 30, 2019, we had $192,500 of term loan A borrowings outstanding and $43,000 revolver borrowings under the 2018 Credit Agreement. The tranche A term loan is subject to principal amortization, with $10,000 due and payable in each of fiscal 2019, 2020, 2021 and 2022, with the remaining $160,000 due and payable at maturity on June 28, 2023. During the nine months ended April 30, 2019, we made principal payments of $7,500.

Borrowings under the 2018 Credit Agreement bear interest at rates ranging from 0.00% to 1.00% above prime rate for base rate borrowings, or at rates ranging from 1.00% to 2.00% above the London Interbank Offered Rate (“LIBOR”), depending upon our “Consolidated Leverage Ratio,” which is defined as the consolidated ratio of total funded debt to earnings before interest, taxes, depreciation and amortization, and as further adjusted under the terms of the 2018 Credit Agreement (“Consolidated EBITDA”). At April 30, 2019, the lender’s base rate was 5.75% and the LIBOR rate was 3.73%. The margins applicable to our outstanding borrowings were 0.25% above the lender’s base rate or 1.25% above LIBOR. All of our outstanding borrowings were under LIBOR contracts at April 30, 2019. The 2018 Credit Agreement also provides for fees on the unused portion of our facility at rates ranging from 0.20% to 0.35%, depending upon our Consolidated Leverage Ratio, which was 0.20% at April 30, 2019. At April 30, 2019, the interest rate on our outstanding borrowings was approximately 3.74%.

The 2018 Credit Agreement contains affirmative and negative covenants reasonably customary for similar credit facilities and is secured by (i) substantially all assets of Cantel and its U.S.-based subsidiaries, (ii) a pledge by Cantel of all of the outstanding shares of its U.S.-based subsidiaries and 65% of the outstanding shares of certain of Cantel’s foreign-based subsidiaries and (iii) a guaranty by Cantel’s domestic subsidiaries. We are in compliance with all financial covenants under the 2018 Credit Agreement.

11.    Commitments and Contingencies

Contingent Consideration and Assumed Contingent Liability

At April 30, 2019, $1,374 was recorded related to the Aexis acquisition, which is for the estimated fair value of contingent consideration payable upon the achievement of certain purchase order targets through March 21, 2020. During fiscal 2017, we decided to exit the Jet Prep business that was acquired in fiscal 2014. At the time of the acquisition, we assumed a contingent obligation payable to the Israeli Government based on future sales. In November 2017, the Israeli Government formally notified us that they would forgive any future amounts payable due to our decision to exit the Jet Prep business. As a result of this formal notification, we reduced the $1,138 contingent obligation to zero during the first quarter of fiscal 2018, resulting in a benefit through other income for the nine months ended April 30, 2018.

(dollar amounts in thousands except share and per share data or as otherwise noted) 16

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Legal Matters

In the normal course of business, we are subject to pending and threatened legal actions. It is our policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount of anticipated exposure can be reasonably estimated. We do not believe that any of these pending claims or legal actions will have a material effect on our business, financial condition, results of operations or cash flows.

12.    Earnings Per Common Share

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (nonvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of nonvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities.

The following table sets forth the computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities):

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Numerator for basic and diluted earnings per share:
Net income	$	8,175		$	18,736		$	46,217		$	74,153
Less income allocated to participating securities	(5		)	(59		)	(51		)	(281		)
Net income available to common shareholders	$	8,170		$	18,677		$	46,166		$	73,872
Denominator for basic and diluted earnings per share, adjusted for participating securities:
Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock	41,720,733			41,580,387			41,685,623			41,559,312
Dilutive effect of stock awards using the treasury stock method and the average market price for the year	38,705			69,134			40,608			63,642
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock	41,759,438			41,649,521			41,726,231			41,622,954
Earnings per share attributable to common stock:
Basic earnings per share	$	0.20		$	0.45		$	1.11		$	1.78
Diluted earnings per share	$	0.20		$	0.45		$	1.11		$	1.77
Stock options excluded from weighted average dilutive common shares because their inclusion would have been anti-dilutive	—			—			—			—

A reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, as determined above, to our total weighted average number of shares and common stock equivalents, including participating securities, is set forth in the following table:

	Three Months Ended April 30,		Nine Months Ended April 30,
	2019	2018	2019	2018
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock	41,759,438	41,649,521	41,726,231	41,622,954
Participating securities	25,002	133,954	45,485	159,932
Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities	41,784,440	41,783,475	41,771,716	41,782,886

(dollar amounts in thousands except share and per share data or as otherwise noted) 17

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

13.    Income Taxes

On December 22, 2017, the U.S. government enacted wide-ranging tax legislation, the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act significantly revised U.S. tax law by, among other provisions, (a) lowering the applicable U.S. federal statutory income tax rate from 35% to 21%, (b) creating a partial territorial tax system that includes imposing a mandatory one-time transition tax on previously deferred foreign earnings, (c) creating provisions regarding the (1) Global Intangible Low Tax Income (“GILTI”), (2) the Foreign Derived Intangible Income (“FDII”) deduction, and (3) the Base Erosion Anti-Abuse Tax (“BEAT”), and (d) eliminating or reducing certain income tax deductions, such as interest expense, executive compensation expenses and certain employee expenses.

ASC 740, “Income Taxes,” requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. However, due to the complexity and significance of the 2017 Tax Act’s provisions, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allows companies to record the tax effects of the 2017 Tax Act on a provisional basis and then, if necessary, subsequently adjust such amounts during a limited measurement period as more information becomes available. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year from enactment. As a result, we provided a provisional estimate of the effect of the Tax Act for the fiscal year ended July 31, 2018, and recorded a net benefit of $8,657 due to the impact on our deferred taxes on the basis of the actual fiscal 2018 results of operations. The measurement period provided by SAB 118 concluded during the second quarter of fiscal 2019, and no material adjustments were made to the provisional estimates recorded.

As part of U.S. tax reform, the 2017 Tax Act imposed a one-time transition tax on certain accumulated positive foreign earnings (net of foreign deficits) across all non-U.S. subsidiaries, as computed under U.S. tax principles. As of December 31, 2017, our non-U.S. subsidiaries were in a net foreign deficit position in the aggregate, and therefore no accrual for the transition tax was made.

Section 15 of the Internal Revenue Code (the “Code”) governs rate changes and was not amended by the 2017 Tax Act. Section 15 requires a blended tax rate for fiscal-year taxpayers for their fiscal year that includes the effective date of the rate change, which was January 1, 2018. As a result of the 2017 Tax Act, we revised our estimated annual effective rate to reflect the change in the U.S. federal statutory rate by computing a tentative tax under both rates, and then prorating the tentative tax based on the number of days with and without the rate change to arrive at a blended tax rate of 26.9%, as required by the Code. This blended rate was applied for fiscal 2018 (beginning with the second quarter) and the new U.S. federal statutory rate of 21% applies to fiscal 2019 and beyond. 

As noted above, the 2017 Tax Act also establishes new tax laws that will affect the fiscal year ending July 31, 2019, which include the GILTI provision, the FDII deduction, a new minimum tax related to payments to foreign subsidiaries and affiliates known as BEAT and certain employee expense deductions. The provisional estimates were based on our understanding of the 2017 Tax Act and other information available at the time of the estimates, including assumptions and expectations about future events, such as projected financial performance, and are subject to further refinement as additional information becomes available, including potential new or interpretative guidance issued by the SEC, the FASB, or IRS.

A reconciliation of the consolidated effective income tax rate is as follows:

	Three Months Ended		Nine Months Ended
Effective Rate, April 30, 2018	26.7	%	16.2	%
Deferred tax revaluation	1.0	%	10.0	%
U.S. federal statutory rate decrease	(5.8	)%	(5.8	)%
Foreign operations	4.9	%	2.4	%
State taxes	(0.9	)%	0.2	%
Excess tax benefit	3.5	%	1.4	%
Other	4.2	%	2.5	%
Effective Rate, April 30, 2019	33.6	%	26.9	%

(dollar amounts in thousands except share and per share data or as otherwise noted) 18

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

14.    Accumulated Other Comprehensive Loss

The components and changes in accumulated other comprehensive loss were as follows:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Beginning balance	$	(17,096	)	$	1,246		$	(11,456	)	$	(9,900	)
Foreign currency translation	(3,168		)	(6,538		)	(8,808		)	4,608
Interest rate swap	609			—			609			—
Ending balance	$	(19,655	)	$	(5,292	)	$	(19,655	)	$	(5,292	)

15.    Reportable Segments

In accordance with 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 income from operations.

During the first quarter of fiscal 2019, we changed the names of our reportable segments to better align with our key customers and the markets we serve. As a result of this change, our industrial biological and chemical indicator business has moved from the Dental segment to the Life Sciences segment. Prior year segment disclosures have been recast to conform to the current year presentation.

Our reportable segments are as follows:

Medical: designs, develops, manufactures, sells and installs a comprehensive offering of products and services comprising a complete circle of infection prevention solutions. Our products include endoscope reprocessing and endoscopy procedure products.

Life Sciences: designs, develops, manufactures, sells, and installs water purification systems for medical, pharmaceutical and other bacteria controlled applications. We also provide filtration/separation and disinfectant technologies to the medical and life science markets through a worldwide distributor network. Two customers collectively accounted for approximately 40.9% and 50.1% of our Life Sciences segment net sales for the nine months ended April 30, 2019 and 2018, respectively.

Dental: designs, manufactures, sells, supplies and distributes a broad selection of infection prevention healthcare products, the majority of which are single-use products used by dental practitioners. Three customers collectively accounted for approximately 45.7% and 47.7% of our Dental segment net sales for the nine months ended April 30, 2019 and 2018, respectively.

Dialysis: designs, develops, manufactures, sells and services reprocessing systems and sterilants for dialyzers (a device serving as an artificial kidney), as well as dialysate concentrates and supplies utilized for renal dialysis. Three customers accounted for approximately 45.6% and 39.0% of our Dialysis segment net sales for the nine months ended April 30, 2019 and 2018, respectively. These customers include one of the top two customers noted above under our Life Sciences segment.

None of our customers accounted for 10% or more of our consolidated net sales for the nine months ended April 30, 2019 and 2018.

Information as to reportable segments is summarized below:

	Three Months Ended April 30,				Nine Months Ended April 30,
Net sales	2019		2018		2019		2018
Medical	$	130,722	$	118,396	$	386,854	$	347,446
Life Sciences	46,478		54,020		151,692		161,127
Dental	43,628		36,832		116,189		110,599
Dialysis	7,724		8,020		23,944		23,896
Total net sales	$	228,552	$	217,268	$	678,679	$	643,068

(dollar amounts in thousands except share and per share data or as otherwise noted) 19

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

	Three Months Ended April 30,				Nine Months Ended April 30,
Income from operations	2019		2018		2019		2018
Medical	$	24,302	$	20,515	$	75,038	$	64,662
Life Sciences	4,842		9,018		18,496		27,976
Dental	4,758		7,025		15,571		22,258
Dialysis	1,151		1,778		3,728		5,795
	35,053		38,336		112,833		120,691
General corporate expenses	20,241		11,269		44,147		29,508
Total income from operations	$	14,812	$	27,067	$	68,686	$	91,183

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand Cantel. The MD&A is provided as a supplement to and should be read in conjunction with our financial statements and the accompanying notes.

Overview

Cantel is a leading provider of infection prevention products and services in the healthcare market, specializing in the following reportable segments: Medical, Life Sciences, Dental and Dialysis. Most of our equipment, consumables and supplies are used to help prevent the occurrence or spread of infections.

Third Quarter 2019 Summary

A summary of financial results for the three months ended April 30, 2019 compared with the three months ended April 30, 2018 follows:

• Net sales increased by 5.2% to $228,552 from $217,268, with organic net sales growth of 2.7%

• Net income decreased by 56.4% to $8,175 from $18,736

• Non-GAAP net income decreased by 7.9% to $22,966 from $24,929

• Diluted EPS decreased by 56.4% to $0.20 from $0.45

• Non-GAAP diluted EPS decreased by 7.5% to $0.55 from $0.60

• Adjusted EBITDAS decreased by 5.0% to $41,384 from $43,569

See Non-GAAP Financial Measures below.

Reportable Segment Name Changes

During the first quarter of fiscal 2019, we changed the names of our reportable segments to better align with our key customers and the markets we serve. As a result of this change, our industrial biological and chemical indicator business has moved from the Dental segment to the Life Sciences segment. Prior year segment disclosures have been recast to conform to the current year presentation.

Acquisitions

On February 1, 2019, we purchased all of the issued and outstanding stock of Omnia, an Italian-based market leader in dental surgical consumables solutions, for total consideration (net of cash acquired), excluding acquisition-related costs, of $19,808, consisting of $16,597 of cash and $3,211 of stock consideration, plus additional earn-outs ranging from zero to a maximum of $5,800, which is payable upon the achievement of certain performance-based financial targets. Omnia’s business consists of a wide-ranging portfolio of sutures, irrigation tubing and customized dental surgical procedure kits, with a focus on procedure room set-up and cross-contamination prevention, and is included in our Dental segment.

(dollar amounts in thousands except share and per share data or as otherwise noted) 20

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

On August 1, 2018, we acquired certain net assets of Stericycle Inc. related to its controlled environmental solutions business (“CES business”) for total cash consideration, excluding acquisition-related costs, of $17,047. The CES business is a leading provider of testing and certification, environmental monitoring and decontamination services for clean rooms and other controlled environments to ensure safety, regulatory compliance and quality control, and is included in our Life Sciences segment.

U.S. Tax Reform

The 2017 Tax Act, among other provisions, lowered the applicable U.S. federal statutory income tax rate from 35% to 21% and implemented the imposition of a one-time transition tax on previously deferred foreign earnings. ASC 740 requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted, including the revaluation of deferred income tax assets and liabilities. During the second quarter ended January 31, 2018, we recorded a one-time net benefit of $8,398 to the income tax provision as a provisional estimate of the net accounting impact of the 2017 Tax Act in accordance with SAB 118. During the third quarter ended April 30, 2018, we reduced the one-time net benefit by $294.

Results of Operations

The following tables give information as to the percentages of net sales represented by selected items reflected in our condensed consolidated statements of income.

	Three Months Ended April 30,								Percentage Change
Statement of Income Data:	2019				2018
Net sales	$	228,552	100.0	%	$	217,268	100.0	%	5.2	%
Cost of sales	121,675		53.2	%	112,594		51.8	%	8.1	%
Gross profit	106,877		46.8	%	104,674		48.2	%	2.1	%
Selling	36,077		15.8	%	33,252		15.3	%	8.5	%
General and administrative	48,634		21.3	%	37,784		17.4	%	28.7	%
Research and development	7,354		3.2	%	6,571		3.0	%	11.9	%
Total operating expenses	92,065		40.3	%	77,607		35.7	%	18.6	%
Income from operations	14,812		6.5	%	27,067		12.5	%	(45.3	)%
Interest expense, net	2,509		1.1	%	1,498		0.7	%	67.5	%
Other income, net	—		—	%	—		—	%	—	%
Income before income taxes	12,303		5.4	%	25,569		11.8	%	(51.9	)%
Income taxes	4,128		1.8	%	6,833		3.2	%	(39.6	)%
Net income	$	8,175	3.6	%	$	18,736	8.6	%	(56.4	)%

(dollar amounts in thousands except share and per share data or as otherwise noted) 21

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

	Nine Months Ended April 30,										Percentage Change
Statement of Income Data:	2019					2018
Net sales	$	678,679		100.0	%	$	643,068		100.0	%	5.5	%
Cost of sales	361,878			53.3	%	336,500			52.3	%	7.5	%
Gross profit	316,801			46.7	%	306,568			47.7	%	3.3	%
Selling	103,233			15.2	%	95,774			14.9	%	7.8	%
General and administrative	122,527			18.1	%	102,068			15.9	%	20.0	%
Research and development	22,355			3.3	%	17,543			2.7	%	27.4	%
Total operating expenses	248,115			36.6	%	215,385			33.5	%	15.2	%
Operating income	68,686			10.1	%	91,183			14.2	%	(24.7	)%
Interest expense, net	6,742			1.0	%	3,822			0.6	%	76.4	%
Other income, net	(1,313		)	(0.2	)%	(1,138		)	(0.2	)%	—	%
Income before income taxes	63,257			9.3	%	88,499			13.8	%	(28.5	)%
Income taxes	17,040			2.5	%	14,346			2.3	%	18.8	%
Net income	$	46,217		6.8	%	$	74,153		11.5	%	(37.7	)%

The following table gives information as to the net sales by reportable segment and geography, as well as the related percentage of such net sales to the total net sales.

	Three Months Ended April 30,								Nine Months Ended April 30,
Net sales by segment	2019				2018				2019				2018
Medical	$	130,722	57.2	%	$	118,396	54.5	%	$	386,854	57.0	%	$	347,446	54.0	%
Life Sciences	46,478		20.3	%	54,020		24.9	%	151,692		22.4	%	161,127		25.1	%
Dental	43,628		19.1	%	36,832		17.0	%	116,189		17.1	%	110,599		17.2	%
Dialysis	7,724		3.4	%	8,020		3.6	%	23,944		3.5	%	23,896		3.7	%
Total net sales	$	228,552	100.0	%	$	217,268	100.0	%	$	678,679	100.0	%	$	643,068	100.0	%
Net sales by geography
United States	$	163,367	71.5	%	$	159,375	73.4	%	$	497,469	73.3	%	$	478,024	74.3	%
International	65,185		28.5	%	57,893		26.6	%	181,210		26.7	%	165,044		25.7	%
Total net sales	$	228,552	100.0	%	$	217,268	100.0	%	$	678,679	100.0	%	$	643,068	100.0	%

The following table gives information as to the amount of income from operations, as well as income from operations as a percentage of net sales, for each of our reportable segments.

	Three Months Ended April 30,								Nine Months Ended April 30,
Income from operations by segment	2019				2018				2019				2018
Medical	$	24,302	18.6	%	$	20,515	17.3	%	$	75,038	19.4	%	$	64,662	18.6	%
Life Sciences	4,842		10.4	%	9,018		16.7	%	18,496		12.2	%	27,976		17.4	%
Dental	4,758		10.9	%	7,025		19.1	%	15,571		13.4	%	22,258		20.1	%
Dialysis	1,151		14.9	%	1,778		22.2	%	3,728		15.6	%	5,795		24.3	%
Income from operations by segment	35,053		15.3	%	38,336		17.6	%	112,833		16.6	%	120,691		18.8	%
General corporate expenses	20,241		8.8	%	11,269		5.1	%	44,147		6.5	%	29,508		4.6	%
Income from operations	$	14,812	6.5	%	$	27,067	12.5	%	$	68,686	10.1	%	$	91,183	14.2	%

(dollar amounts in thousands except share and per share data or as otherwise noted) 22

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Net Sales

Total net sales increased by $11,284 or 5.2%, to $228,552 for the three months ended April 30, 2019 from $217,268 for the three months ended April 30, 2018, which consisted of an increase of 2.7% in organic sales, an increase of 3.8% in net sales due to acquisitions and a decrease of 1.3% due to foreign currency translation. International net sales increased by $7,292 or 12.6%, to $65,185 for the three months ended April 30, 2019 from $57,893 for the three months ended April 30, 2018. The 12.6% increase in international net sales consisted of 8.3% organic sales growth, a 9.5% increase due to acquisitions (offset by dispositions), and a decrease of 5.2% due to foreign currency translation, resulting from the strengthening of the U.S. dollar. 

Total net sales increased by $35,611 or 5.5%, to $678,679 for the nine months ended April 30, 2019 from $643,068 for the nine months ended April 30, 2018, which consisted of an increase of 4.1% in organic sales, an increase of 2.4% in net sales due to acquisitions and a decrease of 1.0% due to foreign currency translation. International net sales increased by $16,166 or 9.8%, to $181,210 for the nine months ended April 30, 2019 from $165,044 for the nine months ended April 30, 2018. The 9.8% increase in international net sales consisted of 9.2% organic sales growth, a 4.5% increase due to acquisitions (offset by dispositions), and a decrease of 3.9% due to foreign currency translation, resulting from the strengthening of the U.S. dollar. 

Medical. Net sales increased by $12,326 or 10.4%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018, which consisted of 12.2% organic sales growth, a 0.6% increase due to acquisitions and a decrease of 2.4% due to foreign currency translation. Net sales increased by $39,408 or 11.3%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018, which consisted of 12.1% organic sales growth, a 0.9% increase due to acquisitions and a decrease of 1.7% due to foreign currency translation. The increases in organic net sales for the three and nine month periods were primarily driven by increased sales of our reprocessing products (across all product lines) and to a lesser extent, our procedure room products and consumables. The sales growth was primarily driven by our domestic business and also supported by international sales increases, most notably in the Asia/Pacific region.

Life Sciences. Net sales decreased by $7,542 or 14.0% for the three months ended April 30, 2019 compared with the three months ended April 30, 2018, which consisted of 17.6% organic sales decrease and a decrease of 0.3% due to foreign currency translation, partially offset by a 3.9% increase due to acquisitions (net of divestitures). Net sales decreased by $9,435 or 5.9% for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018, which consisted of 9.3% organic sales decrease and a decrease of 0.4% due to foreign currency translation, partially offset by a 3.8% increase due to acquisitions (net of divestitures). The decreases in sales for the three and nine month periods were primarily due to continued softness in demand for capital equipment, primarily in the medical water business, partially offset by acquisition-related growth. We expect this softness in demand to continue through the end of our fiscal year as orders for our hemodialysis water business were down this quarter, as a result of a key customer moving toward a dual source approach and a cyclical downturn in this business. For a more detailed discussion on the competitive threat to our hemodialysis water business, see Part I, Item 1A, Risk Factors, in our 2018 Annual Report on Form 10-K.

Dental. Net sales increased by $6,796 or 18.5%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018. Net sales increased by $5,590 or 5.1%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018. The increases for the three and nine month periods were primarily driven by acquisition-related growth, partially offset by a decrease in sales to our distributor network due to inventory adjustments within our channel at the start of this fiscal year. Organic sales for the three month period increased by 3.4% as the inventory adjustments within our distributor network have stabilized.

Dialysis.Net sales decreased by $296 or 3.7%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018. Net sales increased by $48 or 0.2%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018. The decreases in sales for the three month period was primarily due to the decrease in reprocessing sales, partially offset by the increase in sales volume for our domestic concentrate. The slight increases in sales for the nine month period was primarily due to the increase in sales volume for our domestic concentrate business, offset by decreases in reprocessing sales and the loss of concentrate business in certain international regions.

Gross Profit

Gross profit increased by $2,203 or 2.1%, to $106,877 for the three months ended April 30, 2019 from $104,674 for the three months ended April 30, 2018. Gross profit as a percentage of net sales for the three months ended April 30, 2019 and 2018 was 46.8% and 48.2%, respectively. Gross profit increased by $10,233 or 3.3%, to $316,801 for the nine months ended April 30, 2019 from $306,568 for the nine months ended April 30, 2018. Gross profit as a percentage of net sales for the nine months ended April 30, 2019 and 2018 was 46.7% and 47.7%, respectively. The decreases in gross profit as a percentage of net sales for the three and nine month periods ended April 30, 2019 were due to increased labor costs resulting from livable wage increases, and

(dollar amounts in thousands except share and per share data or as otherwise noted) 23

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

the reclassification of certain compensation and benefit-related costs that had previously been recorded in operating expenses into cost of sales. The reclassification of certain compensation and benefit-related costs negatively impacted gross profit as a percentage of net sales by approximately 0.5% for the three and nine month periods ended April 30, 2019. Excluding the impact of acquisition-related and restructuring-related items, gross profit as a percentage of net sales for the three months ended April 30, 2019 and 2018, was 47.1% and 48.2%, respectively, and for the nine months ended April 30, 2019 and 2018, was 46.9% and 48.3%, respectively.

Operating Expenses

Operating expenses as a percentage of net sales for the three months ended April 30, 2019 and 2018 was 40.3% and 35.7%, respectively. Operating expenses as a percentage of net sales for the nine months ended April 30, 2019 and 2018 was 36.6% and 33.5%, respectively. As stated above, there was a reclassification of certain compensation and benefit-related costs that had previously been recorded in operating expenses into cost of sales, which positively impacted operating expenses as a percentage of net sales by approximately 0.5% for the three and nine month periods ended April 30, 2019.

Selling expenses increased by $2,825 or 8.5%, to $36,077 for the three months ended April 30, 2019 from $33,252 for the three months ended April 30, 2018. Selling expenses increased by $7,459 or 7.8%, to $103,233 for the nine months ended April 30, 2019 from $95,774 for the nine months ended April 30, 2018. The increase was primarily due to selling and marketing expenses of our recent acquisitions, and to a lesser extent higher compensation-related costs. Selling expenses as a percentage of net sales were 15.8% and 15.3% for the three months ended April 30, 2019 and 2018, respectively. Selling expenses as a percentage of net sales were 15.2% and 14.9% for the nine months ended April 30, 2019 and 2018, respectively.

General and administrative expenses increased by $10,850 or 28.7%, to $48,634 for the three months ended April 30, 2019 from $37,784 for the three months ended April 30, 2018. General and administrative expenses increased by $20,459 or 20.0%, to $122,527 for the nine months ended April 30, 2019 from $102,068 for the nine months ended April 30, 2018. The increases were primarily due to an increase in ERP implementation costs, an increase of restructuring-related costs resulting from organizational leadership changes, acquisition-related items (such as transaction and integration-related costs), and higher amortization expense as a result of our recent acquisitions. General and administrative expenses as a percentage of net sales were 21.3% and 17.4% for the three months ended April 30, 2019 and 2018, respectively. General and administrative expenses as a percentage of net sales were 18.1% and 15.9% for the nine months ended April 30, 2019 and 2018, respectively.

 Research and development expenses (which include continuing engineering costs) increased by $783 or 11.9%, to $7,354 for the three months ended April 30, 2019 from $6,571 for the three months ended April 30, 2018. Research and development expenses increased by $4,812 or 27.4%, to $22,355 for the nine months ended April 30, 2019 from $17,543 for the nine months ended April 30, 2018. The increase was primarily due to additional product development initiatives primarily in our Medical segment, and to a lesser extent due to increased headcount. Research and development expenses as a percentage of net sales were 3.2% and 3.0% for the three months ended April 30, 2019 and 2018, respectively. Research and development expenses as a percentage of net sales were 3.3% and 2.7% for the nine months ended April 30, 2019 and 2018, respectively.

Income from Operations

Medical. Income from operations increased by $3,787 or 18.5%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018. Income from operations increased by $10,376 or 16.0%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018. The increases in the three and nine month periods were primarily due to increased sales volume in the United States and internationally, as further explained above. The increase was partially offset by elevated ERP implementation costs associated with a third quarter go-live date and restructuring-related charges resulting from organizational leadership changes.

Life Sciences. Income from operations decreased by $4,176 or 46.3%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018. Income from operations decreased by $9,480 or 33.9%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018. The decreases in the three and nine month periods were primarily due to lower net sales, restructuring-related costs (including the accelerated amortization of certain intangible assets) and an increase in research and development costs. We expect this continued softness in demand to continue in the upcoming quarters as orders for our hemodialysis water business were down this quarter, as a result of a key customer moving toward a dual source approach and a cyclical downturn in this business.

Dental. Income from operations decreased by $2,267 or 32.3%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018. Income from operations decreased by $6,687 or 30.0%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018. The decreases in the three and nine month periods were

(dollar amounts in thousands except share and per share data or as otherwise noted) 24

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

primarily due to reduced gross profit (resulting from livable wage increase, decreased productivity and inflationary pressures) and increased selling and marketing expenses, partially offset by income from operations related to acquisitions.

Dialysis. Income from operations decreased by $627 or 35.3%, for the three months ended April 30, 2019 compared with the three months ended April 30, 2018. Income from operations decreased by $2,067 or 35.7%, for the nine months ended April 30, 2019 compared with the nine months ended April 30, 2018. The decreases in the three and nine month periods were primarily due to the shift to lower margin products and increased selling expenses, partially offset by higher net sales (for the nine month period).

General Corporate Expenses

General corporate expenses relate to unallocated corporate costs primarily related to executive management personnel as well as costs associated with certain facets of our acquisition and integration programs and being a publicly traded company. Such expenses increased by $8,972 or 79.6%, for the three months ended April 30, 2019 from the three months ended April 30, 2018. Such expenses increased by $14,639 or 49.6%, for the nine months ended April 30, 2019 from the nine months ended April 30, 2018. The increases in the three and nine month periods were primarily due to an increase of restructuring-related costs resulting from organizational leadership changes, acquisition-related charges and ERP implementation costs.

Interest Expense, Net

Interest expense, net increased by $1,011 or 67.5%, to $2,509 for the three months ended April 30, 2019 from $1,498 for the three months ended April 30, 2018. Interest expense, net increased by $2,920 or 76.4%, to $6,742 for the nine months ended April 30, 2019 from $3,822 for the nine months ended April 30, 2018. These increases in the three and nine month periods resulted from an increase in the average outstanding borrowings due to both the term loan and revolver borrowings to support the funding of acquisitions, and to a lesser extent, higher variable interest rates.

Other Income, Net

Other income, net of $1,313 for the nine months ended April 30, 2019 represents the gain on sale of our high purity water business in Canada. Other income, net of $1,138 for the nine months ended April 30, 2018 represents the favorable resolution of the contingent liability associated with the Jet Prep acquisition.

Income Taxes

The consolidated effective tax rate increased by 6.9% to 33.6% for the three months ended April 30, 2019 from a 26.7% benefit for the three months ended April 30, 2018. The consolidated effective tax rate increased by 10.7% to 26.9% for the nine months ended April 30, 2019 from 16.2% for the nine months ended April 30, 2018. The increase in the three month period was primarily the result of income mix between domestic and foreign operations, excess tax charges related to share-based compensation, partially offset by the reduction in U.S. federal tax rate. The increase in the nine month period was primarily attributed to the recording of the discrete net tax benefits associated with the estimated impact of our U.S. net deferred tax items as a result of the 2017 Tax Act during fiscal 2018.

Non-GAAP Financial Measures

In evaluating our operating performance, we supplement the reporting of our financial information determined under generally accepted accounting principles in the United States (“GAAP”) with certain non-GAAP financial measures including (i) non-GAAP net income, (ii) non-GAAP earnings per diluted share (“EPS”), (iii) earnings before interest, taxes, depreciation, amortization, loss on disposal of fixed assets, and stock-based compensation expense (“EBITDAS”), (iv) adjusted EBITDAS, (v) net debt and (vi) organic sales. These non-GAAP financial measures are indicators of our performance that are not required by, or presented in accordance with, GAAP. They are presented with the intent of providing greater transparency to financial information used by us in our financial analysis and operational decision-making. We believe that these non-GAAP measures provide meaningful information to assist investors, stockholders and other readers of our consolidated financial statements in making comparisons to our historical operating results and analyzing the underlying performance of our results of operations. These non-GAAP financial measures are not intended to be, and should not be, considered separately from, or as an alternative to, the most directly comparable GAAP financial measures.

To measure earnings performance on a consistent and comparable basis, we exclude certain items that affect comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not be indicative of our past and future performance and are therefore excluded to allow investors to better understand underlying operating trends. The following

(dollar amounts in thousands except share and per share data or as otherwise noted) 25

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

are examples of the types of adjustments that are excluded: (i) amortization of purchased intangible assets, (ii) acquisition-related items, (iii) business optimization and restructuring-related charges, (iv) certain significant and discrete tax matters and (v) other significant items management deems irregular or non-operating in nature.

Amortization expense of purchased intangible assets is a non-cash expense related to intangibles that were primarily the result of business acquisitions. Our history of acquiring businesses has resulted in significant increases in amortization of intangible assets that reduce our net income. The removal of amortization from our overall operating performance helps in assessing our cash generated from operations including our return on invested capital, which we believe is an important analysis for measuring our ability to generate cash and invest in our continued growth.

Acquisition-related items consist of (i) fair value adjustments to contingent consideration and other contingent liabilities resulting from acquisitions, (ii) due diligence, integration, legal fees and other transaction costs associated with our acquisition program and (iii) acquisition accounting charges for the amortization of the initial fair value adjustments of acquired inventory and deferred revenue. The adjustments of contingent consideration and other contingent liabilities are periodic adjustments to record such amounts at fair value at each balance sheet date. Given the subjective nature of the assumptions used in the determination of fair value calculations, fair value adjustments may potentially cause significant earnings volatility that are not representative of our operating results. Similarly, due diligence, integration, legal and other acquisition costs associated with our acquisition program, including accounting charges relating to recording acquired inventory and deferred revenue at fair market value, can be significant and also adversely impact our effective tax rate as certain costs are often not tax-deductible. Since these acquisition-related items are irregular and often mask underlying operating performance, we exclude these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to past operating performance.

Excess tax benefits (expense) resulting from stock compensation are recorded as an adjustment to income tax expense. The magnitude of the impact of excess tax benefits generated in the future, which may be favorable or unfavorable, are dependent upon our future grants of equity awards, our future share price on the date awards vest in relation to the fair value of awards on grant date and the exercise behavior of our stock award holders. Since these tax benefits are largely unrelated to our results and unrepresentative of our normal effective tax rate, we excluded their impact on net income and diluted EPS to arrive at our non-GAAP financial measures.

During the nine months ended April 30, 2019, we recorded specific discrete tax items associated with our international operations that were unrelated to fiscal 2019. As these items are unrepresentative of our normal effective tax rate, we excluded their impact on net income and diluted EPS to arrive at our non-GAAP financial measures.

The 2017 Tax Act significantly revised U.S. tax law by, among other provisions, (a) lowering the applicable U.S. federal statutory income tax rate from 35% to 21%, (b) creating a partial territorial tax system that includes imposing a mandatory one-time transition tax on previously deferred foreign earnings, (c) creating provisions regarding the (1) Global Intangible Low Tax Income, (2) the Foreign Derived Intangible Income deduction, and (3) the Base Erosion Anti-Abuse Tax and (d) eliminating or reducing certain income tax deductions, such as interest expense, executive compensation expenses and certain employee expenses. During the nine months ended April 30, 2018, we recorded a one-time net benefit as a provisional estimate of the net accounting impact of the 2017 Tax Act in accordance with SAB 118. Since the net favorable tax benefit is largely unrelated to our results and unrepresentative of our normal effective tax rate, we excluded its impact on net income and diluted EPS to arrive at our non-GAAP financial measures.

In November 2018, we completed the disposition of our high purity water business in Canada. This resulted in a pre-tax gain of $1,313 through other income, net for the nine months ended April 30, 2019. Since this gain was irregular, we made an adjustment to our net income and diluted EPS to exclude this gain to arrive at our non-GAAP financial measures.

In November 2017, the Israeli Government notified us that they would forgive any future amounts due under a contingent obligation payable from a previous acquisition. As a result of this formal notification, we reduced the $1,138 contingent obligation payable to zero during the nine months ended April 30, 2018, resulting in a gain through other income. Since this gain was irregular, we made an adjustment to our net income and diluted EPS to exclude this gain to arrive at our non-GAAP financial measures.

Three Months Ended April 30, 2019

We made adjustments to net income and diluted EPS to exclude (i) amortization expense of purchased intangible assets, (ii) acquisition-related items, (iii) business optimization and restructuring-related charges, primarily related to organizational leadership changes, (iv) an adjustment to the excess tax benefits applicable to stock compensation and (v) tax matters to arrive at our non-GAAP financial measures, non-GAAP net income and non-GAAP diluted EPS.

(dollar amounts in thousands except share and per share data or as otherwise noted) 26

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Three Months Ended April 30, 2018

We made adjustments to net income and diluted EPS to exclude (i) amortization expense of purchased intangible assets, (ii) acquisition-related items, (iii) business optimization and restructuring-related charges, (iv) litigation matters, and (v) the reduction of a repatriation tax related to the 2017 Tax Act to arrive at our non-GAAP financial measures, non-GAAP net income and non-GAAP diluted EPS.

The reconciliations of net income and diluted EPS to non-GAAP net income and non-GAAP diluted EPS were calculated as follows:

	Three Months Ended April 30,
	2019				2018
Net income/Diluted EPS, as reported	$	8,175	$	0.20	$	18,736		$	0.45
Intangible amortization, net of tax(1)	3,850		0.09		3,468			0.08
Acquisition-related items, net of tax(2)	2,047		0.05		651			0.02
Restructuring-related charges, net of tax(3)	8,401		0.20		991			0.02
Litigation matters(1)	—		—		1,637			0.04
Excess tax expenses(4)	434		0.01		—			—
Tax matters(4)	59		—		(554		)	(0.01		)
Non-GAAP net income/Non-GAAP diluted EPS	$	22,966	$	0.55	$	24,929		$	0.60

________________________________________________

(1) Amounts were recorded in general and administrative expenses.

(2) For the three months ended April 30, 2019, pre-tax acquisition-related items of $47 were recorded in net sales, $394 were recorded in cost of sales and $2,400 were recorded in general and administrative expenses. For the three months ended April 30, 2018, pre-tax acquisition-related items of $953 were recorded in general and administrative expenses.

(3) For the three months ended April 30, 2019, pre-tax restructuring-related items of $272 were recorded in cost of sales and $9,840 were recorded in general and administrative expenses. For the three months ended April 30, 2018, pre-tax restructuring-related items of $17 were recorded in cost of sales and $1,466 were recorded in general and administrative expenses.

(4) Amounts were recorded in income taxes.

Nine Months Ended April 30, 2019

We made adjustments to net income and diluted EPS to exclude (i) amortization expense of purchased intangible assets, (ii) acquisition-related items, (iii) business optimization and restructuring-related charges, primarily related to organizational leadership changes, (iv) gain on disposition of business, (v) excess tax benefits applicable to stock compensation, (vi) tax matters and (vii) litigation matters to arrive at our non-GAAP financial measures, non-GAAP net income and non-GAAP diluted EPS.

Nine Months Ended April 30, 2018

We made adjustments to net income and diluted EPS to exclude (i) amortization expense of purchased intangible assets, (ii) acquisition-related items, (iii) business optimization and restructuring-related charges, (iv) excess tax benefits applicable to stock compensation, (v) the net tax benefit associated with the estimated impact of the revaluation of our U.S. net deferred tax liabilities as a result of the 2017 Tax Act, (vi) litigation matters and (vii) the resolution of the contingent liability associated with the Jet Prep acquisition to arrive at our non-GAAP financial measures, non-GAAP net income and non-GAAP diluted EPS.

(dollar amounts in thousands except share and per share data or as otherwise noted) 27

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

The reconciliations of net income and diluted EPS to non-GAAP net income and non-GAAP diluted EPS were calculated as follows:

	Nine Months Ended April 30,
	2019						2018
Net income/Diluted EPS, as reported	$	46,217		$	1.11		$	74,153		$	1.77
Intangible amortization, net of tax(1)	11,928			0.29			9,844			0.24
Acquisition-related items, net of tax(2)	4,236			0.10			2,307			0.06
Restructuring-related charges, net of tax(3)	10,486			0.25			2,844			0.07
Gain on disposition of business, net of tax(4)	(929		)	(0.02		)	—			—
Excess tax benefits(5)	(563		)	(0.01		)	(2,012		)	(0.05		)
Tax matters(5)	959			0.02			(8,952		)	(0.22		)
Litigation matters(1)	134			—			1,637			0.04
Resolution of contingent liability(4)	—			—			(1,138		)	(0.03		)
Non-GAAP net income/Non-GAAP diluted EPS	$	72,468		$	1.74		$	78,683		$	1.88

________________________________________________

(1) Amounts were recorded in general and administrative expenses.

(2) For the nine months ended April 30, 2019, pre-tax acquisition-related items of $351 were recorded in net sales, $486 were recorded in cost of sales and $4,960 were recorded in general and administrative expenses. For the nine months ended April 30, 2018, pre-tax acquisition-related items of $893 were recorded in cost of sales and $2,409 were recorded in general and administrative expenses.

(3) For the nine months ended April 30, 2019, pre-tax restructuring-related items of $272 were recorded in cost of sales, $12,533 were recorded in general and administrative expenses and $1,313 of expenses were recorded in other income. For the nine months ended April 30, 2018, pre-tax restructuring-related items of $1,164 were recorded in cost of sales and $2,656 were recorded in general and administrative expenses.

(4) Amounts were recorded in other income, net.

(5) Amounts were recorded in income taxes.

We believe EBITDAS is an important valuation measurement for management and investors given the increasing effect that non-cash charges, such as stock-based compensation, amortization related to acquisitions and depreciation of capital equipment have on net income. In particular, acquisitions have historically resulted in significant increases in amortization of purchased intangible assets that reduce net income. Additionally, we regard EBITDAS as a useful measure of operating performance and cash flow before the effect of interest expense and is a complement to income from operations, net income and other GAAP financial performance measures.

We define adjusted EBITDAS as EBITDAS excluding the same non-GAAP adjustments to net income discussed above. We use adjusted EBITDAS when evaluating operating performance because we believe the exclusion of such adjustments, of which a significant portion are non-cash items, is necessary to provide the most accurate measure of on-going core operating results and to evaluate comparative results period over period.

(dollar amounts in thousands except share and per share data or as otherwise noted) 28

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

The reconciliations of net income to EBITDAS and adjusted EBITDAS were calculated as follows:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2019		2018		2019			2018
Net income, as reported	$	8,175	$	18,736	$	46,217		$	74,153
Interest expense, net	2,509		1,498		6,742			3,822
Income taxes	4,128		6,833		17,040			14,346
Depreciation	5,892		4,626		15,455			12,816
Amortization	4,956		4,480		15,508			12,892
Loss on disposal of fixed assets	529		187		1,368			521
Stock-based compensation expense	5,722		2,443		11,885			7,033
EBITDAS	31,911		38,803		114,215			125,583
Acquisition-related items	2,841		953		5,797			3,302
Restructuring-related charges(1)	6,632		1,468		8,871			3,721
Gain on disposition of business	—		—		(1,313		)	—
Litigation matters	—		2,345		163			2,345
Resolution of contingent liability	—		—		—			(1,138		)
Adjusted EBITDAS	$	41,384	$	43,569	$	127,733		$	133,813

________________________________________________

(1) Excludes stock-based compensation expense.

We define net debt as long-term debt less cash and cash equivalents. Each of the components of net debt appears on our consolidated balance sheets. We believe that the presentation of net debt provides useful information to investors because we review net debt as part of our management of our overall liquidity, financial flexibility, capital structure and leverage.

	April 30, 2019			July 31, 2018
Long-term debt (excluding debt issuance costs)	$	235,500		$	200,000
Less cash and cash equivalents	(51,348		)	(94,097		)
Net debt	$	184,152		$	105,903

We define organic sales as net sales less (i) the impact of foreign currency translation, (ii) net sales related to acquired businesses during the first twelve months of ownership and (iii) divestitures during the periods being compared. We believe that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior periods. We exclude the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. We exclude the effect of acquisitions and divestitures because the nature, size, and number of acquisitions and divestitures can vary dramatically from period to period and can obscure underlying business trends and make comparisons of financial performance difficult. The reconciliation of net sales to organic sales can be found elsewhere in this MD&A in “Net Sales.”

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Significant factors affecting the management of liquidity are cash flows generated from operating activities, capital expenditures, acquisitions, dispositions and cash dividends. Cash provided by operating activities continues to be a primary source of funds. As necessary, we supplement operating cash flow with borrowings from our revolving credit facility to fund our acquisitions and related business activities.

Cash Flows

Net Cash Provided by Operating Activities.Net cash provided by operating activities decreased by $41,517 or 46.1%, to $48,486 for the nine months ended April 30, 2019 from $90,003 for the nine months ended April 30, 2018, primarily due to the decrease in net income, decreased cash collections of outstanding accounts receivable, cash payments associated with restructuring-related activities during the period and an increase in inventory, partially offset by the timing of accounts payable and a reduction

(dollar amounts in thousands except share and per share data or as otherwise noted) 29

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

in income tax payments. The timing of our enterprise resource planning ERP go-live this quarter impacted our net cash provided by operating activities during the nine month period.

Net Cash Used in Investing Activities. Net cash used in investing activities increased by $4,611 or 4.3%, to $112,978 for the nine months ended April 30, 2019 from $108,367 for the nine months ended April 30, 2018, primarily due to the increase in capital expenditures (primarily related to the purchase of a new facility in Minnesota and our ERP project), partially offset by a decrease in cash paid for acquisitions and the proceeds from the sale of a business.

Net Cash Provided by Financing Activities.Net cash provided by financing activities decreased by $11,746 or 35.3%, to $21,492 for the nine months ended April 30, 2019 from $33,238 for the nine months ended April 30, 2018, primarily due to a net decrease in borrowings used to support acquisition-related activity, increase in cash withheld for taxes related to the net settlement of equity awards, and an increase in dividend payments.

Debt

At April 30, 2019, we had $192,500 of outstanding term loan borrowings and $43,000 of revolver borrowings under our Fourth Amended and Restated Credit Agreement (the “2018 Credit Agreement”).

For further information regarding the 2018 Credit Agreement, including a description of affirmative and negative covenants, see Note 10 to our condensed consolidated financial statements in Part I, Item 1 of this report.

In order to hedge against the impact of fluctuations in the interest rate associated with our variable rate borrowings, on April 9, 2019, we entered into two interest rate swaps with a combined notional value of $150,000, expiring on June 28, 2023. The swaps fixed interest rates at 2.45%. The fair value of these interest rate swaps is subject to movements in LIBOR and will fluctuate in future periods.

Financing Needs

At April 30, 2019, our long-term debt (excluding debt issuance costs) of $235,500, net of our cash and cash equivalents of $51,348, was $184,152. Stockholders’ equity as of that date was $655,865.

Our operating segments generate significant cash from operations. At April 30, 2019, we had a cash balance of $51,348, of which $23,734 was held by foreign subsidiaries. Our foreign cash is needed by our foreign subsidiaries for working capital purposes as well as for current international growth initiatives. Accordingly, our foreign unremitted earnings are considered indefinitely reinvested and unavailable for repatriation.

We believe that our current cash position, anticipated cash flows from operations and the funds available under our 2018 Credit Agreement will be sufficient to satisfy our worldwide cash operating requirements for the foreseeable future based upon our existing operations, particularly given that we historically have not needed to borrow for working capital purposes. At June 6, 2019, approximately $356,729 was available under our 2018 Credit Agreement.

Critical Accounting Policies

There were no changes to our critical accounting policies from those disclosed in our 2018 Annual Report on Form 10-K.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, or forecasts about our businesses, the industries in which we operate, and the current beliefs and assumptions of management; they do not relate strictly to historical or current facts. Without limiting the foregoing, words or phrases such as “expect,” “anticipate,” “goal,” “project,” “intend,” “plan,” “believe,” “seek,” “may,” “could” and variations of such words and similar expressions generally identify forward-looking statements. In addition, any statements that refer to predictions or projections of our future financial performance, anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions about future events, activities or developments and are subject to numerous risks, uncertainties, and assumptions that are difficult to predict. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made. Some of the factors which could cause results to differ from those expressed in any forward-looking statement are set forth under Item 1A of the 2018

(dollar amounts in thousands except share and per share data or as otherwise noted) 30

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Annual Report on Form 10-K, entitled Risk Factors. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the information reported in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2018 Annual Report on Form 10-K. 

Item 4.    Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that the design and operation of these disclosure controls and procedures were effective and designed to ensure that material information relating to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports is (i) recorded, processed, summarized and reported within the time periods specified by the SEC and (ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

We have evaluated our internal control over financial reporting and determined that no changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except as described below.

On February 1, 2019, we acquired Omnia, on March 21, 2018, we acquired Aexis, and on August 1, 2018, we acquired the CES business, as more fully described in Note 3 to the condensed consolidated financial statements. During the initial transition period following the acquisitions, we enhanced our internal control process to ensure that all financial information related to these acquisitions was properly reflected in our condensed consolidated financial statements. We expect all aspects of the Aexis business and CES business will be fully integrated into our existing overall internal control structure during fiscal 2019. We expect all aspects of the Omnia business will be fully integrated into our existing overall internal control structure during fiscal 2020.

In 2017, we began the process of implementing a global operating and financial reporting information technology system, SAP S4 Hana (“SAP”), as part of a multi-year plan to integrate and upgrade our systems and processes. The first phase of this implementation became operational in February 2019, at our Medical segment's United States operations, our Medivators B.V. operations and at our corporate headquarters. As the phased implementation of SAP continues, we are experiencing certain changes to our processes and procedures which, in turn, result in changes to our internal control over financial reporting. We believe the necessary steps have been taken to monitor and maintain appropriate internal control over financial reporting during this period of change and we will continue to evaluate the operating effectiveness of related key controls during subsequent periods.  While we expect SAP to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as each of the affected areas evolves.

PART II – OTHER INFORMATION

Item 1.    Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our 2018 Annual Report on Form 10‑K. The risk factors disclosed in Part I, Item 1A to our 2018 Annual Report on Form 10-K, in addition to the other information set forth in this report, could materially affect our business, financial condition, or results of operations.

31

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

The following table represents information with respect to purchases of common stock made by the Company during the current quarter:

Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the program
February 1 - February 28	535	$	83.12	—	—
March 1 - March 31	1,951	$	73.93	—	—
April 1 - April 30	1,226	$	69.01	—	—
Total	3,712	$	73.63	—	—

The Company does not currently have a repurchase program. All of the shares purchased during the current quarter represent shares surrendered to the Company to pay employee withholding taxes due upon the vesting of restricted stock.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

10.1	Retirement Agreement and General Release dated as of March 29, 2019 between the Company and Eric W. Nodiff.
31.1	Certification of Principal Executive Officer.
31.2	Certification of Principal Financial Officer.
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) Notes to Condensed Consolidated Financial Statements.

(dollar amounts in thousands except share and per share data or as otherwise noted) 32

Cantel Medical Corp.                                 2019 Third Quarter Form 10-Q

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CANTEL MEDICAL CORP.
Date: June 6, 2019
	By:	/s/ George L. Fotiades
		George L. Fotiades
		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Peter G. Clifford
		Peter G. Clifford,
		Executive Vice President and Chief Operating Officer
		(Principal Financial Officer through April 30, 2019)
	By:	/s/ Brian R. Capone
		Brian R. Capone
		Senior Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

33

EX-10.1

EXHIBIT 10.1

To:Eric Nodiff

From:George L. Fotiades

Date:March 29, 2019

RE:RETIREMENT AGREEMENT

Eric, this letter confirms that your voluntary retirement from Cantel Medical Corp. (“Cantel” or the “Company”) will be effective on July 31, 2019 (the “Retirement Date”). Based on our discussions, this letter also confirms both (i) the final pay and benefits you will receive, and (ii) the retirement benefits you are eligible to receive if you sign and return the original of this Retirement Agreement (“Retirement Agreement”) and the General Release attached hereto as Exhibit A (the “General Release”) (the Retirement Agreement and General Release being referred to collectively as the “Agreement”) to the Company (as instructed below) and do not rescind the release of ADEA Claims (as defined below) under Section 11 of the General Release, all within the time frames noted below. All payments and benefits under this Retirement Agreement are subject to you abiding by all other terms of this Agreement. Payments made to you under this Retirement Agreement are subject to applicable withholdings, taxes and deductions, and will, unless otherwise provided for herein, be paid when in cash through the Company’s payroll system in the ordinary course.

1. Final Pay and Benefits. Regardless of whether you sign and return the General Release, you will receive the final pay and benefits set forth in this Section 1 as follows:

• Final Pay. Provided that you continue to meet the duties and responsibilities of your position, you will be paid your regular base salary through and including the Retirement Date, as well as any accrued and unused PTO through such date.

• Reimbursement of Expenses. Provided that you apply for reimbursement in accordance with the Company’s established expense reimbursement procedures (within the period required by such procedures but under no circumstances later than ninety (90) days after the Retirement Date), the Company will reimburse you for expenses to the extent to which you are entitled under such procedures not later than the payment date for the payroll period next following the date on which you apply for reimbursement.

• Benefits. Your 401(k) and welfare benefits (to the extent you continue to remain eligible under the various plans) will remain in effect through your Retirement Date. You will have the option to continue your existing group health (medical, dental and/or vision) benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for up to 18 months, or for such other period as provided by law, provided that you pay the required premiums for COBRA continuation coverage (subject to Section 2 below). Your COBRA period will begin on August 1, 2019 (the first day of the first month following the month in which the Retirement Date occurs) (your “COBRA Start Month”). You will receive COBRA information from our COBRA administrator within fourteen (14) days following the Retirement Date, which will include information regarding the premiums you would be required to pay. All other benefits, including but not limited to PTO and holiday pay, end on the Retirement Date. Your 401(k) benefits are governed by applicable plan documents.

2. Retirement Package. In addition to the final pay and benefits addressed in Section 1 above, the Company will provide you with the benefits (including the Consultant Agreement, defined below)

set forth in this Section 2 (the “Retirement Package”) to which you might not otherwise be entitled, provided that you: (i) have reasonably continued to meet the duties and responsibilities of your position through the Retirement Date as agreed to by you and the Company; (ii) sign and return the original of the General Release to Ms. Jean Casner, Senior Vice President - Chief Human Resources Officer, Cantel Medical Corp., 150 Clove Road, Little Falls, New Jersey 07424, by hand, email to HRIS@cantelmedical.com (with a copy to jcasner@cantelmedical.com),mail or overnight courier no earlier than the Retirement Date and no later than twenty-one (21) days following the Retirement Date; (iii) do not rescind the release of ADEA Claims under the General Release during the Rescission Period (defined in Section 11 of the General Release); and (iv) abide by all other terms of this Agreement.

The lump sum payments set forth below (Retirement Payment and MICP payment) will be made within the time frames set forth below, provided that the Company has received the original signed General Release from you within the required time period and that the Rescission Period (defined in Section 11 of the General Release) has expired without rescission by you, and further provided that you abide by all other terms of this Agreement. All payments made to you under this Retirement Agreement are subject to all applicable withholdings and taxes and will be paid through the Company’s payroll system in the ordinary course.

◦ Retirement Payment: The Company will pay you the sum of $491,438 (the “Retirement Payment”). Such payment will be made in a lump sum at a time agreed by you and the Company that is (i) no sooner than two weeks after the Company’s receipt of the original signed General Release from you within the required time period and the expiration of the Rescission Period without rescission by you, and (ii) no later than January 31, 2020, and is subject to abiding by all other terms of this Agreement.

◦ MICP Payment: You will receive your full (unprorated and unadjusted as a result of performance) MICP payment with respect to the fiscal year ending July 31, 2019 (“FY2019”) at the target percentage (55%) of your base salary in effect on your Retirement Date. Such MICP payment will be made in a lump sum two weeks after the Company’s receipt of the original signed General Release from you within the required time period and the expiration of the Rescission Period without rescission by you.

◦ LTI: All unvested restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) granted to you by Cantel will be accelerated (with any performance-based RSAs and RSUs vesting based on target performance (notwithstanding the terms thereof), with no upward or downward adjustment to the award regardless of the actual performance thresholds achieved), fully vested and no longer subject to forfeiture as of the Retirement Date, or a cash equivalent payment to any such accelerated award will be paid by Cantel; provided that the election to make a cash equivalent payment shall be at Cantel’s sole discretion. Notwithstanding any provision in any applicable RSA agreement or RSU agreement to the contrary, (i) shares in settlement of the vested RSAs, and accrued and unpaid dividends associated therewith, will be delivered or the cash equivalent paid, as applicable, shortly after your Retirement Date (but effective as of the Retirement Date) and (ii) shares in settlement of the vested RSUs, including all dividend equivalents associated therewith, will be delivered or the cash equivalent paid, as applicable, as of the vesting date provided for in the original grant of such RSUs. You acknowledge and agree that you are not entitled to, and are not receiving, any additional equity awards or cash equivalents on or after the date of this Retirement Agreement, other than as set forth in this Section and Section 7 of this Retirement Agreement.

◦ Full Payment of COBRA Premiums: Beginning with the COBRA Start Month, the Company will pay the employer and employee portion of the premiums for COBRA continuation coverage for you and/or one or more qualified beneficiaries (to the extent you elect such COBRA coverage) until the earliest of (i) nineteen (19) months, (ii) you become eligible for coverage under another group health plan offered by your employer or your spouse’s employer or (iii) you are no longer eligible for COBRA coverage (as applicable, the “COBRA Payment Period”). If you wish to continue COBRA coverage beyond the end of the COBRA Payment Period and such coverage is otherwise available under the applicable plan, you must pay the required COBRA premiums as in effect from time to time and as set forth in the COBRA information you receive from the Company’s COBRA administrator.

Notwithstanding the preceding paragraph, if the Company determines that all or a portion of the payment of the COBRA premiums under this Section would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Internal Revenue Code or any statute or regulation of similar effect (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying the COBRA premiums, the Company shall impute the equivalent amount into your income throughout the COBRA Payment Period. Such payment will be subject to applicable withholdings. By your signature below, you acknowledge and agree that the Company may modify or terminate its group health plans at any time and that, notwithstanding the above, you shall have the right to participate in the Company’s group health plans only in accordance with the applicable plan documents. You further agree to promptly provide the Company notice if you become covered or eligible to be covered under a group health plan of your employer or your spouse’s employer.

◦ Consultant Agreement. The Company will provide you with a twelve (12) month Consultant Agreement (substantially in the form of Exhibit B hereto), commencing on the first day following the Retirement Date and ending on July 31, 2020 pursuant to which you will be available to consult on matters such as mergers & acquisitions and anti-corruption training, as well as other legal work as may be agreed from time to time. During the consulting period you will report to Jeff Mann. The consulting fee will be $27,500 per month, subject to the terms of the Consultant Agreement. The Company will have the option to renew the consulting term for an additional year in its discretion (provided that you are willing to continue providing services).

◦ Miscellaneous. Following the Retirement Date, you will be permitted to retain your cell phone provided by the Company; provided, however, that you must first have the Company’s IT department delete from the cell phone any proprietary or confidential information, software and other information and material deemed necessary or appropriate by the Company. The Company will reimburse you up to $1,500 for the purchase of a new laptop computer, and the Company’s IT department will transfer documents/data it deems appropriate, e.g., contact file, personal documents and photographs, to your new personal computer. You acknowledge that the Company may be required to impute the value of the cell phone into your income or treat the reimbursement for the purchase of a new laptop computer as additional taxable compensation.

3.Governing Law; Jurisdiction. This Retirement Agreement will be governed by and construed in accordance with the laws of the State of New Jersey without regard to principles of conflicts of laws. As to any dispute concerning or arising out of this Retirement Agreement, each of Cantel and you hereby expressly consent to personal jurisdiction in the State of New Jersey, hereby submit to the exclusive jurisdiction of the state and federal courts located in the State of New Jersey, County of Passaic, and further agree not to assert that any action brought in such jurisdiction has been brought

in an inconvenient forum or that such venue is improper. To the extent permitted by law, any and all claims asserted in such an action shall be adjudicated by a judge sitting without a jury.

4. Tax Consequences. Notwithstanding any action the Company takes under Section 2 with respect to any or all income tax, payroll tax or other tax-related withholding with respect to payments under this Retirement Agreement, the ultimate liability for all taxes with respect to such payments is and remains your responsibility and the Company (i) makes no representation or undertakings regarding the treatment of any tax-related items in connection with this Retirement Agreement, and (ii) does not commit to structure the payments to reduce or eliminate your liability for any taxes with respect to the payments.

5. Section 409A. This Retirement Agreement, and any payment hereunder, is intended to be exempt from Section 409A of the Internal Revenue Code (“Section 409A”) under the short-term deferral exemption to the maximum extent permitted by Section 409A. However, to the extent that this Retirement Agreement or any payment hereunder is subject to Section 409A, this Retirement Agreement will be construed and interpreted in a manner that is consistent with the requirements of Section 409A. For these purposes, each “payment” (as defined by Section 409A) made under this Retirement Agreement shall be considered a “separate payment.” Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Retirement Agreement comply with Section 409A and in no event will the Company, its divisions and affiliates nor their respective directors, officers, employees or advisers be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by you on account of non-compliance with Section 409A.

If this Retirement Agreement (or any portion thereof) is subject to Section 409A and any amount subject to Section 409A becomes payable as a result of your “separation from service” (as defined under Section 409A) and at such time you are a “specified employee” (as defined under Section 409A), payment of such amount shall be delayed and shall be paid (without interest) on the first day of the seventh calendar month following the date of your “separation from service.”

6. Severability. If any one or more of the provisions of this Retirement Agreement is held invalid, illegal or unenforceable, the remaining provisions of this Retirement Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision that comes closest to the intent of the parties.

7. 2014 Severance Agreement; Change in Control. You agree that you are not entitled to severance or any other amounts payable or benefits due under the Amended and Restated Executive Severance Agreement dated as of November 17, 2014 between you and the Company (the “2014 Severance Agreement”) and that agreement shall have no further force and effect as between the parties except with respect to the definitions provided in the following paragraph.

In the event (i) a “Change in Control” of Cantel (as defined in the 2014 Severance Agreement) occurs prior to or within six (6) months after the Retirement Date or (ii) a “Potential Change in Control” of Cantel (as defined in the 2014 Severance Agreement) occurs prior to the Retirement Date and a resulting “Change in Control” (as defined in the 2014 Severance Agreement) occurs within fifteen (15) months following the Retirement Date, then in addition to the other payments under this Agreement, Cantel will pay you a lump sum of (x) $984,238 plus (y) the difference in the cash equivalent value of your TSR-based RSA and RSU grants actually vested on your Retirement Date pursuant to Section 2 of this Retirement Agreement and the reasonably estimated value of such LTI grants had the grants been adjusted upward (but not downward) pursuant to the original terms of the TSR-based RSA and RSU grant documents as of July 31, 2019

(collectively, the two (2) payments being the “CIC Payment”). The CIC Payment will be paid to you within ten (10) calendar days following the date of the Change in Control.

Eric, I would like to personally thank you for your many years of dedication and contributions to Cantel and wish you well in your retirement.

Sincerely,

CANTEL MEDICAL CORP.

By: ___________________________

George L. Fotiades

President and CEO, Cantel Medical Corp.

ACCEPTANCE AND AGREEMENT TO RETIREMENT AGREEMENT

By signing below, I, Eric Nodiff, acknowledge and agree to the following:

• I have had adequate time to consider whether to sign this Retirement Agreement.

• I have read this Retirement Agreement carefully.

• I understand, accept and agree to all of the terms of this Retirement Agreement.

• At the time of signing this Retirement Agreement, I have no knowledge of any Claims (as defined in the General Release).

• I have not, in signing this Retirement Agreement, relied upon any representations or statements, written or oral, or explanations made by the Company except for those specifically set forth in this Retirement Agreement.

• I intend this Retirement Agreement to be legally binding.

• I have kept a full copy of this Retirement Agreement for my records.

____________________________________        ______________________________________                                                    

DateEric Nodiff

Exhibit A

GENERAL RELEASE

To:Eric Nodiff

From:George L. Fotiades

Date:[INSERT]

RE:GENERAL RELEASE

Eric, reference is made to the Retirement Agreement by and between you and Cantel Medical Corp. (“Cantel” or the “Company”) dated March __, 2019 (“Retirement Agreement”). For purposes of this General Release, capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Retirement Agreement.

In accordance with the terms of the Retirement Agreement, you are eligible to receive the Retirement Package set forth in the Retirement Agreement if you sign and return the original of this General Release to the Company (as instructed below) and do not rescind the release of ADEA Claims (as defined below) under Section 11 of this General Release, all within the time frames noted below.

1. General Release of Claims. By signing this General Release, you agree that the Retirement Package, and other benefits set forth in the Retirement Agreement, constitute adequate consideration for your release and waiver of claims as set forth below.  For valuable consideration you receive from the Company pursuant to the Retirement Agreement, you, on behalf of yourself and your heirs, executors, administrators, trustees, representatives, successors and assigns (collectively, the “Releasors”) hereby release, waive and forever discharge all claims, demands, causes of actions, administrative claims, obligations, liabilities, claims for punitive or liquidated damages or penalties, any other damages, any claims for costs, disbursements or attorney’s fees, any individual or class action claims, and any other claims or demands of any nature whatsoever, whether asserted or unasserted, known or unknown, absolute or contingent that you or any of the other Releasors have or may have against the Company, any parent, subsidiary, division, affiliated or related entities, its and their present and former officers, directors, shareholders, trustees, employees, agents, attorneys, insurers, representatives and consultants, and the current and former trustees and administrators of any pension or other benefit plan applicable to the employees or former employees of any of them, and the successors, predecessors and assigns of each (collectively “Releasees”), arising out of, or in any manner based upon, or related to, any act, occurrence, transaction, omission or communication that transpired or occurred at any time on or before the date of your signing of this General Release.

Without limitation to the foregoing, you specifically release, waive and forever discharge the Releasees from and against: any and all claims arising out of or relating to your employment by the Company (and/or by any of the other Releasees), the terms and condition of such employment and/or the termination of such employment; any and all claims that arise under the U.S. Constitution, the New Jersey Constitution, the New Jersey Law Against Discrimination, N.J. Rev. Stat. § 10:5-1 etseq., the New Jersey Family Leave Act, N.J. Stat. § 34:11B-1 etseq., the New Jersey Conscientious Employee Protection Act, N.J. Stat. § 34:19-1 etseq., any claims under any other New Jersey or other state or local anti-discrimination, employment or human rights laws or regulations, or any other New Jersey

or other state or local law, ordinance or regulation, any claims under any other state or local law, ordinance or regulation, any claims under the Age Discrimination in Employment Act, 29 U.S.C. § 621 etseq., Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e etseq., the Americans with Disabilities Act, 42 U.S.C. § 12101 etseq., the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 etseq., the Equal Pay Act, the federal Family and Medical Leave Act, 29 U.S.C. § 2601 etseq., the National Labor Relations Act, 29 U.S.C. § 151 etseq., the Genetic Information Nondiscrimination Act, 42 U.S.C. § 2000ff etseq., the Sarbanes-Oxley Act, 15 U.S.C. § 7201 etseq., the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 etseq., and any amendments to any of the above; any and all claims arising under any other local, state or federal constitution, statute, ordinance, regulation or order, or that involve claims for discrimination or harassment based on age, race, religion, creed, color, national origin, ancestry, affectional or sexual orientation, sexual preference, gender identity or expression, military or veterans status, sex, disability, marital status, pregnancy, genetic information, or any other legally protected category or characteristic; any and all claims for wages, salary, commissions, expense reimbursement, or other compensation; any and all claims for retaliation, reprisal, wrongful discharge, breach of contract (express or implied); any and all whistleblower claims under any federal, state or local law or regulation or under common law; and/or any other tort, contract or other statutory or common law cause of action, including, without limitation, any claims for attorneys’ fees, costs or disbursements.

2. Release of Unknown Claims. You understand that this release extends to all of the aforementioned claims and potential claims, whether now known or unknown, suspected or unsuspected (collectively, “Claims”).

3. Excluded Claims. You are not, by signing this General Release, releasing or waiving (i) any vested interest you may have in any stock grants, stock options or other forms of equity awards, 401(k) or other retirement plan by virtue of your employment with the Company, subject to the terms and conditions of the applicable plans, any grant or award agreement and applicable law, (ii) any rights or claims that may arise after this General Release is signed by you, (iii) the right to institute legal action for the purpose of enforcing the provisions of this General Release or the Retirement Agreement, (iv) any right you may have to apply for any state unemployment insurance benefits, (v) any workers compensation benefits to which you may be entitled under applicable law, (vi) any rights to indemnification under any agreement with the Company, any certificate of incorporation or by laws (or comparable organizational document) of the Company or any applicable insurance policy of the Company with respect to acts or omissions by you occurring or alleged to have occurred during the course of your employment by the Company (and/or by any of the other Releasee entities), subject to the applicable definitions, terms and conditions of any such agreement, certificate of incorporation, by laws (or comparable organizational document), insurance policy and applicable law, or (vii) any rights for continuation coverage under COBRA. Additionally, nothing in this General Release waives or otherwise limits your right to: file a charge or complaint with the U.S. Equal Employment Opportunity Commission (“EEOC”) (and/or with any other government agency); testify, assist or participate in any investigation, hearing or proceeding conducted by the EEOC (and/or by any other government agency); or challenge under the Older Workers Benefit Protection Act (“OWBPA”) (29 U.S.C. § 626) the knowing and voluntary nature of your release of any claims that you may have under the ADEA. However, neither the immediately preceding sentence nor any other provision in this General Release constitute a waiver of any kind by any of the Releasees of their right to assert the Release set forth in this General Release as a defense to any charge or complaint filed with the EEOC, any other government agency, any court, and/or any other tribunal. Additionally, you hereby waive any right to, and agree that you will not accept, any monetary award or recovery resulting from a filing of a charge or complaint by or with the EEOC, any other government agency, any court, and/

or any other tribunal against the Company (and/or against any of the other Releasees) asserting or alleging any claim, demand or cause of action that has been released or waived in this General Release. In addition, for the avoidance of doubt, nothing in this General Release shall be interpreted to limit your right to receive an award to which you may be entitled for information provided to the U.S. Securities and Exchange Commission (“SEC”), the U.S. Commodity Futures Trading Commission (“CFTC”), or equivalent state securities enforcement agencies.

4. Cooperation on Transition of Business. You agree that you will provide to the Company on or before your Retirement Date, and at any time upon the Company’s reasonable request following the Retirement Date, a list and status of current work projects and other information requested by the Company to ensure an orderly transition of such projects. You agree to also provide a list of any current action items with key customers and/or vendors or external communication follow up with customers or vendors that need to occur to ensure continuation of business. You also agree to assist and cooperate with the Company in the transition of work responsibilities.

5. Return of Property. You acknowledge by your signature to this General Release that as of the date you sign this General Release you have returned to the Company all property of the Company or any related entity, including laptops, tablets, external storage devices, any other electronic devices and equipment, or any other property issued to you during the course of employment and all documents, files, correspondence, emails and other electronic communications, reports, materials, legal documents, contracts, marketing materials, and other items, whether in hard copy, on DVD, disc, flash drive or other storage mechanism, or on any electronic device, or otherwise, including all copies, which belong to the Company or any related entity or are related to the business of, or the services you performed for, the Company or any related entity, for any customer, including but not limited to any property, documents, files, correspondence, emails and other electronic communications, reports, materials, legal documents, contracts, marketing materials, and other items containing trade secret, proprietary or confidential information and materials.

6. Non-Disparagement. You agree that you will not make any material disparaging or negative remarks, whether oral or in writing, regarding the Company, or their respective officers, directors, employees or affiliates, or their respective operations, products and/or services except for remarks to employees or directors of the Company in connection with the performance of services under the Consultant Agreement. Neither this Section nor any other provision of this General Release affects or restricts your obligation to provide good faith truthful information in connection with an application for state unemployment compensation benefits, or to provide any other good faith truthful information required in response to a government inquiry, in response to a valid subpoena or court order, in an action to enforce the terms of this General Release or as otherwise specifically required by law. In addition, neither this Section nor any other provision of this General Release affects or restricts your obligation to provide good faith truthful information in connection with the filing of a claim or charge with, or an investigation, hearing or proceeding conducted by, a governmental agency, including the SEC, the CFTC, the EEOC or similar state agencies. You acknowledge and agree however (as indicated above in Section 1 of this General Release) that you will not be entitled to recover any award of money, compensation, costs, attorney’s fees or damages whatsoever from the Company or any of the other Releasees in connection with any charge of discrimination or other claim that has been released and/or waived under Section 1 of this General Release or if you have such a charge or claim filed on your behalf, and you agree that the Retirement Package, and other benefits set forth in the Retirement Agreement, that you receive or for which you are eligible under the Retirement Agreement fully and completely compensate you for any and all claims you may have against the Company or any of the related entities and individuals released in Section 1 of this General Release. You may not be held

criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Nothing in this General Release is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

7. Return of Retirement Package. You will not receive the Retirement Package, and other benefits set forth in the Retirement Agreement, and you will be required to return any such payments or benefits made to you or on your behalf if you (i) do not sign this General Release and return the original of this General Release within the time period specified in this General Release, (ii) rescind the release of ADEA Claims under this General Release after signing the General Release, (iii) violate any of the terms and conditions set forth in this General Release or (iv) intentionally and materially breach any provision of the Confidentiality and Non-Competition Agreement between you and the Company dated as of January 1, 2010 (the “Confidentiality Agreement”) and fail to cure such breach (if curable) within thirty (30) days. The remedies provided for in this Section 7 are in addition to any other remedies that may be available to the Company under law or equity.

8. Binding Effect. This General Release is final and binding upon and inures to the benefit of the parties and their respective successors and legal representatives and permitted assigns, and together with the applicable provisions of the Confidentiality Agreement (defined above) constitutes the complete and exclusive statement of the terms and conditions of your retirement. You acknowledge that you have not relied on any representations or statements, whether oral or written, other than the express statements of the Retirement Agreement and this General Release (and the applicable provisions of the Confidentiality Agreement), in signing this General Release. With the exception of the Confidentiality Agreement and the Retirement Agreement, this General Release supersedes and merges all prior negotiations, agreements and understandings between the Company and you, if any. No modification, release, discharge or waiver of any provision of this General Release shall be of any force or effect unless made in writing and signed by the Company and you, and specifically identified as an amendment, modification, release or discharge of this General Release. If any term, clause or provision of this General Release is determined for any reason by a court of competent jurisdiction to be invalid, unenforceable or void, the determination shall not impair or invalidate any of the other provisions of this General Release, all of which shall be performed in accordance with their respective terms. However, if any of the waivers and releases set forth in Section 1 of this General Release are held to be invalid, void and/or unenforceable by a court or arbitrator then: the remaining waivers and releases shall remain fully valid and enforceable and, upon request by the Company, you shall immediately duly execute and deliver to the Company a release and waiver that is legal and enforceable to the fullest extent of the law.

9. Signing Period. By your signature to this General Release, you acknowledge and agree that you have been given a period of at least twenty-one (21) calendar days to consider this General Release prior to signing it and that you have not signed it until the twenty-first day after receiving it or, if you have signed it prior to the expiration of the twenty-one (21) day period, you are acknowledging that you have done so knowingly and voluntarily and on the advice of your own attorney at your expense and that the Company has in no way requested, asked or required that you sign this General Release prior to the expiration of the twenty-one (21) day period. By your signature you also acknowledge and agree that the Company has advised you to consult with an attorney of your choice at your expense prior to signing this General Release and you have done so, or chosen not to do so, of your own accord. You further agree that any modifications made to this General Release, material or otherwise,

do not restart or affect in any manner the consideration period of at least twenty-one (21) calendar days.

10. Confidentiality Agreement. By signing this General Release, you acknowledge and agree that the post-termination obligations and provisions of the Confidentiality Agreement will continue in full force and effect according to the applicable terms of the Confidentiality Agreement following your termination. By signing this General Release, you represent that you have complied with all obligations, terms and provisions of the Confidentiality Agreement and will continue to comply with the obligations that survive termination of your employment.

11. Right to Rescind Release of ADEA Claims. You are hereby notified of your right to rescind the release of claims in regard to claims arising under the Federal Age Discrimination in Employment Act, 29 U.S.C. § 621 etseq. (“ADEA Claims”) within seven (7) calendar days after signing this General Release (the “Rescission Period”). In order to be effective, the rescission must be in writing and delivered to Ms. Casner, Senior Vice President - Chief Human Resources Office, Cantel Medical Corp., 150 Clove Road, Little Falls, New Jersey 07424, by hand, email to HRIS@cantelmedical.com (with a copy to jcasner@cantelmedical.com and pclifford@cantelmedical.com) or mail. If delivered by mail, the rescission must be postmarked within the required period, properly addressed to Ms. Casner, as set forth above, and sent by certified mail, return receipt requested. It is further understood that, if you rescind the release of ADEA Claims in accordance with this Section, or if you decide not to sign this General Release, the Company shall have no obligation to provide the Retirement Package or any other benefits provided under the Retirement Agreement, and you shall be required to return or repay any such payments or benefits already provided to you or made on your behalf.

12. Governing Law; Jurisdiction. This General Release will be governed by and construed in accordance with the laws of the State of New Jersey without regard to principles of conflicts of laws. As to any dispute concerning or arising out of this General Release, each of Cantel and you hereby expressly consent to personal jurisdiction in the State of New Jersey, hereby submit to the exclusive jurisdiction of the state and federal courts located in the State of New Jersey, County of Passaic, and further agree not to assert that any action brought in such jurisdiction has been brought in an inconvenient forum or that such venue is improper. To the extent permitted by law, any and all claims asserted in such an action shall be adjudicated by a judge sitting without a jury.

13. Severability. If any one or more of the provisions of this General Release is held invalid, illegal or unenforceable, the remaining provisions of this General Release shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision that comes closest to the intent of the parties.

Eric, your signature below indicates that you have carefully read, understand and agree to all terms and provisions of this General Release in its entirety. Your signature further indicates that you have had a sufficient and reasonable amount of time prior to signing this General Release to ask questions regarding this General Release, that you have been advised to seek legal advice and that you have signed this General Release as a free and voluntary act.

If you wish to receive the Retirement Package, and other benefits set forth in the Retirement Agreement, you must sign and return the original of this General Release to Jean Casner in Human Resources by hand, mail or overnight courier (as set forth in Section 2 of the Retirement Agreement) no earlier than the Retirement Date and no later than the close of business on the twenty-first day following the Retirement Date. You must also abide by all other terms of this General Release.

ACCEPTANCE AND AGREEMENT TO GENERAL RELEASE

By signing below, I, Eric Nodiff, acknowledge and agree to the following:

• I have had adequate time to consider whether to sign this General Release.

• I have read this General Release carefully.

• I understand, accept and agree to all of the terms of this General Release.

• I am knowingly and voluntarily releasing my claims as set forth in this General Release.

• I have not, in signing this General Release, relied upon any representations or statements, written or oral, or explanations made by the Company except for those specifically set forth in this General Release.

• I intend this General Release to be legally binding.

• I have kept a full copy of this General Release for my records.

I am signing this General Release no earlier than the Retirement Date as defined above and no later than the close of business on the twenty-first day thereafter.

________________________________            __________________________________                                                    

DateEric Nodiff

Exhibit B

CONSULTANT AGREEMENT

This CONSULTANT AGREEMENT (this “Agreement”) is effective as of August 1, 2019 (the “Effective Date”) by and between Cantel Medical Corp. (the “Company”) and Eric Nodiff, Single member LLC or similar disregarded entity may be inserted.an independent consultant (“Consultant”). The Company and Consultant are collectively referred to as the “Parties” and individually as a “Party” in this Agreement.

WHEREAS, the Company desires to engage Consultant to perform certain consulting services for the Company, and Consultant desires to accept such engagement, pursuant to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1

SERVICES AND FEES

1.1Services. Consultant will provide consulting services for the Company related to legal support for mergers and acquisitions and, to the extent mutually agreed, other matters of the nature historically performed by Consultant (the “Services”) on the terms and conditions set forth herein. Consultant will take direction from Jeff Mann, SVP and General Counsel of the Company, and his designees. Consultant will have the right to determine how he will provide the services. The Company acknowledges that the Services will generally be provided on a part time basis as determined by Jeff Mann and in consultation with Consultant; provided, however, that the specific time required for Services will vary based on the specific matter(s) Consultant is working on. Consultant will provide the Services independently and without use of Company personnel or other resources, except to the extent approved in advance by the Company (e.g., pertinent files, electronic documents, etc.).

1.2Compensation. In consideration for the Services rendered by Consultant hereunder, the Company agrees to pay Consultant a fixed consulting fee of $27,500 per month during the term of this Agreement. It is anticipated by the Parties that Consultant will provide between 500 and 700 hours of Services over the term of this Agreement. In the event that Consultant provides less than 500 hours of Services during the term of this Agreement, there will be no adjustment to the monthly payment. In the event that Consultant provides more than 700 hours of Services during the term, Consultant will provide documentation for such hours and invoice the Company for each such hour of Service in excess of 700 hours at the rate of $500 per hour or such other rate that is mutually agreed in writing by the parties. Consultant shall be responsible for documenting hours and work performed and shall keep the Company reasonably apprised (by email to Jeff Mann or his designee) on a monthly basis as to the hours of Services accrued to-date under the Agreement. The number of hours performed will be deemed final and approved unless the Company gives Consultant a written notice disputing such number of hours together (with a reasonably detailed explanation of the basis for such dispute) within ten (10) days following Consultant’s submission of his monthly report. Payment will be made within ten (10) days following receipt of an invoice from Consultant, or monthly, as the parties may agree. In addition, the Company will pay all of Consultant’s reasonable travel, food and related expenses (consistent with the Company’s travel policies for senior executives) incurred in connection with the Services that are approved in advance by the Company.

1.3Consultant will provide a written Statement of Work to be approved by Jeff Mann prior to any work commencing, setting forth the scope of Services and a good faith estimate of the number of hours and travel expenses expected to be incurred by Consultant for such work.

ARTICLE 2

INDEPENDENT CONSULTANT RELATIONSHIP

2.1Independent Contractor Status. To the fullest extent permitted by law, Consultant will be an independent contractor to the Company. Consultant will not be deemed an agent, employee or servant of the Company. Neither the Company nor Consultant will have any right to act on behalf of or bind the other Party for any purpose. Consultant is authorized only to provide the Services in accordance with the terms of this Agreement. Consultant does not have the right to enter into any contract or agreement (whether written or oral) on behalf of the Company. Consultant is not authorized to make any commitments or create any obligation on the Company’s behalf. The Company acknowledges and agrees that the Services will involve business consulting and advice, and not involve legal services or the practice of law. The Company agrees to utilize legal counsel in connection with any Services to the extent necessary.

2.2No Employee Benefits. In connection with the Services and this Agreement, Consultant: (a) acknowledges and agrees that Consultant will not receive or be eligible to receive from the Company or any of its affiliates or subsidiaries any benefits provided to employees of the Company or any of its affiliates or subsidiaries; (b) hereby declines all offers of employee benefits from the Company or its affiliates or subsidiaries; and (c) to the extent permitted by law, waives any and all rights and claims to such employee benefits. The foregoing will not nullify or otherwise affect any obligation the Company has to Consultant under the Retirement Agreement dated January [INSERT], 2019 between the parties (the “Retirement Agreement”) and the General Release provided in accordance with the Retirement Agreement.

2.3Tax Treatment. Consultant will be solely responsible to pay any and all state, local and/or federal income, Social Security and unemployment taxes payable with respect to all compensation payable to Consultant under this Agreement. The Company will not withhold any taxes or issue W-2 forms for Consultant, but will provide Consultant with a Form 1099 if and as required by law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

3.1Consultant’s Representations, Warranties and Agreements.

3.1.1Consultant represents and warrants to the Company that: (a) all Services provided hereunder will be performed to the best of his ability with the standards of care, skill and diligence used by persons who are skilled, trained and experienced with respect to the Services to be provided hereunder; (b) neither the execution of this Agreement nor the performance of his obligations hereunder will violate any other agreement pursuant to which Consultant may be a party; and (c) Consultant has the right and authority to execute, deliver and perform this Agreement, and that he is not, and during the term of this Agreement will not be, a party to any agreement, contract or undertaking which would restrict or prohibit him in any way from undertaking or performing or discharging any of his duties and responsibilities under this Agreement.

3.1.2Consultant represents that he has no conflicts of interest in the performance of Services hereunder and that if any such conflicts arise during the term of this Agreement, he will promptly disclose them to the Company.

3.1.3The compensation paid hereunder has been established through good faith and arms-length bargaining and represents the fair market value of the Services rendered.

ARTICLE 4

COMPLIANCE WITH LAWS

4.1Compliance with Laws. In connection with the performance of Services pursuant to this Agreement, Consultant will comply with the provisions of all applicable state, local and federal laws, regulations, ordinances, requirements and codes. Consultant further agrees to comply with the Company’s policy of maintaining a business environment free of all forms of discrimination including sexual harassment.

ARTICLE 5

NON-DISCLOSURE; NON-USE; AND NON-COMPETE

5.1Confidential Information. The term “Confidential Information” means all information (whether or not specifically labeled or identified as confidential), in any form or medium, that is disclosed to, or developed or learned by, Consultant in connection with the performance of the Services hereunder, and that relates to the business, products, research or development of the Company or its affiliates, suppliers, clients or customers. Confidential Information will not include any information that Consultant can demonstrate: (a) is publicly known through no wrongful act or breach of any obligation of confidentiality; (b) was received by Consultant from a third party not in breach of any obligation of confidentiality; or (c) was independently developed by Consultant without any use of any Confidential Information. Within five (5) business days of the termination of this Agreement, Consultant will return to the Company all Confidential Information and all other properties of the Company.

5.2Agreement to Maintain Confidentiality. Consultant acknowledges and agrees that he will have access to and contribute to Confidential Information and that he intends to protect the legitimate business interests of the Company. Consultant agrees that, during the term of this Agreement and at all times thereafter, he will not use for his benefit or the benefit of any other person, and will not disclose to any other person or entity, any Confidential Information, except to the extent such use or disclosure is required in the performance of the Services, pursuant to Section 5.3 of this Agreement, or is made with the Company’s prior written consent. Consultant will use his best efforts and utmost diligence to safeguard the Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. However, Consultant will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

5.3Required Disclosures. In the event that Consultant is required by law or court order to disclose any Confidential Information, Consultant will: (a) promptly notify the Company in writing and in no event no later than five (5) business days prior to any such disclosure; (b) cooperate with the Company to preserve

the confidentiality of such Confidential Information consistent with applicable law; and (c) use Consultant’s best efforts to limit any such disclosure to the minimum disclosure necessary to comply with such law or court order.

5.4Covenant Not To Compete. During the term of this Agreement, Consultant will be free to pursue other consulting engagements, provided that Consultant will not, directly or indirectly, either alone or in association with others: (a) develop, design, market, sell or render products which are competitive with Company products in the U.S. or Canada, or render services to anyone that develops, designs, markets, sells or renders products which are competitive with Company products in the U.S. or Canada; or (b) solicit any of the employees or consultants of the Company to leave the employ of the Company. Consultant agrees that the foregoing limitations are reasonable and do not preclude Consultant from pursuing his livelihood. However, if any such limitation is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time, over too great a range of activities or in too broad a geographic area, it will be interpreted to extend only over the maximum period of time, range of activities or geographic area, as the case may be, as to which it may be enforceable.

ARTICLE 6

TERM

6.1In General. This Agreement will be effective for the one (1) year period ending July 31, 2020.

6.2Early Termination Provisions. Notwithstanding Section 6.1, this Agreement may be terminated (i) by Consultant at any time by providing at least thirty (30) days’ notice to the Company, and (ii) by the Company by providing at least one-hundred eighty (180) days’ notice to Consultant at any time by the Company following a Change in Control (as defined in the Amended and Restated Executive Severance Agreement dated as of November 17, 2014), in each case for any reason or no reason. In the event this Agreement is terminated by either party, all accrued but unpaid amounts through the last day of the month that the termination occurs shall be payable to Consultant as provided in Section 1 of this Agreement, and, following such termination, the Company shall maintain the right to enforce all applicable terms of this Agreement including Sections 2, 3, 4, and 5 herein.

ARTICLE 7

MISCELLANEOUS

7.1No Present or Future Agreements or Employment Promises. Consultant acknowledges that the Company makes no promise regarding the renewal or extension of this Agreement or future agreements, or any promise of present or future use of Consultant.

7.2Assignments; Waiver. This Agreement may not be assigned by Consultant, in whole or in part, without the prior written consent of the Company.

7.3Governing Law. This Agreement will be governed by and construed in accordance with, the laws of the State of New Jersey, without giving effect to any principles of conflicts of law.

7.4Severability; Survival. If any provision of this Agreement is held or declared to be prohibited or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or

invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

7.5Entire Agreement; Amendments; Counterparts. This Agreement, which is entered into in connection with the Retirement Agreement, contains the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes any previous understandings or agreements, whether written or oral, in respect of such subject matter. The language used in this Agreement will be deemed to express the mutual intent of the Parties, and no provision of this Agreement will be presumptively construed against any Party. This Agreement may only be amended by a written instrument executed by the Parties hereto. This Agreement may be signed in one or more counterparts, each of which will constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

CANTEL MEDICAL CORP.

By:_________________________________

Name: George L. Fotiades

Title: President and CEO

CONSULTANT

__________________________________

[Eric Nodiff or contracting entity]

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, George L. Fotiades, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cantel Medical Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	June 6, 2019
By:	/s/ George L. Fotiades
George L. Fotiades, President and Chief Executive Officer
(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Peter G. Clifford, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cantel Medical Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	June 6, 2019
By:	/s/ Peter G. Clifford
Peter G. Clifford, Executive Vice President and Chief Operating Officer
(Principal Financial Officer through April 30, 2019)

EX-32

Exhibit 32

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF

TITLE 18, UNITED STATES CODE)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), the undersigned officers of Cantel Medical Corp. (the “Company”), do hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarter ended April 30, 2019 as filed with the Securities and Exchange Commission  (the “Form 10-Q”) that, to the best of their knowledge:

1. The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company, as of the date and for the period referred to in this report.

Date:	June 6, 2019
		/s/ George L. Fotiades
		George L. Fotiades
		President and Chief Executive Officer
		(Principal Executive Officer)
		/s/ Peter G. Clifford
		Peter G. Clifford
		Executive Vice President and Chief Operating Officer
		(Principal Financial Officer through April 30, 2019)

XML

Document and Entity Information - shares	9 Months Ended
	Apr. 30, 2019	May 31, 2019
Document and Entity Information
Entity Registrant Name	CANTEL MEDICAL CORP
Entity Central Index Key	0000019446
Document Type	10-Q
Document Period End Date	Apr. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--07-31
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding		41,766,952
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Apr. 30, 2019	Jul. 31, 2018
Current assets:
Cash and cash equivalents	$ 51,348	$ 94,097
Accounts receivable, net of allowance for doubtful accounts of $1,498 and $1,149	142,504	118,642
Inventories, net	134,193	107,592
Prepaid expenses and other current assets	23,018	17,912
Income taxes receivable	1,483	0
Total current assets	352,546	338,243
Property and equipment, net	173,070	111,417
Intangible assets, net	148,075	137,361
Goodwill	378,144	368,027
Other assets	7,337	5,749
Deferred income taxes	3,621	2,911
Total assets	1,062,793	963,708
Current liabilities:
Accounts payable	50,537	34,258
Compensation payable	29,665	30,595
Accrued expenses	33,412	28,525
Deferred revenue	26,635	28,614
Current portion of long-term debt	10,000	10,000
Income taxes payable	819	2,791
Total current liabilities	151,068	134,783
Long-term debt	223,214	187,302
Deferred income taxes	25,663	27,624
Other long-term liabilities	6,983	5,132
Total liabilities	406,928	354,841
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred Stock, par value $1.00 per share; authorized 1,000,000 shares; none issued	0	0
Common Stock, par value $0.10 per share; authorized 75,000,000 shares; issued 46,356,251 shares and outstanding 41,765,917 shares as of April 30, 2019; issued 46,243,582 shares and outstanding 41,706,084 shares as of July 31, 2018	4,636	4,624
Additional paid-in capital	201,116	184,212
Retained earnings	534,449	491,540
Accumulated other comprehensive loss	(19,655)	(11,456)
Treasury Stock, at cost; 4,590,334 shares as of April 30, 2019; 4,537,498 shares as of July 31, 2018	(64,681)	(60,053)
Total stockholders’ equity	655,865	608,867
Total liabilities and stockholders’ equity	$ 1,062,793	$ 963,708

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Apr. 30, 2019	Jul. 31, 2018
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 1,498	$ 1,149
Preferred Stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred Stock, authorized (in shares)	1,000,000	1,000,000
Preferred Stock, issued (in shares)	0	0
Common Stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common Stock, authorized (in shares)	75,000,000	75,000,000
Common Stock, issued (in shares)	46,356,251	46,243,582
Common Stock, outstanding (in shares)	41,765,917	41,706,084
Treasury Stock (in shares)	4,590,334	4,537,498

XML

Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Net sales
Net sales	$ 228,552	$ 217,268	$ 678,679	$ 643,068
Cost of sales
Cost of sales	121,675	112,594	361,878	336,500
Gross profit	106,877	104,674	316,801	306,568
Expenses:
Selling	36,077	33,252	103,233	95,774
General and administrative	48,634	37,784	122,527	102,068
Research and development	7,354	6,571	22,355	17,543
Total operating expenses	92,065	77,607	248,115	215,385
Income from operations	14,812	27,067	68,686	91,183
Interest expense, net	2,509	1,498	6,742	3,822
Other income, net	0	0	(1,313)	(1,138)
Income before income taxes	12,303	25,569	63,257	88,499
Income taxes	4,128	6,833	17,040	14,346
Net income	$ 8,175	$ 18,736	$ 46,217	$ 74,153
Earnings per common share:
Basic (in dollars per share)	$ 0.20	$ 0.45	$ 1.11	$ 1.78
Diluted (in dollars per share)	0.20	0.45	1.11	1.77
Dividends per common share (in dollars per share)	$ 0.00	$ 0.00	$ 0.10	$ 0.09
Product sales
Net sales
Net sales	$ 197,478	$ 189,861	$ 587,251	$ 564,310
Cost of sales
Cost of sales	99,867	93,762	299,595	283,005
Product service
Net sales
Net sales	31,074	27,407	91,428	78,758
Cost of sales
Cost of sales	$ 21,808	$ 18,832	$ 62,283	$ 53,495

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 8,175	$ 18,736	$ 46,217	$ 74,153
Other comprehensive (loss) income:
Foreign currency translation	(3,168)	(6,538)	(8,808)	4,608
Interest rate swap	609	0	609	0
Total other comprehensive (loss) income:	(2,559)	(6,538)	(8,199)	4,608
Comprehensive income	$ 5,616	$ 12,198	$ 38,018	$ 78,761

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury stock, at cost
Beginning Balance (in shares) at Jul. 31, 2017		41,728,934
Beginning Balance at Jul. 31, 2017	$ 523,932	$ 4,619	$ 174,602	$ 407,590	$ (9,900)	$ (52,979)
Increase (Decrease) in Stockholders' Equity
Repurchases of shares (in shares)		(52,008)
Repurchases of shares	(5,822)					(5,822)
Stock-based compensation	1,851		1,851
Equity vestings/option exercises (in shares)		42,168
Equity vestings/option exercises	879	$ 5	874
Cancellations of restricted stock (in shares)		(1,315)
Cancellations of restricted stock	0
Dividends on common stock	0			0
Net income	22,929			22,929
Other (in shares)		88,100
Other	42	$ 10	32
Other comprehensive income (loss)	(1,233)				(1,233)
Ending Balance (in shares) at Oct. 31, 2017		41,805,879
Ending Balance at Oct. 31, 2017	542,578	$ 4,634	177,359	430,519	(11,133)	(58,801)
Beginning Balance (in shares) at Jul. 31, 2017		41,728,934
Beginning Balance at Jul. 31, 2017	523,932	$ 4,619	174,602	407,590	(9,900)	(52,979)
Increase (Decrease) in Stockholders' Equity
Net income	74,153
Other comprehensive income (loss)	4,608
Ending Balance (in shares) at Apr. 30, 2018		41,709,335
Ending Balance at Apr. 30, 2018	601,306	$ 4,046	183,551	478,197	(5,292)	(59,196)
Beginning Balance (in shares) at Oct. 31, 2017		41,805,879
Beginning Balance at Oct. 31, 2017	542,578	$ 4,634	177,359	430,519	(11,133)	(58,801)
Increase (Decrease) in Stockholders' Equity
Repurchases of shares (in shares)		(1,272)
Repurchases of shares	(131)					(131)
Stock-based compensation	2,739		2,739
Equity vestings/option exercises (in shares)		0
Equity vestings/option exercises	0	$ 0	0
Cancellations of restricted stock (in shares)		(1,604)
Cancellations of restricted stock	0
Dividends on common stock	(3,545)			(3,545)
Net income	32,488			32,488
Other (in shares)		(88,100)
Other	(25)	$ (10)	(15)
Other comprehensive income (loss)	12,379				12,379
Ending Balance (in shares) at Jan. 31, 2018		41,714,903
Ending Balance at Jan. 31, 2018	586,483	$ 4,624	180,083	459,462	1,246	(58,932)
Increase (Decrease) in Stockholders' Equity
Repurchases of shares (in shares)		(2,336)
Repurchases of shares	(264)					(264)
Stock-based compensation	2,443		2,443
Equity vestings/option exercises (in shares)		620
Equity vestings/option exercises	0	$ 0	0
Cancellations of restricted stock (in shares)		(3,482)
Cancellations of restricted stock	0
Net income	18,736			18,736
Other (in shares)		(370)
Other	446	$ (578)	1,025	(1)
Other comprehensive income (loss)	(6,538)				(6,538)
Ending Balance (in shares) at Apr. 30, 2018		41,709,335
Ending Balance at Apr. 30, 2018	$ 601,306	$ 4,046	183,551	478,197	(5,292)	(59,196)
Beginning Balance (in shares) at Jul. 31, 2018	41,706,084	41,706,084
Beginning Balance at Jul. 31, 2018	$ 608,867	$ 4,624	184,212	491,540	(11,456)	(60,053)
Increase (Decrease) in Stockholders' Equity
Repurchases of shares (in shares)		(37,802)
Repurchases of shares	(4,288)					(4,288)
Stock-based compensation	2,576		2,576
Equity vestings/option exercises (in shares)		53,320
Equity vestings/option exercises	955	$ 7	948
Cancellations of restricted stock (in shares)		(286)
Cancellations of restricted stock	0
Dividends on common stock	0			0
Net income	19,242			19,242
Other	(634)		(634)
Other comprehensive income (loss)	(5,223)				(5,223)
Ending Balance (in shares) at Oct. 31, 2018		41,721,316
Ending Balance at Oct. 31, 2018	$ 622,360	$ 4,631	187,102	511,647	(16,679)	(64,341)
Beginning Balance (in shares) at Jul. 31, 2018	41,706,084	41,706,084
Beginning Balance at Jul. 31, 2018	$ 608,867	$ 4,624	184,212	491,540	(11,456)	(60,053)
Increase (Decrease) in Stockholders' Equity
Equity vestings/option exercises (in shares)	30,000
Net income	$ 46,217
Other comprehensive income (loss)	$ (8,199)
Ending Balance (in shares) at Apr. 30, 2019	41,765,917	41,765,917
Ending Balance at Apr. 30, 2019	$ 655,865	$ 4,636	201,116	534,449	(19,655)	(64,681)
Beginning Balance (in shares) at Oct. 31, 2018		41,721,316
Beginning Balance at Oct. 31, 2018	622,360	$ 4,631	187,102	511,647	(16,679)	(64,341)
Increase (Decrease) in Stockholders' Equity
Repurchases of shares (in shares)		(880)
Repurchases of shares	(67)					(67)
Stock-based compensation	3,587		3,587
Equity vestings/option exercises (in shares)		1,857
Equity vestings/option exercises	0	$ 0	0
Cancellations of restricted stock (in shares)		(1,107)
Cancellations of restricted stock	0
Dividends on common stock	(4,173)			(4,173)
Net income	18,800			18,800
Other	1,513		1,513
Other comprehensive income (loss)	(417)				(417)
Ending Balance (in shares) at Jan. 31, 2019		41,721,186
Ending Balance at Jan. 31, 2019	641,603	$ 4,631	192,202	526,274	(17,096)	(64,408)
Increase (Decrease) in Stockholders' Equity
Issuance of shares (in shares)		42,705
Issuance of shares	3,197	$ 4	3,193
Repurchases of shares (in shares)		(3,712)
Repurchases of shares	(273)					(273)
Stock-based compensation	5,722		5,722
Equity vestings/option exercises (in shares)		5,875
Equity vestings/option exercises	0	$ 1	(1)
Cancellations of restricted stock (in shares)		(137)
Cancellations of restricted stock	0
Dividends on common stock	0			0
Net income	8,175			8,175
Other comprehensive income (loss)	$ (2,559)				(2,559)
Ending Balance (in shares) at Apr. 30, 2019	41,765,917	41,765,917
Ending Balance at Apr. 30, 2019	$ 655,865	$ 4,636	$ 201,116	$ 534,449	$ (19,655)	$ (64,681)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Cash flows from operating activities
Net income	$ 46,217	$ 74,153
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	15,455	12,816
Amortization	15,508	12,892
Stock-based compensation expense	11,885	7,033
Deferred income taxes	(2,671)	(7,499)
Other non-cash items, net	263	586
Changes in assets and liabilities, net of effects of acquisitions/dispositions:
Accounts receivable	(18,642)	892
Inventories	(24,671)	(9,791)
Prepaid expenses and other assets	(4,929)	(7,256)
Accounts payable and other liabilities	13,608	13,859
Income taxes	(3,537)	(7,682)
Net cash provided by operating activities	48,486	90,003
Cash flows from investing activities
Capital expenditures	(75,387)	(23,772)
Proceeds from sale of business	3,053	0
Acquisitions, net of cash acquired	(40,644)	(84,595)
Net cash used in investing activities	(112,978)	(108,367)
Cash flows from financing activities
Repayments of long-term debt	(12,707)	0
Borrowings under revolving credit facility	50,000	82,300
Repayments under revolving credit facility	(7,000)	(39,300)
Dividends paid	(4,173)	(3,546)
Purchases of treasury stock	(4,628)	(6,216)
Net cash provided by financing activities	21,492	33,238
Effect of exchange rate changes on cash and cash equivalents	251	458
(Decrease) increase in cash and cash equivalents	(42,749)	15,332
Cash and cash equivalents at beginning of period	94,097	36,584
Cash and cash equivalents at end of period	$ 51,348	$ 51,916

XML

Basis of Presentation

9 Months Ended

Apr. 30, 2019

Basis of Presentation

Basis of Presentation

Basis of Presentation

Throughout this document, references to “Cantel,” “us,” “we,” “our,” and the “Company” are references to Cantel Medical Corp. and its subsidiaries, except where the context makes it clear the reference is to Cantel itself and not its subsidiaries.

During the first quarter of fiscal 2019, we changed the names of our reportable segments to better align with our key customers and the markets we serve. This decision resulted in a change from a financial reporting perspective as the industrial biological and chemical indicator business has moved from the Dental segment to the Life Sciences segment. Prior year segment disclosures have been recast to conform to the current year presentation. See Note 15, “Reportable Segments.”

Cantel is a leading provider of infection prevention products and services in the healthcare market, specializing in the following reportable segments: Medical, Life Sciences, Dental and Dialysis. Most of our equipment, consumables and supplies are used to help prevent the occurrence or spread of infections.

The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles for interim financial reporting and the requirements of Form 10-Q and Rule 10.01 of Regulation S-X. Accordingly, they do not include certain information and note disclosures required by generally accepted accounting principles for annual financial reporting and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Annual Report of Cantel Medical Corp. on Form 10-K for the fiscal year ended July 31, 2018 (the “2018 Form 10-K”) and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. The unaudited interim financial statements reflect all adjustments (of a normal and recurring nature) which management considers necessary for a fair presentation of the results of operations for these periods. The results of operations for the interim periods are not necessarily indicative of the results for the full year. The Condensed Consolidated Balance Sheet at July 31, 2018 was derived from the audited Consolidated Balance Sheet of Cantel at that date. Certain prior year amounts have been reclassified to conform to the current year presentation.

Subsequent Events

We performed a review of events subsequent to April 30, 2019 through the date of issuance of the accompanying unaudited consolidated interim financial statements.

XML

Accounting Pronouncements

9 Months Ended

Apr. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Accounting Pronouncements

Accounting Pronouncements

Newly Adopted Accounting Standards

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities,” (“ASU 2017-12”) to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), including interim periods within that reporting period. We early adopted ASU 2017-12 effective August 1, 2018. The adoption of ASU 2017-12 did not have a material impact on our financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09, “(Topic 718) Scope of Modification Accounting,” (“ASU 2017-09”) to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019), including interim periods within that reporting period. Accordingly, we adopted ASU 2017-09 on August 1, 2018. The adoption of ASU 2017-09 did not have a material impact on our financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15, “(Topic 230) Classification of Certain Cash Receipts and Cash Payments,” (“ASU 2016-15”). This guidance makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019). Accordingly, we adopted ASU 2016-15 on August 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition” (“ASC 605”). ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to fiscal years beginning after December 15, 2017 (our fiscal year 2019), including interim periods within that reporting period. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2016-12”), which provided narrow scope improvements and practical expedients relating to ASU 2014-09. We adopted the collective standard (“ASC 606”) on August 1, 2018. See Note 5, “Revenue Recognition” for a discussion of the impact and required disclosures.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-15,“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. The adoption of ASU 2018-15 is not expected to have a material impact on our financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-13,“Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”) to modify the disclosure requirements on fair value measurements in ASC 820, “Fair Value Measurement”. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. The adoption of ASU 2018-13 is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2018, the FASB issued ASU 2018-02,“Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”) to allow for the reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Tax Cuts and Jobs Act enacted in December 2017. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), including interim periods within that reporting period. The adoption of ASU 2018-02 is not expected to have a material impact on our financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-04, “(Topic 350) Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”) to simplify the test for goodwill impairment. The revised guidance eliminates the existing Step 2 of the goodwill impairment test which required an entity to compute the implied fair value of its goodwill at the testing date in order to measure the amount of the impairment charge when the fair value of the reporting unit failed Step 1 of the goodwill impairment test. The guidance will be applied on a prospective basis on or after the effective date. ASU 2017-04 is effective for fiscal years beginning after December 31, 2019 (our fiscal year 2021) and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, “(Topic 842) Leases,” (“ASU 2016-02”). The new guidance requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. ASU 2016-02 is effective for fiscal years beginning after December 31, 2018 (our fiscal year 2020), including interim periods within that reporting period. Early adoption is permitted as of the beginning of an interim or annual period. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11, “Leases (Topic 842) Targeted Improvements,” in December 2018, the FASB issued ASU 2018-20, “Narrow-Scope Improvements for Lessors” andin March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements.” These ASUs provide adjustments relating to ASU 2016-02 and improvements to comparative reporting requirements for initial adoption and for separating components of a contract for lessors. We are currently in the process of evaluating the impact of the collective standard (“ASC 842”) on our financial position, results of operations and cash flows.

XML

Acquisitions

9 Months Ended

Apr. 30, 2019

Business Combinations [Abstract]

Acquisitions

Acquisitions

Fiscal 2019

Omnia: On February 1, 2019, we purchased all of the issued and outstanding stock of Omnia S.p.A. (“Omnia”), an Italian-based market leader in dental surgical consumables solutions, for total consideration (net of cash acquired), excluding acquisition-related costs, of $19,808, consisting of $16,597 of cash and $3,211 of stock consideration, plus additional earn-outs ranging from zero to a maximum of $5,800, which is payable upon the achievement of certain performance-based financial targets. Omnia’s business consists of a wide-ranging portfolio of sutures, irrigation tubing and customized dental surgical procedure kits, with a focus on procedure room set-up and cross-contamination prevention, and is included in our Dental segment.

CES business: On August 1, 2018, we acquired certain net assets of Stericycle Inc. related to its controlled environmental solutions business (“CES business”) for total cash consideration, excluding acquisition-related costs, of $17,047. The CES business is a leading provider of testing and certification, environmental monitoring and decontamination services for clean rooms and other controlled environments to ensure safety, regulatory compliance and quality control, and is included in our Life Sciences segment.

Fiscal 2018

Aexis: On March 21, 2018, we purchased all of the issued and outstanding stock of Aexis Medical BVBA (“Aexis”) for total consideration, excluding acquisition-related costs, of $21,600, consisting of $20,308 of cash consideration (net of cash acquired), plus contingent consideration ranging from zero to a maximum of $1,850, which is payable upon the achievement of certain purchase order targets through March 21, 2020. Aexis specializes in advanced software solutions focused on the tracking and monitoring of instrument reprocessing for hospitals and healthcare professionals, and is included in our Medical segment.

BHT Group: On August 23, 2017, we purchased all of the issued and outstanding stock of BHT Hygienetechnik Holding GmbH (“BHT Group”), a leader in the German market in automated endoscope reprocessing and related equipment and services for total consideration (net of cash acquired), excluding acquisition related costs, of $60,216. BHT Group consists of a portfolio of high-quality automatic endoscope reprocessors, advanced endoscope storage and drying cabinets (products globally distributed by our Company prior to the acquisition under an agreement with BHT Group), washer-disinfectors for central sterile applications, associated technical service and parts as well as flexible endoscope repair services. BHT Group is included in our Medical segment.

The following table presents our purchase price allocations of our material acquisitions:

	2019					2018
Purchase Price Allocation	Omnia			CES Business(1)		Aexis			BHT Group
	(Preliminary)			(Preliminary)		(Final)			(Final)
Purchase Price:
Cash paid	$	16,597		$	17,047	$	20,308		$	60,216
Fair value of contingent consideration	—			—		1,292			—
Common stock issued	3,211			—		—			—
Total	$	19,808		$	17,047	$	21,600		$	60,216
Allocation:
Property and equipment	1,285			539		130			835
Amortizable intangible assets:
Customer relationships	9,259			8,100		1,800			12,500
Technology	1,600			—		4,600			6,200
Brand names	1,600			—		—			—
Goodwill	9,101			6,137		17,092			40,934
Deferred income taxes	—			—		(1,639		)	(5,881		)
Other working capital	2,170			2,271		909			5,628
Contingent consideration	—			—		(1,292		)	—
Long-term debt	(5,207		)	—		—			—
Total	$	19,808		$	17,047	$	21,600		$	60,216

_______________________________________________

(1) The excess purchase price over net assets acquired was assigned to goodwill, all of which is deductible for income tax purposes.

Unaudited Pro Forma Summary of Operations

The acquisitions above, both individually and in the aggregate, were not material to our consolidated results of operations or financial position and, therefore, pro forma financial information is not presented.

XML

Stock-Based Compensation

9 Months Ended

Apr. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2016 Equity Incentive Plan

At April 30, 2019, 281,044 nonvested restricted stock awards were outstanding under the 2016 plan. No options were outstanding under the 2016 plan. At April 30, 2019, 793,110 shares were collectively available for issuance pursuant to restricted stock and other stock awards, stock options and stock appreciation rights.

2006 Equity Incentive Plan

The 2006 Plan was terminated on January 7, 2016 in conjunction with the adoption of the 2016 Plan. At April 30, 2019, options to purchase 40,000 shares of common stock were outstanding under the 2006 Plan. No additional awards will be granted under this plan.

The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2019		2018		2019		2018
Cost of sales	$	245	$	167	$	769	$	463
Operating expenses:
Selling	538		559		1,684		1,188
General and administrative(1)	4,874		1,641		9,249		5,231
Research and development	65		76		183		151
Total operating expenses	5,477		2,276		11,116		6,570
Stock-based compensation expense	$	5,722	$	2,443	$	11,885	$	7,033

_______________________________________________

(1) The increase in stock-based compensation expense primarily relates to the accelerated vesting of awards resulting from organizational leadership changes. 

At April 30, 2019, total unrecognized stock-based compensation expense related to total nonvested stock options and restricted stock awards was $15,427 with a remaining weighted average period of 14 months over which such expense is expected to be recognized.

We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions:

	Nine Months Ended April 30,
	2019		2018
Volatility of common stock	27.54	%	26.60	%
Average volatility of peer companies	36.55	%	33.72	%
Average correlation coefficient of peer companies	27.18	%	32.26	%
Risk-free interest rate	2.93	%	1.62	%

A summary of nonvested stock award activity for the nine months ended April 30, 2019 follows:

	Number of Time-based Awards		Number of Performance-based Awards		Number of Market-based Awards		Number of Total Awards		Weighted Average Fair Value
July 31, 2018	168,320		26,076		17,710		212,106		$	88.87
Granted	143,144		35,981		25,320		204,445		$	88.48
Vested(1)	(95,459	)	(12,742	)	(4,335	)	(112,536	)	$	79.53
Forfeited	(10,251	)	(7,034	)	(5,686	)	(22,971	)	$	98.73
April 30, 2019	205,754		42,281		33,009		281,044		$	91.86

_______________________________________________

(1) The aggregate fair value of all nonvested stock awards which vested was approximately $8,952.

A summary of stock option activity for the nine months ended April 30, 2019 follows:

	Number of shares		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2018	70,000		$	38.60
Exercised	(30,000	)	$	31.81
Outstanding at April 30, 2019	40,000		$	43.70	0.82	$	1,010
Exercisable at April 30, 2019	40,000		$	43.70	0.82	$	1,010

During the nine months ended April 30, 2019, 5,000 options vested, with an aggregate fair value of approximately $277. During the nine months ended April 30, 2019, 30,000 options were exercised, with an aggregate fair value of approximately $1,787. At April 30, 2019, all outstanding options were vested.

Excess tax benefits arise when the ultimate tax effect of the deduction for tax purposes is greater than the income tax benefit on stock-based compensation. For the nine months ended April 30, 2019, income tax deductions of $2,465 were generated, of which $1,902 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $563 was recorded as a reduction in income tax expense. For the nine months ended April 30, 2018, income tax deductions of $3,406 were generated, of which $1,394 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $2,012 was recorded as a reduction in income tax expense.

XML

Revenue Recognition

9 Months Ended

Apr. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Adoption of “Revenue from Contracts with Customers (ASC 606)”

We adopted ASC 606, effective August 1, 2018, using the modified retrospective method applied to those contracts which were not completed as of August 1, 2018. Results for reporting beginning after August 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and will continue to be reported in accordance with our historic accounting under ASC 605.

Due to the cumulative impact of adopting ASC 606, we recorded a net increase of $865 to opening retained earnings, net of tax, as of August 1, 2018. The impact is primarily related to the timing of revenue recognition for the shipment of products in both our Medical and Life Sciences segments where risk of loss provisions are present (“synthetic FOB destination”). The new standard does not require us to defer revenue for these products and allows us to recognize revenue at the time of shipment. The cumulative adjustment to retained earnings also includes the impact of the change in timing of revenue recognition associated with software licensing arrangements in our Medical segment. Additionally, revenue related to software renewals was historically recognized on a ratable basis over the license period. Under ASC 606, the license is considered functional intellectual property, and is considered to be transferred to the customer at a point in time, specifically, at the start of each annual renewal period. As a result, revenue related to our annual software license renewals has been accelerated.

Revenue Recognition

A portion of our medical, life sciences and dialysis sales include multiple performance obligations, whereby revenue is allocated to the equipment, installation and consumable components based upon their relative standalone selling prices, which includes comparable historical transactions of similar equipment, installation and consumables sold as stand-alone components. Revenue on capital equipment and consumables is recognized when control of the equipment or consumable transfers to the customer, which is generally driven by the underlying shipping terms of the transaction. Revenue on the installation component is recognized when the installation is complete. The most significant judgments related to these arrangements include identifying the various performance obligations of these arrangements and determining the relative standalone selling price of each performance obligation.

With respect to certain of our customers, rebates are provided. Such rebates, which consist primarily of volume rebates, are provided for as a reduction of sales at the time of revenue recognition. Such allowances are determined based on estimated projections of sales volume for the entire rebate periods. If it becomes known that sales volume to customers will deviate from original projections, the rebate provisions originally established would be adjusted accordingly. We also offer certain volume-based rebates to our distribution customers, which we record as variable consideration when calculating the transaction price. We use information available at the time and our historical experience with each customer to estimate the rebate amount by applying the expected value method.

The following table gives information as to the net sales disaggregated by geography and product line:

	Three Months Ended April 30,				Nine Months Ended April 30,
Net sales by geography	2019		2018(1)		2019		2018(1)
United States	$	163,367	$	159,375	$	497,469	$	478,024
Europe/Africa/Middle East	39,949		33,702		106,278		94,254
Asia/Pacific	15,140		14,341		46,476		41,190
Canada	8,555		7,842		24,064		24,638
Latin America/South America	1,541		2,008		4,392		4,962
Total	$	228,552	$	217,268	$	678,679	$	643,068
Net sales by product line
Capital equipment	$	51,351	$	58,935	$	166,870	$	177,175
Consumables	144,515		130,155		417,067		385,963
Product service	31,074		27,407		91,428		78,758
All other(2)	1,612		771		3,314		1,172
Total	$	228,552	$	217,268	$	678,679	$	643,068

_______________________________________________

(1) As noted above, prior year amounts have not been adjusted under the modified retrospective method.

(2) Primarily includes software licensing revenues.

Remaining Performance Obligations

At April 30, 2019, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $66,534, primarily within the Medical segment. We expect to recognize revenue on approximately 60% of these remaining performance obligations over the remainder of fiscal 2019 and fiscal 2020. These performance obligations primarily reflect the future product service revenues for multi-period service arrangements.

Contract Liabilities

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. Our contract liabilities arise primarily in the Medical and Life Sciences segments when payment is received upfront for various multi-period extended service arrangements. We expect to recognize substantially all of this revenue over the next twelve months.

A summary of contract liabilities activity for the nine months ended April 30, 2019 follows:

	Contract Liabilities
Balance, August 1, 2018	$	29,015
Revenue deferred in current year	48,589
Deferred revenue recognized	(49,710		)
Foreign currency translation	(435		)
Balance, April 30, 2019	27,459
Contract liabilities included in Other long-term liabilities	(824		)
Deferred revenue	$	26,635

Practical Expedients and Policy Elections

As part of the cost to obtain a contract, we may pay incremental commissions to sales employees upon entering into a sales contract. Under ASC 606, we have elected to expense these costs as incurred when the period of benefit is less than one year. For certain multi-period contracts, we capitalize these amounts as contract costs, and amortize them based on the contract duration to which the assets relate, which ranges from two to five years. The amounts at April 30, 2019, were not material. For certain international contracts with distributors, we recognize a receivable at the point in time in which we have an unconditional right to payment. Most customers are required to pay a portion of the transaction price in advance and the remaining balance within 30 days of receiving the related products. Accordingly, we have elected to use the practical expedient which allows us to ignore the possible existence of a significant financing component within these contracts.

As a policy, for shipping and handling costs incurred after the customer has obtained control of a good, we will continue to treat these costs as a fulfillment cost rather than as an additional promised service. Additionally, in certain U.S. states, we are required to collect sales taxes from our customers, and in certain international jurisdictions, we are required to collect value added taxes. The tax collected is recorded as a liability until remitted to the taxing authority.

XML

Inventories, Net

9 Months Ended

Apr. 30, 2019

Inventory Disclosure [Abstract]

Inventories, Net

Inventories, Net

A summary of inventories is as follows:

	April 30, 2019			July 31, 2018
Raw materials and parts	$	68,557		$	49,054
Work-in-process	4,816			13,189
Finished goods	70,887			53,948
Reserve for excess and obsolete inventory	(10,067		)	(8,599		)
Total	$	134,193		$	107,592

XML

Derivatives

9 Months Ended

Apr. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

Derivatives

Foreign Currency

In order to hedge against the impact of fluctuations in the value of the Euro, British Pound, Canadian dollar, Australian dollar and Singapore dollar relative to the U.S. dollar on the conversion of such net assets into the functional currencies, we enter into short-term forward contracts to purchase Euros, British Pounds, Canadian dollars, Australian dollars and Singapore dollars, which contracts are one-month in duration. These short-term contracts are designated as fair value hedge instruments. These foreign currency forward contracts are continually replaced with new one-month contracts as long as we have significant net assets that are denominated and ultimately settled in currencies other than each entity’s functional currency. Gains and losses related to hedging contracts to buy Euros, British Pounds, Canadian dollars, Australian dollars and Singapore dollars forward are immediately realized within general and administrative expenses due to the short-term nature of such contracts. We do not currently hedge against the impact of fluctuations in the value of the Chinese Renminbi and Sri Lankan Rupee relative to the U.S. dollar because the overall foreign currency exposure relating to these currencies is not material.

There were six foreign currency forward contracts with an aggregate notional value of $61,447 and $30,159 at April 30, 2019 and July 31, 2018, respectively, which covered certain assets and liabilities that were denominated in currencies other than each entity’s functional currency. For the nine months ended April 30, 2019 and 2018, the settlements of our forward contracts resulted in immaterial amounts of currency conversion gains and losses on the hedged items in the aggregate.

Variable Rate Borrowings

In order to hedge against the impact of fluctuations in the interest rate associated with our variable rate borrowings, on April 9, 2019, we entered into two interest rate swaps with a combined notional value of $150,000, expiring on June 28, 2023. The swaps fixed interest rates at 2.45%. At April 30, 2019, we had an asset of $751 recorded in other assets, and a liability of $142 recorded in accrued expenses, which represent the fair value of the interest rate swaps. The fair value of these interest rate swaps is subject to movements in LIBOR and will fluctuate in future periods.

XML

Fair Value Measurements

9 Months Ended

Apr. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair Value Hierarchy

We apply the provisions of ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”), for our financial assets and liabilities that are re-measured and reported at fair value each reporting period and our nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. We define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Our financial assets that are re-measured at fair value on a recurring basis include money market funds that are classified as cash and cash equivalents in the consolidated balance sheets. These money market funds are classified within Level 1 of the fair value hierarchy and are valued using quoted market prices for identical assets.

For the Aexis acquisition, additional purchase price payments ranging from zero to $1,850 are contingent upon the achievement of certain purchase order targets through March 21, 2020. We estimated the original fair value of the contingent consideration using the weighted probabilities of the possible contingent payments. At the date of acquisition, we estimated the original fair value of the contingent consideration to be $1,292. We are required to reassess the fair value of contingent payments on a periodic basis. The significant inputs used in these estimates include numerous possible scenarios for the payments based on the contractual terms of the contingent consideration, for which probabilities are assigned to each scenario. Given the short term nature of the financial instrument, the contingent consideration is not discounted to present value. Although we believe our assumptions are reasonable, different assumptions or changes in the future may result in different estimated amounts.

In connection with the Jet Prep Ltd. (“Jet Prep”) acquisition in fiscal 2014, we assumed a contingent obligation payable to the Israeli Government based on future sales. This fair value measurement was based on significant inputs not observed in the market and thus represent Level 3 measurements. In November 2017, the Israeli Government formally notified us that they would forgive any future amounts payable due to our decision to exit the Jet Prep business. During the first quarter of fiscal 2018, we reduced the fair value of this obligation to zero. See Note 11, “Commitments and Contingencies.”

The fair values of our financial instruments measured on a recurring basis were categorized as follows:

	April 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money markets	$	104	$	—	$	—	$	104
Other Assets:
Interest rate swap	—		751		—		751
Total assets	$	104	$	751	$	—	$	855
Liabilities:
Accrued expenses:
Interest rate swap	—		142		—		142
Other long-term liabilities:
Contingent consideration	—		—		1,374		1,374
Total liabilities	$	—	$	142	$	1,374	$	1,516

	July 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money markets	$	104	$	—	$	—	$	104
Total assets	$	104	$	—	$	—	$	104
Liabilities:
Other long-term liabilities:
Contingent consideration	—		—		1,298		1,298
Total liabilities	$	—	$	—	$	1,298	$	1,298

A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:

	Aexis Contingent Consideration
Balance, July 31, 2018	$	1,298
Net activity	76
Balance, April 30, 2019	$	1,374

Disclosure of Fair Value of Financial Instruments

At April 30, 2019 and July 31, 2018, the carrying amounts for cash and cash equivalents (excluding money markets), accounts receivable and accounts payable approximated fair value due to the short maturity of these instruments. At April 30, 2019 and July 31, 2018, the carrying value of our outstanding borrowings under our credit facility approximated the fair value of these obligations as the respective borrowing rates reflect prevailing market interest rates.

XML

Intangibles and Goodwill

9 Months Ended

Apr. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangibles and Goodwill

Intangibles and Goodwill

Our intangible assets consist of the following:

	April 30, 2019							July 31, 2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships(1)	$	144,003	$	(49,042	)	$	94,961	$	133,347	$	(45,618	)	$	87,729
Technology(1)	59,652		(21,722		)	37,930		54,585		(19,836		)	34,749
Brand names(1)	8,462		(3,116		)	5,346		8,141		(3,857		)	4,284
Non-compete agreements(1)	2,880		(1,604		)	1,276		3,060		(1,628		)	1,432
Patents and other registrations	3,103		(1,236		)	1,867		2,826		(1,179		)	1,647
	218,100		(76,720		)	141,380		201,959		(72,118		)	129,841
Trademarks and tradenames	6,695		—			6,695		7,520		—			7,520
Total intangible assets	$	224,795	$	(76,720	)	$	148,075	$	209,479	$	(72,118	)	$	137,361

_______________________________________________

(1) During the nine months ended April 30, 2019, we wrote off $10,127 of fully amortized intangible assets.

Amortization expense related to intangible assets was $15,508 and $12,892 for the nine months ended April 30, 2019 and 2018, respectively. We expect to recognize an additional $5,547 of amortization expense related to intangible assets for the remainder of fiscal 2019, and thereafter $18,382, $18,051, $17,252, $16,222 and $15,352 of amortization expense for fiscal years 2020, 2021, 2022, 2023 and 2024, respectively.

Goodwill changed during the nine months ended April 30, 2019 as follows:

	Medical			Life Sciences			Dental			Dialysis		Total Goodwill
Balance, July 31, 2018	$	186,690		$	58,925		$	114,279		$	8,133	$	368,027
Acquisitions	—			6,137			9,101			—		15,238
Divestitures	—			(491		)	—			—		(491		)
Foreign currency translation	(4,244		)	(176		)	(210		)	—		(4,630		)
Balance, April 30, 2019	$	182,446		$	64,395		$	123,170		$	8,133	$	378,144

XML

Financing Arrangements

9 Months Ended

Apr. 30, 2019

Debt Disclosure [Abstract]

Financing Arrangements

Financing Arrangements

Our long-term debt consists of the following:

	April 30, 2019			July 31, 2018
Revolving credit loans outstanding	$	43,000		$	—
Tranche A term loan outstanding	192,500			200,000
Unamortized debt issuance costs	(2,286		)	(2,698		)
Total long-term debt, net of unamortized debt issuance costs	233,214			197,302
Current portion of long-term debt	(10,000		)	(10,000		)
Long-term debt, net of unamortized debt issuance costs and excluding current portion	$	223,214		$	187,302

On June 28, 2018, we entered into a Fourth Amended and Restated Credit Agreement (the “2018 Credit Agreement”). The 2018 Agreement refinances our credit facility under the Third Amended and Restated Credit Agreement (the “Existing Credit Agreement”) dated March 4, 2014, to include a $200,000 tranche A term loan and a $400,000 revolving credit facility. Subject to the satisfaction of certain conditions precedent, including the consent of the lenders, we may from time to time increase our borrowing capacity under the revolving credit facility or tranche A term loan by an aggregate amount not to exceed $300,000. The 2018 Credit Agreement expires on June 28, 2023. Additionally, subject to certain restrictions and conditions (i) any of our domestic or foreign subsidiaries may become borrowers and (ii) borrowings may occur in multi-currencies.

At April 30, 2019, we had $192,500 of term loan A borrowings outstanding and $43,000 revolver borrowings under the 2018 Credit Agreement. The tranche A term loan is subject to principal amortization, with $10,000 due and payable in each of fiscal 2019, 2020, 2021 and 2022, with the remaining $160,000 due and payable at maturity on June 28, 2023. During the nine months ended April 30, 2019, we made principal payments of $7,500.

Borrowings under the 2018 Credit Agreement bear interest at rates ranging from 0.00% to 1.00% above prime rate for base rate borrowings, or at rates ranging from 1.00% to 2.00% above the London Interbank Offered Rate (“LIBOR”), depending upon our “Consolidated Leverage Ratio,” which is defined as the consolidated ratio of total funded debt to earnings before interest, taxes, depreciation and amortization, and as further adjusted under the terms of the 2018 Credit Agreement (“Consolidated EBITDA”). At April 30, 2019, the lender’s base rate was 5.75% and the LIBOR rate was 3.73%. The margins applicable to our outstanding borrowings were 0.25% above the lender’s base rate or 1.25% above LIBOR. All of our outstanding borrowings were under LIBOR contracts at April 30, 2019. The 2018 Credit Agreement also provides for fees on the unused portion of our facility at rates ranging from 0.20% to 0.35%, depending upon our Consolidated Leverage Ratio, which was 0.20% at April 30, 2019. At April 30, 2019, the interest rate on our outstanding borrowings was approximately 3.74%.

The 2018 Credit Agreement contains affirmative and negative covenants reasonably customary for similar credit facilities and is secured by (i) substantially all assets of Cantel and its U.S.-based subsidiaries, (ii) a pledge by Cantel of all of the outstanding shares of its U.S.-based subsidiaries and 65% of the outstanding shares of certain of Cantel’s foreign-based subsidiaries and (iii) a guaranty by Cantel’s domestic subsidiaries. We are in compliance with all financial covenants under the 2018 Credit Agreement.

XML

Commitments and Contingencies

9 Months Ended

Apr. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Contingent Consideration and Assumed Contingent Liability

At April 30, 2019, $1,374 was recorded related to the Aexis acquisition, which is for the estimated fair value of contingent consideration payable upon the achievement of certain purchase order targets through March 21, 2020. During fiscal 2017, we decided to exit the Jet Prep business that was acquired in fiscal 2014. At the time of the acquisition, we assumed a contingent obligation payable to the Israeli Government based on future sales. In November 2017, the Israeli Government formally notified us that they would forgive any future amounts payable due to our decision to exit the Jet Prep business. As a result of this formal notification, we reduced the $1,138 contingent obligation to zero during the first quarter of fiscal 2018, resulting in a benefit through other income for the nine months ended April 30, 2018.

Legal Matters

In the normal course of business, we are subject to pending and threatened legal actions. It is our policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount of anticipated exposure can be reasonably estimated. We do not believe that any of these pending claims or legal actions will have a material effect on our business, financial condition, results of operations or cash flows.

XML

Earnings Per Common Share

9 Months Ended

Apr. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic EPS is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. We include participating securities (nonvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of nonvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities.

The following table sets forth the computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities):

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Numerator for basic and diluted earnings per share:
Net income	$	8,175		$	18,736		$	46,217		$	74,153
Less income allocated to participating securities	(5		)	(59		)	(51		)	(281		)
Net income available to common shareholders	$	8,170		$	18,677		$	46,166		$	73,872
Denominator for basic and diluted earnings per share, adjusted for participating securities:
Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock	41,720,733			41,580,387			41,685,623			41,559,312
Dilutive effect of stock awards using the treasury stock method and the average market price for the year	38,705			69,134			40,608			63,642
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock	41,759,438			41,649,521			41,726,231			41,622,954
Earnings per share attributable to common stock:
Basic earnings per share	$	0.20		$	0.45		$	1.11		$	1.78
Diluted earnings per share	$	0.20		$	0.45		$	1.11		$	1.77
Stock options excluded from weighted average dilutive common shares because their inclusion would have been anti-dilutive	—			—			—			—

A reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, as determined above, to our total weighted average number of shares and common stock equivalents, including participating securities, is set forth in the following table:

	Three Months Ended April 30,		Nine Months Ended April 30,
	2019	2018	2019	2018
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock	41,759,438	41,649,521	41,726,231	41,622,954
Participating securities	25,002	133,954	45,485	159,932
Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities	41,784,440	41,783,475	41,771,716	41,782,886

XML

Income Taxes

9 Months Ended

Apr. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

On December 22, 2017, the U.S. government enacted wide-ranging tax legislation, the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act significantly revised U.S. tax law by, among other provisions, (a) lowering the applicable U.S. federal statutory income tax rate from 35% to 21%, (b) creating a partial territorial tax system that includes imposing a mandatory one-time transition tax on previously deferred foreign earnings, (c) creating provisions regarding the (1) Global Intangible Low Tax Income (“GILTI”), (2) the Foreign Derived Intangible Income (“FDII”) deduction, and (3) the Base Erosion Anti-Abuse Tax (“BEAT”), and (d) eliminating or reducing certain income tax deductions, such as interest expense, executive compensation expenses and certain employee expenses.

ASC 740, “Income Taxes,” requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. However, due to the complexity and significance of the 2017 Tax Act’s provisions, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which allows companies to record the tax effects of the 2017 Tax Act on a provisional basis and then, if necessary, subsequently adjust such amounts during a limited measurement period as more information becomes available. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year from enactment. As a result, we provided a provisional estimate of the effect of the Tax Act for the fiscal year ended July 31, 2018, and recorded a net benefit of $8,657 due to the impact on our deferred taxes on the basis of the actual fiscal 2018 results of operations. The measurement period provided by SAB 118 concluded during the second quarter of fiscal 2019, and no material adjustments were made to the provisional estimates recorded.

As part of U.S. tax reform, the 2017 Tax Act imposed a one-time transition tax on certain accumulated positive foreign earnings (net of foreign deficits) across all non-U.S. subsidiaries, as computed under U.S. tax principles. As of December 31, 2017, our non-U.S. subsidiaries were in a net foreign deficit position in the aggregate, and therefore no accrual for the transition tax was made.

Section 15 of the Internal Revenue Code (the “Code”) governs rate changes and was not amended by the 2017 Tax Act. Section 15 requires a blended tax rate for fiscal-year taxpayers for their fiscal year that includes the effective date of the rate change, which was January 1, 2018. As a result of the 2017 Tax Act, we revised our estimated annual effective rate to reflect the change in the U.S. federal statutory rate by computing a tentative tax under both rates, and then prorating the tentative tax based on the number of days with and without the rate change to arrive at a blended tax rate of 26.9%, as required by the Code. This blended rate was applied for fiscal 2018 (beginning with the second quarter) and the new U.S. federal statutory rate of 21% applies to fiscal 2019 and beyond. 

As noted above, the 2017 Tax Act also establishes new tax laws that will affect the fiscal year ending July 31, 2019, which include the GILTI provision, the FDII deduction, a new minimum tax related to payments to foreign subsidiaries and affiliates known as BEAT and certain employee expense deductions. The provisional estimates were based on our understanding of the 2017 Tax Act and other information available at the time of the estimates, including assumptions and expectations about future events, such as projected financial performance, and are subject to further refinement as additional information becomes available, including potential new or interpretative guidance issued by the SEC, the FASB, or IRS.

A reconciliation of the consolidated effective income tax rate is as follows:

	Three Months Ended		Nine Months Ended
Effective Rate, April 30, 2018	26.7	%	16.2	%
Deferred tax revaluation	1.0	%	10.0	%
U.S. federal statutory rate decrease	(5.8	)%	(5.8	)%
Foreign operations	4.9	%	2.4	%
State taxes	(0.9	)%	0.2	%
Excess tax benefit	3.5	%	1.4	%
Other	4.2	%	2.5	%
Effective Rate, April 30, 2019	33.6	%	26.9	%

XML

Accumulated Other Comprehensive Loss

9 Months Ended

Apr. 30, 2019

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The components and changes in accumulated other comprehensive loss were as follows:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Beginning balance	$	(17,096	)	$	1,246		$	(11,456	)	$	(9,900	)
Foreign currency translation	(3,168		)	(6,538		)	(8,808		)	4,608
Interest rate swap	609			—			609			—
Ending balance	$	(19,655	)	$	(5,292	)	$	(19,655	)	$	(5,292	)

XML

Reportable Segments

9 Months Ended

Apr. 30, 2019

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

In accordance with 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 income from operations.

During the first quarter of fiscal 2019, we changed the names of our reportable segments to better align with our key customers and the markets we serve. As a result of this change, our industrial biological and chemical indicator business has moved from the Dental segment to the Life Sciences segment. Prior year segment disclosures have been recast to conform to the current year presentation.

Our reportable segments are as follows:

Medical: designs, develops, manufactures, sells and installs a comprehensive offering of products and services comprising a complete circle of infection prevention solutions. Our products include endoscope reprocessing and endoscopy procedure products.

Life Sciences: designs, develops, manufactures, sells, and installs water purification systems for medical, pharmaceutical and other bacteria controlled applications. We also provide filtration/separation and disinfectant technologies to the medical and life science markets through a worldwide distributor network. Two customers collectively accounted for approximately 40.9% and 50.1% of our Life Sciences segment net sales for the nine months ended April 30, 2019 and 2018, respectively.

Dental: designs, manufactures, sells, supplies and distributes a broad selection of infection prevention healthcare products, the majority of which are single-use products used by dental practitioners. Three customers collectively accounted for approximately 45.7% and 47.7% of our Dental segment net sales for the nine months ended April 30, 2019 and 2018, respectively.

Dialysis: designs, develops, manufactures, sells and services reprocessing systems and sterilants for dialyzers (a device serving as an artificial kidney), as well as dialysate concentrates and supplies utilized for renal dialysis. Three customers accounted for approximately 45.6% and 39.0% of our Dialysis segment net sales for the nine months ended April 30, 2019 and 2018, respectively. These customers include one of the top two customers noted above under our Life Sciences segment.

None of our customers accounted for 10% or more of our consolidated net sales for the nine months ended April 30, 2019 and 2018.

Information as to reportable segments is summarized below:

	Three Months Ended April 30,				Nine Months Ended April 30,
Net sales	2019		2018		2019		2018
Medical	$	130,722	$	118,396	$	386,854	$	347,446
Life Sciences	46,478		54,020		151,692		161,127
Dental	43,628		36,832		116,189		110,599
Dialysis	7,724		8,020		23,944		23,896
Total net sales	$	228,552	$	217,268	$	678,679	$	643,068

	Three Months Ended April 30,				Nine Months Ended April 30,
Income from operations	2019		2018		2019		2018
Medical	$	24,302	$	20,515	$	75,038	$	64,662
Life Sciences	4,842		9,018		18,496		27,976
Dental	4,758		7,025		15,571		22,258
Dialysis	1,151		1,778		3,728		5,795
	35,053		38,336		112,833		120,691
General corporate expenses	20,241		11,269		44,147		29,508
Total income from operations	$	14,812	$	27,067	$	68,686	$	91,183

XML

Accounting Pronouncements (Policies)

9 Months Ended

Apr. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Newly Adopted And Recently Issued Accounting Standards

Newly Adopted Accounting Standards

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities,” (“ASU 2017-12”) to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), including interim periods within that reporting period. We early adopted ASU 2017-12 effective August 1, 2018. The adoption of ASU 2017-12 did not have a material impact on our financial position, results of operations or cash flows.

In May 2017, the FASB issued ASU 2017-09, “(Topic 718) Scope of Modification Accounting,” (“ASU 2017-09”) to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019), including interim periods within that reporting period. Accordingly, we adopted ASU 2017-09 on August 1, 2018. The adoption of ASU 2017-09 did not have a material impact on our financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU 2016-15, “(Topic 230) Classification of Certain Cash Receipts and Cash Payments,” (“ASU 2016-15”). This guidance makes eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 (our fiscal year 2019). Accordingly, we adopted ASU 2016-15 on August 1, 2018. The adoption of ASU 2016-15 did not have a material impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition” (“ASC 605”). ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2015-14”), which defers the effective date of ASU 2014-09 by one year to fiscal years beginning after December 15, 2017 (our fiscal year 2019), including interim periods within that reporting period. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2016-12”), which provided narrow scope improvements and practical expedients relating to ASU 2014-09. We adopted the collective standard (“ASC 606”) on August 1, 2018. See Note 5, “Revenue Recognition” for a discussion of the impact and required disclosures.

Recently Issued Accounting Standards

In August 2018, the FASB issued ASU 2018-15,“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. The adoption of ASU 2018-15 is not expected to have a material impact on our financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-13,“Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”) to modify the disclosure requirements on fair value measurements in ASC 820, “Fair Value Measurement”. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. The adoption of ASU 2018-13 is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2018, the FASB issued ASU 2018-02,“Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”) to allow for the reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Tax Cuts and Jobs Act enacted in December 2017. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018 (our fiscal year 2020), including interim periods within that reporting period. The adoption of ASU 2018-02 is not expected to have a material impact on our financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-04, “(Topic 350) Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”) to simplify the test for goodwill impairment. The revised guidance eliminates the existing Step 2 of the goodwill impairment test which required an entity to compute the implied fair value of its goodwill at the testing date in order to measure the amount of the impairment charge when the fair value of the reporting unit failed Step 1 of the goodwill impairment test. The guidance will be applied on a prospective basis on or after the effective date. ASU 2017-04 is effective for fiscal years beginning after December 31, 2019 (our fiscal year 2021) and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a material impact on our financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, “(Topic 842) Leases,” (“ASU 2016-02”). The new guidance requires the recording of assets and liabilities arising from leases on the balance sheet accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. ASU 2016-02 is effective for fiscal years beginning after December 31, 2018 (our fiscal year 2020), including interim periods within that reporting period. Early adoption is permitted as of the beginning of an interim or annual period. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11, “Leases (Topic 842) Targeted Improvements,” in December 2018, the FASB issued ASU 2018-20, “Narrow-Scope Improvements for Lessors” andin March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements.” These ASUs provide adjustments relating to ASU 2016-02 and improvements to comparative reporting requirements for initial adoption and for separating components of a contract for lessors. We are currently in the process of evaluating the impact of the collective standard (“ASC 842”) on our financial position, results of operations and cash flows.

XML

Acquisitions (Tables)

9 Months Ended

Apr. 30, 2019

Business Combinations [Abstract]

Schedule of purchase price allocated to the assets acquired and assumed liabilities based on estimated fair values

The following table presents our purchase price allocations of our material acquisitions:

	2019					2018
Purchase Price Allocation	Omnia			CES Business(1)		Aexis			BHT Group
	(Preliminary)			(Preliminary)		(Final)			(Final)
Purchase Price:
Cash paid	$	16,597		$	17,047	$	20,308		$	60,216
Fair value of contingent consideration	—			—		1,292			—
Common stock issued	3,211			—		—			—
Total	$	19,808		$	17,047	$	21,600		$	60,216
Allocation:
Property and equipment	1,285			539		130			835
Amortizable intangible assets:
Customer relationships	9,259			8,100		1,800			12,500
Technology	1,600			—		4,600			6,200
Brand names	1,600			—		—			—
Goodwill	9,101			6,137		17,092			40,934
Deferred income taxes	—			—		(1,639		)	(5,881		)
Other working capital	2,170			2,271		909			5,628
Contingent consideration	—			—		(1,292		)	—
Long-term debt	(5,207		)	—		—			—
Total	$	19,808		$	17,047	$	21,600		$	60,216

_______________________________________________

(1) The excess purchase price over net assets acquired was assigned to goodwill, all of which is deductible for income tax purposes.

XML

Stock-Based Compensation (Tables)

9 Months Ended

Apr. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of the income statement components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Income

The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2019		2018		2019		2018
Cost of sales	$	245	$	167	$	769	$	463
Operating expenses:
Selling	538		559		1,684		1,188
General and administrative(1)	4,874		1,641		9,249		5,231
Research and development	65		76		183		151
Total operating expenses	5,477		2,276		11,116		6,570
Stock-based compensation expense	$	5,722	$	2,443	$	11,885	$	7,033

Schedule of weighted-average assumptions used to estimate fair value of stock options

We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions:

	Nine Months Ended April 30,
	2019		2018
Volatility of common stock	27.54	%	26.60	%
Average volatility of peer companies	36.55	%	33.72	%
Average correlation coefficient of peer companies	27.18	%	32.26	%
Risk-free interest rate	2.93	%	1.62	%

Summary of nonvested stock award activity

A summary of nonvested stock award activity for the nine months ended April 30, 2019 follows:

	Number of Time-based Awards		Number of Performance-based Awards		Number of Market-based Awards		Number of Total Awards		Weighted Average Fair Value
July 31, 2018	168,320		26,076		17,710		212,106		$	88.87
Granted	143,144		35,981		25,320		204,445		$	88.48
Vested(1)	(95,459	)	(12,742	)	(4,335	)	(112,536	)	$	79.53
Forfeited	(10,251	)	(7,034	)	(5,686	)	(22,971	)	$	98.73
April 30, 2019	205,754		42,281		33,009		281,044		$	91.86

_______________________________________________

(1) The aggregate fair value of all nonvested stock awards which vested was approximately $8,952.

Summary of stock option activity

A summary of stock option activity for the nine months ended April 30, 2019 follows:

	Number of shares		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2018	70,000		$	38.60
Exercised	(30,000	)	$	31.81
Outstanding at April 30, 2019	40,000		$	43.70	0.82	$	1,010
Exercisable at April 30, 2019	40,000		$	43.70	0.82	$	1,010

XML

Revenue Recognition (Tables)

9 Months Ended

Apr. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of net sales disaggregated by geography and product line

The following table gives information as to the net sales disaggregated by geography and product line:

	Three Months Ended April 30,				Nine Months Ended April 30,
Net sales by geography	2019		2018(1)		2019		2018(1)
United States	$	163,367	$	159,375	$	497,469	$	478,024
Europe/Africa/Middle East	39,949		33,702		106,278		94,254
Asia/Pacific	15,140		14,341		46,476		41,190
Canada	8,555		7,842		24,064		24,638
Latin America/South America	1,541		2,008		4,392		4,962
Total	$	228,552	$	217,268	$	678,679	$	643,068
Net sales by product line
Capital equipment	$	51,351	$	58,935	$	166,870	$	177,175
Consumables	144,515		130,155		417,067		385,963
Product service	31,074		27,407		91,428		78,758
All other(2)	1,612		771		3,314		1,172
Total	$	228,552	$	217,268	$	678,679	$	643,068

_______________________________________________

(1) As noted above, prior year amounts have not been adjusted under the modified retrospective method.

(2) Primarily includes software licensing revenues.

Schedule of contract liabilities activity

A summary of contract liabilities activity for the nine months ended April 30, 2019 follows:

	Contract Liabilities
Balance, August 1, 2018	$	29,015
Revenue deferred in current year	48,589
Deferred revenue recognized	(49,710		)
Foreign currency translation	(435		)
Balance, April 30, 2019	27,459
Contract liabilities included in Other long-term liabilities	(824		)
Deferred revenue	$	26,635

XML

Inventories, Net (Tables)

9 Months Ended

Apr. 30, 2019

Inventory Disclosure [Abstract]

Summary of inventories

A summary of inventories is as follows:

	April 30, 2019			July 31, 2018
Raw materials and parts	$	68,557		$	49,054
Work-in-process	4,816			13,189
Finished goods	70,887			53,948
Reserve for excess and obsolete inventory	(10,067		)	(8,599		)
Total	$	134,193		$	107,592

XML

Fair Value Measurements (Tables)

9 Months Ended

Apr. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of fair values of financial instruments measured on a recurring basis

The fair values of our financial instruments measured on a recurring basis were categorized as follows:

	April 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money markets	$	104	$	—	$	—	$	104
Other Assets:
Interest rate swap	—		751		—		751
Total assets	$	104	$	751	$	—	$	855
Liabilities:
Accrued expenses:
Interest rate swap	—		142		—		142
Other long-term liabilities:
Contingent consideration	—		—		1,374		1,374
Total liabilities	$	—	$	142	$	1,374	$	1,516

	July 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money markets	$	104	$	—	$	—	$	104
Total assets	$	104	$	—	$	—	$	104
Liabilities:
Other long-term liabilities:
Contingent consideration	—		—		1,298		1,298
Total liabilities	$	—	$	—	$	1,298	$	1,298

Level 3 activity of financial liabilities

A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:

	Aexis Contingent Consideration
Balance, July 31, 2018	$	1,298
Net activity	76
Balance, April 30, 2019	$	1,374

XML

Intangibles and Goodwill (Tables)

9 Months Ended

Apr. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

Our intangible assets consist of the following:

	April 30, 2019							July 31, 2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships(1)	$	144,003	$	(49,042	)	$	94,961	$	133,347	$	(45,618	)	$	87,729
Technology(1)	59,652		(21,722		)	37,930		54,585		(19,836		)	34,749
Brand names(1)	8,462		(3,116		)	5,346		8,141		(3,857		)	4,284
Non-compete agreements(1)	2,880		(1,604		)	1,276		3,060		(1,628		)	1,432
Patents and other registrations	3,103		(1,236		)	1,867		2,826		(1,179		)	1,647
	218,100		(76,720		)	141,380		201,959		(72,118		)	129,841
Trademarks and tradenames	6,695		—			6,695		7,520		—			7,520
Total intangible assets	$	224,795	$	(76,720	)	$	148,075	$	209,479	$	(72,118	)	$	137,361

_______________________________________________

(1) During the nine months ended April 30, 2019, we wrote off $10,127 of fully amortized intangible assets.

Schedule of changes in goodwill

Goodwill changed during the nine months ended April 30, 2019 as follows:

	Medical			Life Sciences			Dental			Dialysis		Total Goodwill
Balance, July 31, 2018	$	186,690		$	58,925		$	114,279		$	8,133	$	368,027
Acquisitions	—			6,137			9,101			—		15,238
Divestitures	—			(491		)	—			—		(491		)
Foreign currency translation	(4,244		)	(176		)	(210		)	—		(4,630		)
Balance, April 30, 2019	$	182,446		$	64,395		$	123,170		$	8,133	$	378,144

XML

Financing Arrangements (Tables)

9 Months Ended

Apr. 30, 2019

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Our long-term debt consists of the following:

	April 30, 2019			July 31, 2018
Revolving credit loans outstanding	$	43,000		$	—
Tranche A term loan outstanding	192,500			200,000
Unamortized debt issuance costs	(2,286		)	(2,698		)
Total long-term debt, net of unamortized debt issuance costs	233,214			197,302
Current portion of long-term debt	(10,000		)	(10,000		)
Long-term debt, net of unamortized debt issuance costs and excluding current portion	$	223,214		$	187,302

XML

Earnings Per Common Share (Tables)

9 Months Ended

Apr. 30, 2019

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities)

The following table sets forth the computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities):

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Numerator for basic and diluted earnings per share:
Net income	$	8,175		$	18,736		$	46,217		$	74,153
Less income allocated to participating securities	(5		)	(59		)	(51		)	(281		)
Net income available to common shareholders	$	8,170		$	18,677		$	46,166		$	73,872
Denominator for basic and diluted earnings per share, adjusted for participating securities:
Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock	41,720,733			41,580,387			41,685,623			41,559,312
Dilutive effect of stock awards using the treasury stock method and the average market price for the year	38,705			69,134			40,608			63,642
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock	41,759,438			41,649,521			41,726,231			41,622,954
Earnings per share attributable to common stock:
Basic earnings per share	$	0.20		$	0.45		$	1.11		$	1.78
Diluted earnings per share	$	0.20		$	0.45		$	1.11		$	1.77
Stock options excluded from weighted average dilutive common shares because their inclusion would have been anti-dilutive	—			—			—			—

Schedule of reconciliation of weighted average number of shares and common stock equivalents attributable to common stock to the Company's total weighted average number of shares and common stock equivalents including participating securities

A reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, as determined above, to our total weighted average number of shares and common stock equivalents, including participating securities, is set forth in the following table:

	Three Months Ended April 30,		Nine Months Ended April 30,
	2019	2018	2019	2018
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock	41,759,438	41,649,521	41,726,231	41,622,954
Participating securities	25,002	133,954	45,485	159,932
Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities	41,784,440	41,783,475	41,771,716	41,782,886

XML

Income Taxes (Tables)

9 Months Ended

Apr. 30, 2019

Income Tax Disclosure [Abstract]

Reconciliation of consolidated effective income tax rate between periods

A reconciliation of the consolidated effective income tax rate is as follows:

	Three Months Ended		Nine Months Ended
Effective Rate, April 30, 2018	26.7	%	16.2	%
Deferred tax revaluation	1.0	%	10.0	%
U.S. federal statutory rate decrease	(5.8	)%	(5.8	)%
Foreign operations	4.9	%	2.4	%
State taxes	(0.9	)%	0.2	%
Excess tax benefit	3.5	%	1.4	%
Other	4.2	%	2.5	%
Effective Rate, April 30, 2019	33.6	%	26.9	%

XML

Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Apr. 30, 2019

Accumulated Other Comprehensive Income (Loss)

Schedule of the components and changes in accumulated other comprehensive income (loss)

The components and changes in accumulated other comprehensive loss were as follows:

	Three Months Ended April 30,						Nine Months Ended April 30,
	2019			2018			2019			2018
Beginning balance	$	(17,096	)	$	1,246		$	(11,456	)	$	(9,900	)
Foreign currency translation	(3,168		)	(6,538		)	(8,808		)	4,608
Interest rate swap	609			—			609			—
Ending balance	$	(19,655	)	$	(5,292	)	$	(19,655	)	$	(5,292	)

XML

Reportable Segments (Tables)

9 Months Ended

Apr. 30, 2019

Segment Reporting [Abstract]

Information as to reportable segments

Information as to reportable segments is summarized below:

	Three Months Ended April 30,				Nine Months Ended April 30,
Net sales	2019		2018		2019		2018
Medical	$	130,722	$	118,396	$	386,854	$	347,446
Life Sciences	46,478		54,020		151,692		161,127
Dental	43,628		36,832		116,189		110,599
Dialysis	7,724		8,020		23,944		23,896
Total net sales	$	228,552	$	217,268	$	678,679	$	643,068

	Three Months Ended April 30,				Nine Months Ended April 30,
Income from operations	2019		2018		2019		2018
Medical	$	24,302	$	20,515	$	75,038	$	64,662
Life Sciences	4,842		9,018		18,496		27,976
Dental	4,758		7,025		15,571		22,258
Dialysis	1,151		1,778		3,728		5,795
	35,053		38,336		112,833		120,691
General corporate expenses	20,241		11,269		44,147		29,508
Total income from operations	$	14,812	$	27,067	$	68,686	$	91,183

XML

Acquisitions - Omnia (Details) - USD ($)		9 Months Ended
	Feb. 01, 2019	Apr. 30, 2019	Apr. 30, 2018
Business Acquisition [Line Items]
Acquisition of businesses, net of cash acquired		$ 40,644,000	$ 84,595,000
Omnia
Business Acquisition [Line Items]
Total consideration for the transaction, excluding acquisition-related costs	$ 19,808,000	19,808,000
Acquisition of businesses, net of cash acquired	16,597,000
Common stock issued	3,211,000	3,211,000
Contingent consideration		$ 0
Minimum | Omnia
Business Acquisition [Line Items]
Contingent consideration	0
Maximum | Omnia
Business Acquisition [Line Items]
Contingent consideration	$ 5,800,000

XML

Acquisitions - CES Business (Details) - USD ($) $ in Thousands		9 Months Ended
	Aug. 01, 2018	Apr. 30, 2019
CES Business
Business Acquisition [Line Items]
Total consideration for the transaction, excluding acquisition-related costs	$ 17,047	$ 17,047

XML

Acquisitions - Aexis Medical (Details) - USD ($)		9 Months Ended		12 Months Ended
	Mar. 21, 2018	Apr. 30, 2019	Apr. 30, 2018	Jul. 31, 2018
Business Acquisition [Line Items]
Acquisition of businesses, net of cash acquired		$ 40,644,000	$ 84,595,000
Aexis
Business Acquisition [Line Items]
Total consideration for the transaction, excluding acquisition-related costs	$ 21,600,000			$ 21,600,000
Acquisition of businesses, net of cash acquired	20,308,000
Contingent consideration	1,292,000			$ 1,292,000
Minimum | Aexis
Business Acquisition [Line Items]
Contingent consideration	0
Maximum | Aexis
Business Acquisition [Line Items]
Contingent consideration	$ 1,850,000

XML

Acquisitions - BHT Group (Details) - USD ($) $ in Thousands		12 Months Ended
	Aug. 23, 2017	Jul. 31, 2018
BHT Group
Business Acquisition [Line Items]
Total consideration for the transaction, excluding acquisition-related costs	$ 60,216	$ 60,216

XML

Acquisitions - Summary of Acquisitions (Details) - USD ($) $ in Thousands					9 Months Ended	12 Months Ended
	Feb. 01, 2019	Aug. 01, 2018	Mar. 21, 2018	Aug. 23, 2017	Apr. 30, 2019	Jul. 31, 2018
Business Acquisition [Line Items]
Goodwill					$ 378,144	$ 368,027
Omnia
Business Acquisition [Line Items]
Cash paid					16,597
Fair value of contingent consideration					0
Common stock issued	$ 3,211				3,211
Total	$ 19,808				19,808
Property and equipment					1,285
Goodwill					9,101
Deferred income taxes					0
Other working capital					2,170
Contingent consideration					0
Long-term debt					(5,207)
Total					19,808
Omnia | Customer relationships
Business Acquisition [Line Items]
Amortizable intangible assets:					9,259
Omnia | Technology
Business Acquisition [Line Items]
Amortizable intangible assets:					1,600
Omnia | Brand names
Business Acquisition [Line Items]
Amortizable intangible assets:					1,600
CES Business
Business Acquisition [Line Items]
Cash paid					17,047
Fair value of contingent consideration					0
Common stock issued					0
Total		$ 17,047			17,047
Property and equipment					539
Goodwill					6,137
Deferred income taxes					0
Other working capital					2,271
Contingent consideration					0
Long-term debt					0
Total					17,047
CES Business | Customer relationships
Business Acquisition [Line Items]
Amortizable intangible assets:					8,100
CES Business | Technology
Business Acquisition [Line Items]
Amortizable intangible assets:					0
CES Business | Brand names
Business Acquisition [Line Items]
Amortizable intangible assets:					$ 0
Aexis
Business Acquisition [Line Items]
Cash paid						20,308
Fair value of contingent consideration						1,292
Common stock issued						0
Total			$ 21,600			21,600
Property and equipment						130
Goodwill						17,092
Deferred income taxes						(1,639)
Other working capital						909
Contingent consideration			$ (1,292)			(1,292)
Long-term debt						0
Total						21,600
Aexis | Customer relationships
Business Acquisition [Line Items]
Amortizable intangible assets:						1,800
Aexis | Technology
Business Acquisition [Line Items]
Amortizable intangible assets:						4,600
Aexis | Brand names
Business Acquisition [Line Items]
Amortizable intangible assets:						0
BHT Group
Business Acquisition [Line Items]
Cash paid						60,216
Fair value of contingent consideration						0
Common stock issued						0
Total				$ 60,216		60,216
Property and equipment						835
Goodwill						40,934
Deferred income taxes						(5,881)
Other working capital						5,628
Contingent consideration						0
Long-term debt						0
Total						60,216
BHT Group | Customer relationships
Business Acquisition [Line Items]
Amortizable intangible assets:						12,500
BHT Group | Technology
Business Acquisition [Line Items]
Amortizable intangible assets:						6,200
BHT Group | Brand names
Business Acquisition [Line Items]
Amortizable intangible assets:						$ 0

XML

Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Jul. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding unvested restricted stock shares (in shares)	281,044		212,106
Outstanding options (in shares)	40,000		70,000
Total unrecognized stock-based compensation cost	$ 15,427
Remaining weighted average period for unrecognized compensation cost	14 months
Number of options exercised (in shares)	30,000
Deduction in income tax due to exercise of options and vesting of restricted stock	$ 2,465	$ 3,406
Reduction in income tax expense over the equity awards' vesting period	1,902	1,394
Excess tax benefit	$ 563	$ 2,012
Employee and directors stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vested during period (in shares)	5,000
Aggregate fair value of all options vested	$ 277
Number of options exercised (in shares)	30,000
Aggregate fair value of exercised options	$ 1,787
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding unvested restricted stock shares (in shares)	281,044
Outstanding options (in shares)	0
Shares available under Plan (in shares)	793,110
2006 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding options (in shares)	40,000

XML

Stock-Based Compensation - Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income
Stock-based compensation expense	$ 5,722	$ 2,443	$ 11,885	$ 7,033
Cost of sales
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income
Stock-based compensation expense	245	167	769	463
Total operating expenses
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income
Stock-based compensation expense	5,477	2,276	11,116	6,570
Selling
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income
Stock-based compensation expense	538	559	1,684	1,188
General and administrative
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income
Stock-based compensation expense	4,874	1,641	9,249	5,231
Research and development
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income
Stock-based compensation expense	$ 65	$ 76	$ 183	$ 151

XML

Stock-Based Compensation - Fair Value Monte Carlo Simulation (Details) - Restricted Stock	9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility of common stock	27.54%	26.60%
Average volatility of peer companies	36.55%	33.72%
Average correlation coefficient of peer companies	27.18%	32.26%
Risk-free interest rate	2.93%	1.62%

XML

Stock-Based Compensation - Nonvested Stock Award Activity (Details) $ / shares in Units, $ in Thousands	9 Months Ended
	Apr. 30, 2019 USD ($) $ / shares shares
Number of Shares
Nonvested stock awards at the beginning of the period (in shares)	212,106
Granted (in shares)	204,445
Vested (in shares)	(112,536)
Forfeited (in shares)	(22,971)
Nonvested stock awards at the end of the period (in shares)	281,044
Weighted Average Fair Value
Nonvested stock awards at the beginning of the period (in dollars per share) | $ / shares	$ 88.87
Granted (in dollars per share) | $ / shares	88.48
Vested (in dollars per share) | $ / shares	79.53
Forfeited (in dollars per share) | $ / shares	98.73
Nonvested stock awards at the end of the period (in dollars per share) | $ / shares	$ 91.86
Aggregate fair value of nonvested stock awards that vested | $	$ 8,952
Number of Time-based Awards
Number of Shares
Nonvested stock awards at the beginning of the period (in shares)	168,320
Granted (in shares)	143,144
Vested (in shares)	(95,459)
Forfeited (in shares)	(10,251)
Nonvested stock awards at the end of the period (in shares)	205,754
Number of Performance-based Awards
Number of Shares
Nonvested stock awards at the beginning of the period (in shares)	26,076
Granted (in shares)	35,981
Vested (in shares)	(12,742)
Forfeited (in shares)	(7,034)
Nonvested stock awards at the end of the period (in shares)	42,281
Number of Market-based Awards
Number of Shares
Nonvested stock awards at the beginning of the period (in shares)	17,710
Granted (in shares)	25,320
Vested (in shares)	(4,335)
Forfeited (in shares)	(5,686)
Nonvested stock awards at the end of the period (in shares)	33,009

XML

Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Apr. 30, 2019
Number of shares
Outstanding, beginning balance (in shares)	70,000
Exercised (in shares)	(30,000)
Outstanding, ending balance (in shares)	40,000
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share)	$ 38.60
Exercised (in dollars per share)	31.81
Outstanding, ending balance (in dollars per share)	$ 43.70
Stock Option Activity, Additional Disclosures
Options outstanding, Weighted average contractual life remaining (in years)	9 months 25 days
Options outstanding, Aggregate intrinsic value (in dollars)	$ 1,010
Options exercisable, number of options (in shares)	40,000
Options exercisable, Weighted average exercise price (in dollars per share)	$ 43.70
Options exercisable, Weighted average contractual life remaining (in years)	9 months 25 days
Options exercisable, Aggregate intrinsic value (in dollars)	$ 1,010

XML

Revenue Recognition - Narrative (Details) - Accounting Standards Update 2014-09 $ in Thousands	Aug. 01, 2018 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative impact of 606 adoption	$ 865
Retained Earnings
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative impact of 606 adoption	$ 865

XML

Revenue Recognition - Summary of net sales by geography and product line (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Disaggregation of Revenue [Line Items]
Net sales	$ 228,552	$ 217,268	$ 678,679	$ 643,068
Capital equipment
Disaggregation of Revenue [Line Items]
Net sales	51,351	58,935	166,870	177,175
Consumables
Disaggregation of Revenue [Line Items]
Net sales	144,515	130,155	417,067	385,963
Product service
Disaggregation of Revenue [Line Items]
Net sales	31,074	27,407	91,428	78,758
All other
Disaggregation of Revenue [Line Items]
Net sales	1,612	771	3,314	1,172
United States
Disaggregation of Revenue [Line Items]
Net sales	163,367	159,375	497,469	478,024
Europe/Africa/Middle East
Disaggregation of Revenue [Line Items]
Net sales	39,949	33,702	106,278	94,254
Asia/Pacific
Disaggregation of Revenue [Line Items]
Net sales	15,140	14,341	46,476	41,190
Canada
Disaggregation of Revenue [Line Items]
Net sales	8,555	7,842	24,064	24,638
Latin America/South America
Disaggregation of Revenue [Line Items]
Net sales	$ 1,541	$ 2,008	$ 4,392	$ 4,962

XML

Revenue Recognition - Remaining Performance Obligations (Details) $ in Thousands	Apr. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Revenue, remaining performance obligation, amount	$ 66,534
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-05-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, percentage	60.00%
Revenue, remaining performance obligation, expected timing of satisfaction, period	1 year 3 months

XML

Revenue Recognition - Summary of contract liabilities activity (Details) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2019	Jul. 31, 2018
Contract Liabilities
Beginning Balance	$ 29,015
Revenue deferred in current year	48,589
Deferred revenue recognized	(49,710)
Foreign currency translation	(435)
Ending Balance	27,459
Contract liabilities included in Other long-term liabilities	(824)
Deferred revenue	$ 26,635	$ 28,614

XML

Inventories, Net (Details) - USD ($) $ in Thousands	Apr. 30, 2019	Jul. 31, 2018
Inventory Disclosure [Abstract]
Raw materials and parts	$ 68,557	$ 49,054
Work-in-process	4,816	13,189
Finished goods	70,887	53,948
Reserve for excess and obsolete inventory	(10,067)	(8,599)
Total	$ 134,193	$ 107,592

XML

Derivatives (Details) - Designated as hedging instrument	9 Months Ended
	Apr. 30, 2019 USD ($) instrument	Apr. 09, 2019 USD ($) instrument	Jul. 31, 2018 USD ($) instrument
Foreign currency forward contracts | Fair value hedge instruments
Derivatives
Term of contracts	1 month
Number of contracts | instrument	6		6
Aggregate value of contracts	$ 61,447,000		$ 30,159,000
Interest rate swap
Derivatives
Number of contracts | instrument		2
Notional value		$ 150,000,000
Fixed interest rate		2.45%
Derivative asset	751,000
Derivative liability	$ 142,000

XML

Fair Value Measurements - Narrative (Details) - Aexis - USD ($)	Jul. 31, 2018	Mar. 21, 2018
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
Contingent consideration, low end of range		$ 0
Contingent consideration, high end of range		1,850,000
Contingent consideration	$ 1,292,000	$ 1,292,000

XML

Fair Value Measurements - Hierarchy Levels (Details) - Recurring basis - USD ($) $ in Thousands	Apr. 30, 2019	Jul. 31, 2018
Assets:
Total assets	$ 855	$ 104
Other long-term liabilities:
Contingent consideration	1,374	1,298
Total liabilities	1,516	1,298
Money markets
Assets:
Money markets	104	104
Level 1
Assets:
Total assets	104	104
Other long-term liabilities:
Contingent consideration	0	0
Total liabilities	0	0
Level 1 | Money markets
Assets:
Money markets	104	104
Level 2
Assets:
Total assets	751	0
Other long-term liabilities:
Contingent consideration	0	0
Total liabilities	142	0
Level 2 | Money markets
Assets:
Money markets	0	0
Level 3
Assets:
Total assets	0	0
Other long-term liabilities:
Contingent consideration	1,374	1,298
Total liabilities	1,374	1,298
Level 3 | Money markets
Assets:
Money markets	0	$ 0
Interest rate swap
Assets:
Interest rate swap	751
Liabilities:
Accrued expenses:	142
Interest rate swap | Level 1
Assets:
Interest rate swap	0
Liabilities:
Accrued expenses:	0
Interest rate swap | Level 2
Assets:
Interest rate swap	751
Liabilities:
Accrued expenses:	142
Interest rate swap | Level 3
Assets:
Interest rate swap	0
Liabilities:
Accrued expenses:	$ 0

XML

Fair Value Measurements - Level 3 Rollforward (Details) - Aexis $ in Thousands	9 Months Ended
	Apr. 30, 2019 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 1,298
Net activity	76
Ending Balance	$ 1,374

XML

Intangibles and Goodwill - Intangible Assets Summary (Details) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2019	Jul. 31, 2018
Intangible assets with finite lives:
Gross	$ 218,100	$ 201,959
Accumulated Amortization	(76,720)	(72,118)
Net	141,380	129,841
Intangible assets with indefinite lives:
Trademarks and tradenames	6,695	7,520
Total intangible assets
Gross	224,795	209,479
Accumulated Amortization	(76,720)	(72,118)
Net	148,075	137,361
Write-off of fully impaired customer relationships and brand names	10,127
Customer relationships
Intangible assets with finite lives:
Gross	144,003	133,347
Accumulated Amortization	(49,042)	(45,618)
Net	94,961	87,729
Total intangible assets
Accumulated Amortization	(49,042)	(45,618)
Technology
Intangible assets with finite lives:
Gross	59,652	54,585
Accumulated Amortization	(21,722)	(19,836)
Net	37,930	34,749
Total intangible assets
Accumulated Amortization	(21,722)	(19,836)
Brand names
Intangible assets with finite lives:
Gross	8,462	8,141
Accumulated Amortization	(3,116)	(3,857)
Net	5,346	4,284
Total intangible assets
Accumulated Amortization	(3,116)	(3,857)
Non-compete agreements
Intangible assets with finite lives:
Gross	2,880	3,060
Accumulated Amortization	(1,604)	(1,628)
Net	1,276	1,432
Total intangible assets
Accumulated Amortization	(1,604)	(1,628)
Patents and other registrations
Intangible assets with finite lives:
Gross	3,103	2,826
Accumulated Amortization	(1,236)	(1,179)
Net	1,867	1,647
Total intangible assets
Accumulated Amortization	$ (1,236)	$ (1,179)

XML

Intangibles and Goodwill - Narrative (Details) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 15,508	$ 12,892
Future amortization - remainder of 2019	5,547
Future amortization - 2020	18,382
Future amortization - 2021	18,051
Future amortization - 2022	17,252
Future amortization - 2023	16,222
Future amortization - 2024	$ 15,352

XML

Intangibles and Goodwill - Goodwill Rollforward (Details) $ in Thousands	9 Months Ended
	Apr. 30, 2019 USD ($)
Changes in Goodwill
Balance at the beginning of the period	$ 368,027
Acquisitions	15,238
Divestitures	(491)
Foreign currency translation	(4,630)
Balance at the end of the period	378,144
Medical
Changes in Goodwill
Balance at the beginning of the period	186,690
Acquisitions	0
Divestitures	0
Foreign currency translation	(4,244)
Balance at the end of the period	182,446
Life Sciences
Changes in Goodwill
Balance at the beginning of the period	58,925
Acquisitions	6,137
Divestitures	(491)
Foreign currency translation	(176)
Balance at the end of the period	64,395
Dental
Changes in Goodwill
Balance at the beginning of the period	114,279
Acquisitions	9,101
Divestitures	0
Foreign currency translation	(210)
Balance at the end of the period	123,170
Dialysis
Changes in Goodwill
Balance at the beginning of the period	8,133
Acquisitions	0
Divestitures	0
Foreign currency translation	0
Balance at the end of the period	$ 8,133

XML

Financing Arrangements - Schedule of long-term debt (Details) - USD ($) $ in Thousands	Apr. 30, 2019	Jul. 31, 2018	Jun. 28, 2018
Debt Instrument [Line Items]
Total long-term debt, net of unamortized debt issuance costs	$ 233,214	$ 197,302
Current portion of long-term debt	(10,000)	(10,000)
Long-term debt, net of unamortized debt issuance costs and excluding current portion	223,214	187,302
Line of Credit
Debt Instrument [Line Items]
Unamortized debt issuance costs	(2,286)	(2,698)
Revolving credit loan | Line of Credit
Debt Instrument [Line Items]
Loans outstanding	43,000	0	$ 400,000
Tranche A term loan | Line of Credit
Debt Instrument [Line Items]
Loans outstanding	$ 192,500	$ 200,000	$ 200,000

XML

Financing Arrangements - Narrative (Details) - Line of Credit - USD ($)	9 Months Ended
	Apr. 30, 2019	Jul. 31, 2018	Jun. 28, 2018
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 300,000,000
Fees on unused portion of credit facilities (as a percent)	0.20%
Shares of foreign subsidiaries pledged as security (as a percent)	65.00%
Minimum
Debt Instrument [Line Items]
Fees on unused portion of credit facilities (as a percent)	0.20%
Maximum
Debt Instrument [Line Items]
Fees on unused portion of credit facilities (as a percent)	0.35%
Lender's base rate
Debt Instrument [Line Items]
Margin on reference rate (as a percent)	0.25%
Reference rate (as a percent)	5.75%
Lender's base rate | Minimum
Debt Instrument [Line Items]
Margin on reference rate (as a percent)	0.00%
Lender's base rate | Maximum
Debt Instrument [Line Items]
Margin on reference rate (as a percent)	1.00%
LIBOR
Debt Instrument [Line Items]
Margin on reference rate (as a percent)	1.25%
LIBOR | Minimum
Debt Instrument [Line Items]
Margin on reference rate (as a percent)	1.00%
Reference rate (as a percent)	3.73%
LIBOR | Maximum
Debt Instrument [Line Items]
Margin on reference rate (as a percent)	2.00%
Tranche A term loan
Debt Instrument [Line Items]
Loans outstanding	$ 192,500,000	$ 200,000,000	200,000,000
Term loan borrowings outstanding	192,500,000
Principal amortization, periodic payment due 2019, 2020, 2021, and 2022	10,000,000
Balance due and payable at maturity in 2023	160,000,000
Principal payment made	$ 7,500,000
Interest rate (as a percent)	3.74%
Revolving credit loan
Debt Instrument [Line Items]
Loans outstanding	$ 43,000,000	$ 0	$ 400,000,000

XML

Commitments and Contingencies - Narrative (Details) - USD ($)	Apr. 30, 2019	Oct. 31, 2017	Jul. 31, 2017
Aexis
Business Acquisition [Line Items]
Assumed contingent obligation	$ 1,374,000
Jet Prep Ltd.
Business Acquisition [Line Items]
Assumed contingent obligation		$ 0	$ 1,138,000

XML

Earnings Per Common Share - Computation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Apr. 30, 2019	Jan. 31, 2019	Oct. 31, 2018	Apr. 30, 2018	Jan. 31, 2018	Oct. 31, 2017	Apr. 30, 2019	Apr. 30, 2018
Numerator for basic and diluted earnings per share:
Net income	$ 8,175	$ 18,800	$ 19,242	$ 18,736	$ 32,488	$ 22,929	$ 46,217	$ 74,153
Less income allocated to participating securities	(5)			(59)			(51)	(281)
Net income available to common shareholders	$ 8,170			$ 18,677			$ 46,166	$ 73,872
Denominator for basic and diluted earnings per share, adjusted for participating securities:
Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock (in shares)	41,720,733			41,580,387			41,685,623	41,559,312
Dilutive effect of stock awards using the treasury stock method and the average market price for the year (in shares)	38,705			69,134			40,608	63,642
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock (in shares)	41,759,438			41,649,521			41,726,231	41,622,954
Earnings per share attributable to common stock:
Basic earnings per share (in dollars per share)	$ 0.20			$ 0.45			$ 1.11	$ 1.78
Diluted earnings per share (in dollars per share)	$ 0.20			$ 0.45			$ 1.11	$ 1.77
Stock options excluded from weighted average dilutive common shares outstanding because their inclusion would have been anti-dilutive (in shares)	0			0			0	0

XML

Earnings Per Common Share - Weighted Average Shares (Details) - shares	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, to the entity's total weighted average number of shares and common stock equivalents, including participating securities
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock (in shares)	41,759,438	41,649,521	41,726,231	41,622,954
Participating securities (in shares)	25,002	133,954	45,485	159,932
Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities (in shares)	41,784,440	41,783,475	41,771,716	41,782,886

XML

Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jul. 31, 2018	Apr. 30, 2019
Income Tax Disclosure [Abstract]
TCJA, Revaluation of deferred tax assets and liabilities, provisional income tax expense (benefit)	$ (8,657)
Effective blended tax rate		26.90%

XML

Income Taxes - Reconciliation (Details)	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Income Tax Disclosure [Abstract]
Effective Rate	33.60%	26.70%	26.90%	16.20%
Deferred tax revaluation	1.00%		10.00%
U.S. federal statutory rate decrease	(5.80%)		(5.80%)
Foreign operations	4.90%		2.40%
State taxes	(0.90%)		0.20%
Excess tax benefit	3.50%		1.40%
Other	4.20%		2.50%

XML

Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Components and changes in accumulated other comprehensive (loss) income
Beginning balance	$ (17,096)	$ 1,246	$ (11,456)	$ (9,900)
Foreign currency translation	(3,168)	(6,538)	(8,808)	4,608
Interest rate swap	609	0	609	0
Ending balance	$ (19,655)	$ (5,292)	$ (19,655)	$ (5,292)

XML

Reportable Segments - Concentration Risk (Details) - Segment sales - Customer concentration	9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Life Sciences | Two customers
Concentration risk
Concentration risk within segment (as a percent)	40.90%	50.10%
Dental | Three customers
Concentration risk
Concentration risk within segment (as a percent)	45.70%	47.70%
Dialysis | Three customers
Concentration risk
Concentration risk within segment (as a percent)	45.60%	39.00%

XML

Reportable Segments - Results (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Information as to operating segments
Net sales	$ 228,552	$ 217,268	$ 678,679	$ 643,068
Segment operating income	14,812	27,067	68,686	91,183
General corporate expenses	48,634	37,784	122,527	102,068
Operating Segment
Information as to operating segments
Segment operating income	35,053	38,336	112,833	120,691
Medical
Information as to operating segments
Net sales	130,722	118,396	386,854	347,446
Medical | Operating Segment
Information as to operating segments
Segment operating income	24,302	20,515	75,038	64,662
Life Sciences
Information as to operating segments
Net sales	46,478	54,020	151,692	161,127
Life Sciences | Operating Segment
Information as to operating segments
Segment operating income	4,842	9,018	18,496	27,976
Dental
Information as to operating segments
Net sales	43,628	36,832	116,189	110,599
Dental | Operating Segment
Information as to operating segments
Segment operating income	4,758	7,025	15,571	22,258
Dialysis
Information as to operating segments
Net sales	7,724	8,020	23,944	23,896
Dialysis | Operating Segment
Information as to operating segments
Segment operating income	1,151	1,778	3,728	5,795
General corporate | Segment reconciling items
Information as to operating segments
General corporate expenses	$ 20,241	$ 11,269	$ 44,147	$ 29,508