0000912057-95-009376.txt : 19951110 0000912057-95-009376.hdr.sgml : 19951110 ACCESSION NUMBER: 0000912057-95-009376 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19951106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTEL INDUSTRIES INC CENTRAL INDEX KEY: 0000019446 STANDARD INDUSTRIAL CLASSIFICATION: 5047 IRS NUMBER: 221760285 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-06132 FILM NUMBER: 95587622 BUSINESS ADDRESS: STREET 1: 1135 BROAD STREET CITY: CLIFTON STATE: NJ ZIP: 07013 BUSINESS PHONE: 2014708700 MAIL ADDRESS: STREET 2: 1135 BROAD STREET CITY: CLIFTON STATE: NJ ZIP: 07013 FORMER COMPANY: FORMER CONFORMED NAME: STENDIG INDUSTRIES INC DATE OF NAME CHANGE: 19890425 FORMER COMPANY: FORMER CONFORMED NAME: CHARVOZ CARSEN CORP DATE OF NAME CHANGE: 19861215 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K / X / Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended July 31, 1995 or / / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from ________________ to ________________ Commission File No. 0-6132 CANTEL INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-1760285 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1135 Broad Street, Clifton, New Jersey 07013 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (201) 470-8700 -------------- Securities registered pursuant to Section 12(b) of the Act: None ---- Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.10 Per Share -------------------------------------- (Title of Class) 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 the filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) Aggregate market value of registrant's capital stock held by non-affiliates (based on shares held and the closing price quoted by NASDAQ on October 6, 1995): $10,004,347 Number of shares of common stock outstanding as of the close of the period covered by this report: 2,768,193 Documents incorporated by reference: None PART I ITEM 1. BUSINESS. GENERAL The Company, through Carsen Group Inc., its wholly-owned Canadian subsidiary ("Carsen" or "Canadian subsidiary"), is engaged in the marketing and distribution of scientific products and consumer products in Canada, and commencing in fiscal 1996 will be engaged in the marketing and distribution of industrial technology equipment and medical equipment in the United States. The Company also provides servicing of the products it distributes. Unless the context otherwise requires, references herein to the "Company" include Cantel Industries, Inc. ("Cantel") and Carsen. The scientific products distributed by the Company consist of medical instruments, including flexible and rigid endoscopes, endoscope washers/disinfectors, and air cleaning equipment; surgical equipment and related accessories; precision instruments, including microscopes and related accessories; and industrial technology equipment, including borescopes, fiberscopes, video image scopes, laser distance measurement and thermal imaging products and on-line optical inspection and quality assurance systems. The consumer products distributed by the Company consist of photographic and optical equipment, including cameras, dark room equipment, and office equipment including hand-held dictation equipment, paper shredders, and related accessories. The Company distributes the majority of its scientific products and consumer products pursuant to an agreement with Olympus America Inc. (the "Olympus Agreement"), a United States subsidiary of Olympus Optical Co. Ltd., a Japanese corporation ("Olympus Optical"), under which the Company has been granted exclusive distribution rights for certain Olympus products in Canada. Most of such products are manufactured by Olympus Optical and its affiliates in Japan and other foreign countries. Unless the context otherwise requires, references herein to "Olympus" include Olympus America Inc. and Olympus Optical, and their affiliates. The Company, or its predecessor, has been distributing various Olympus products in Canada since 1949. During fiscal year 1994, the Company entered into a long-term agreement with Jenoptik Technologie GmbH of Jena, Germany ("Jenoptik"), for exclusive distribution of Jenoptik's laser distance measurement and thermal imaging products and on-line optical inspection and quality assurance systems in the United States, Canada and Mexico. -2- The Company also distributes other products under separate distribution agreements, including endoscope washers/disinfectors, scientific equipment accessories, shredders and accessory camera products. The following table gives information as to the percentage of consolidated net sales from continuing operations accounted for by each operating segment during the indicated periods. Fiscal Year Ended July 31, -------------------------- 1995 1994 1993 ---- ---- ---- Scientific Products: Medical Instruments ........ 51.2% 46.9% 45.9% Precision Instruments ...... 9.9 8.6 8.2 Industrial Technology Equipment................. 6.2 6.0 5.6 Product Service............. 13.0 13.8 13.4 Consumer Products............. 19.7 24.7 26.9 ----- ----- ----- 100.0% 100.0% 100.0% ----- ----- ----- ----- ----- ----- SCIENTIFIC PRODUCTS The Scientific Products segment is the Company's major source of revenue and profitability. This segment is comprised of the medical instruments, precision instruments, industrial technology equipment and product service divisions. MEDICAL INSTRUMENTS. The Company's principal source of revenue is from the distribution of specialized endoscopes, surgical equipment and related accessories and instruments to hospitals, the majority of which are manufactured by Olympus. Olympus is one of the world's leading manufacturers of endoscopes and related products. An endoscope is a device comprised of an optical system incorporated in a flexible or rigid tube that can be inserted inside a patient's body through a natural opening or through a small incision. Endoscopy, the use of endoscopes in medical procedures, is a valuable aid in the diagnosis of various disorders. Endoscopy enables physicians to study and photograph certain organs and body tissue and, if necessary, to perform a biopsy (removal of a small piece of tissue for microscopic analysis). Many surgical procedures that formerly required a major operation are now performed much more simply by endoscopy, which can often be performed without general anesthesia. A flexible endoscope generally consists of fiberoptic image and light carrying bundles contained in a flexible tube, which can be inserted into irregularly shaped organs of a patient's body, such as the large intestine. The viewing end of a -3- flexible fiberoptic endoscope contains an eyepiece and a steering mechanism and is connected to an external light source, which permits a surgeon to view inside a patient's body. The tip of a flexible endoscope inserted into a patient's body contains a lens and, in most cases, depending on the application, an outlet for air and water. Most flexible endoscopes also have internal working channels which enable accessories such as biopsy forceps to be passed to the tip. In an advanced version of the flexible endoscope, known as a flexible video endoscope, the fiberoptic image and light carrying bundles have been replaced by a charged coupling device (CCD) (which functions like a video camera) that enables a picture to be transmitted electronically to a monitor, which picture can be viewed by a physician as a medical procedure is being performed. A rigid endoscope is a straight, narrow viewing insertion tube consisting of a series of relay lenses and light transmitting fibers that connect to an external light source, which permits a surgeon to view inside a patient's body. A technology known as minimally invasive surgery requires the use of a rigid endoscope. With the addition of a tiny telescopic lens, a light source and a palm-size video camera, a rigid endoscope utilized for minimally invasive surgery can transmit images of the patient's organs, as well as the instrument being used by the surgeon, to a viewing monitor. Minimally invasive surgery enables a surgeon using an endoscope to operate on a patient through small keyhole type incisions, avoiding, in many cases, the need for open surgery. For example, one type of rigid endoscope known as a laproscope, enables a surgeon to remove a gall bladder by making four or five small incisions in the abdomen, rather than one larger incision. In this procedure, the surgeon inserts the laproscope through one of the incisions to view the gall bladder while operating with surgical instruments inserted in other incisions. This procedure can significantly reduce surgical trauma and post-operative pain, with reduced recovery time. Minimally invasive surgery has applications for a growing number of surgical procedures in addition to gall bladder removal, including hernia repair, small bowel resection, lung biopsy and advanced gynecological procedures. Flexible endoscopes are commonly used for visualization of, and diagnosing disorders in, the esophagus, stomach, duodenum, and large intestine (gastroenterology); upper airways and lungs (pneumology); nose and throat (ENT); bladder, kidney and urinary tract (urology); and uterus (gynecology). Rigid endoscopes are commonly used for urology, gynecology, orthopedics, and general surgery, including minimally invasive surgery. The Company also distributes various specialized medical instruments and accessories utilized in both rigid and flexible -4- endoscopy including scissors, needle holders, forceps and other surgical accessories, ambulatory PH and motility monitoring equipment (which is used for diagnosis of various gastrointestinal and respiratory disorders), endoscope washers/disinfectors, carts, trolleys and cleaners, insufflators (which deliver and monitor gas to expand abdominal and other cavities), video monitors and recorders, mavigraphs (which print "hard" copies of video images) and "cold" light supplies (which provide light for endoscopy procedures). The Company believes it has achieved a considerable market share in Canada for flexible endoscopes in certain segments, particularly gastrointestinal endoscopy. The Company believes that growth in sales of medical instruments will be achieved principally from rigid endoscopes and other products used in surgical procedures, as well as from endoscope washers/disinfectors, air cleaners, and related equipment used in the care and maintenance of endoscopes. No assurance can be given that such growth will be attained. All of the endoscopes and certain of the other medical instruments and accessories distributed by the Company are manufactured by Olympus. Other medical products distributed by the Company are manufactured by Synectics Medical AB (ambulatory PH and motility monitoring equipment), F.M. Wiest GmbH & Co. (insufflators), Sony of Canada Ltd. (monitors, mavigraphs and video recorders), and MediVators Inc. (automated endoscope washers/disinfectors). PRECISION INSTRUMENTS. The Company distributes Olympus microscopes and complementary scientific equipment and accessories. Other precision instruments distributed by the Company include Narishige U.S.A., Inc. micromanipulators (which enable a viewer to manipulate objects being viewed under a microscope), Empix Imaging Inc. high resolution imagers (which transmit images of objects being viewed to a monitor), and optical accessories such as high contrast optics, objectives (magnifying lenses) and reticules and video calipers (both of which measure objects being viewed under a microscope). The products are used in numerous disciplines for the microscopic study of objects and are sold directly to the end user. The precision instruments distributed by the Company are sold to hospitals for cytology, pathology and histology purposes; government laboratories for research and forensics; universities and other educational institutions for research and teaching purposes; and private and industrial laboratories, for bio-technology, geology, pharmacology, metallography, quality control and manufacturing applications. -5- INDUSTRIAL TECHNOLOGY EQUIPMENT. The Company distributes three types of industrial technology equipment that are similar to endoscopes, but are designed for an emerging market known as remote visual inspection ("RVI"). RVI is the application of medical endoscopic technology for industrial uses. These products distributed by the Company, most of which are manufactured by Olympus, consist of rigid borescopes (devices that are similar to rigid endoscopes), which use a series of relay lenses to transmit an image through a stainless steel insertion tube; fiberscopes (devices that are similar to flexible endoscopes), which use fiberoptic image carrying bundles to transmit images through a flexible insertion tube; and video image scopes, which utilize a small, high resolution solid state image sensor, similar to the charged coupling device used in advanced flexible endoscopes, that enable a picture to be transmitted electronically to a monitor. Other industrial technology equipment distributed by the Company, most of which is manufactured by Jenoptik, consists of laser meters (devices that use the travel time of laser pulses as a means of measurement) designed for determining distances, vertical angles, target and station heights, as well as speed; thermographic systems (devices that use infrared cameras to measure thermal radiation) which are used as a basis for the analysis and diagnosis of heat and temperature distribution; and on-line optical inspection and quality assurance systems (optical image-processing systems operating on the principle of coherent structural-zonal analysis) designed for inspection, identification and classification, such as establishing object classes, detecting defects and monitoring quality. The Company has recently introduced a number of products under its own trademark, Optiscan. These products have been sourced from outside suppliers or designed by the Company. Most Optiscan products currently available complement or enhance our Olympus RVI business. Optiscan products include IVS video documentation products which integrate video camera, monitor and VCR in one portable unit; and very long (10'-30') ultra-thin quartz glass fiberscopes for specialized applications, particularly in the nuclear power industry. Unrelated to our Olympus business is a software application, Optiscan PVM, developed by the Company, and designed to run in conjunction with Jenoptik laser rangefinders for the measurement of stock pile volumes, such as wood chips and coal. The industrial technology equipment distributed by the Company is generally purchased by large industrial companies engaged in the oil and gas, aerospace, chemicals, power generation, mining, forestry, semiconductor and automotive industries, that require inspections of their machinery or processes for research and development, measurement, maintenance or quality control. The Company also develops new applications -6- for its products, which are then customized by the Company for such applications, based upon the nature of a company's business. For example, the Company has sold borescopes to an automobile manufacturer to examine the inside of automobile engines, fiberscopes and laser measurement equipment to the Canadian customs agency for inspecting vehicles for drugs and other illegal paraphernalia, and video image scopes to a mining company to inspect rock formations for cracks and shifting. PRODUCT SERVICE - SCIENTIFIC. The Company operates a service organization at its Markham, Ontario facility that provides warranty and out-of-warranty service and repairs for scientific products distributed by the Company. Scientific products distributed by the Company bear a product warranty that entitles the purchaser to warranty repairs and service at a nominal or no charge during the warranty period. The Company, and not the manufacturer of the product, is responsible for the cost of warranty repairs. The warranty period for scientific products is generally one year for medical instruments and industrial technology equipment and five years for precision instruments. The Company also provides out-of-warranty service of scientific products for which the customer pays the Company on a time and materials basis. Revenues from the Product Service Division consist principally of out-of- warranty servicing of endoscopes and other medical products, and comprise a significant percentage of the Company's total net sales. CONSUMER PRODUCTS The Company distributes consumer products in Canada, comprised principally of photographic and optical equipment. This equipment, most of which is manufactured by Olympus, includes 35 mm. lens shutter cameras (also known as "point and shoot" cameras) and 35 mm. single lens reflex cameras, binoculars, slide projectors and screens, light meters, darkroom equipment and supplies, camera luggage and other photographic products and accessories. The Company distributes 25 models of the 35 mm. lens shutter cameras, 5 models of the 35 mm. single lens reflex cameras and 6 models of binoculars. Cameras and accessories manufactured by Olympus account for substantially all sales in the Consumer Products Division. The Company also distributes Olympus Pearlcorder- Registered Trademark- hand-held dictation equipment and two lines of paper shredders. The Company distributes its consumer products mostly to major department stores, large retail store chains, independent retailers and cooperative buying groups. The Company also distributes such products to government agencies, school boards, -7- the military, promotional sales organizations and catalog houses and other end- users. PRODUCT SERVICE - CONSUMER. The Company operates a service organization at its Markham, Ontario facility, as well as contracts with independent service centers throughout Canada to provide warranty service for the consumer products distributed by the Company. Pursuant to the Olympus Agreement, the Company is required to provide warranty service for all Olympus cameras presented to the Company for service, whether or not such cameras were sold by the Company. This obligation has not had a material adverse effect on the Company. The Company generally provides a two year warranty for cameras and a one year warranty for other consumer products. Beginning in fiscal year 1995, the Company now provides out-of-warranty services for its consumer products. DISTRIBUTION AGREEMENTS OLYMPUS AGREEMENT. The majority of the Company's sales of scientific products and consumer products have been made pursuant to the Olympus Agreement, under which Olympus has granted the Company the exclusive right to distribute the covered Olympus products in Canada. All products sold by the Company pursuant to the agreement bear the "Olympus" trademark. The Olympus Agreement expires on March 31, 1998. During the term of the Olympus Agreement, the Company has agreed that it will not manufacture, distribute, sell or represent for sale in Canada any products which are competitive with the Olympus products covered by the Olympus Agreement. The Olympus Agreement imposes minimum purchase obligations on the Company with respect to each of medical instruments, precision instruments, industrial technology equipment and consumer products. The aggregate annual minimum purchase obligations for all such products are approximately $16.7 million, $17.2 million and $18.5 million during the contract years ending March 31, 1996, 1997, and 1998, respectively. Subject to an allowance of a 10% shortfall from the minimum purchase requirements in certain situations, Olympus has the right to terminate the Olympus Agreement with respect to each product group for which the Company has failed to meet the minimum purchase requirements. If the Company fails to meet such requirements for both precision instruments and industrial technology equipment, or for medical instruments, then Olympus has the right to terminate the entire Olympus Agreement. Olympus may also terminate the Olympus Agreement if the Company breaches its other obligations under the Olympus Agreement, or if the Company fails to meet any Olympus credit requirement for sale on open account and does not provide Olympus with a letter of credit to -8- secure the Company's payment obligations after demand by Olympus. The Company has delivered to Olympus a letter of credit to secure payment of the Company's first $500,000 of monthly purchases. JENOPTIK AGREEMENT. On May 1, 1994, the Company entered into a long- term agreement with Jenoptik, under which the Company was granted the exclusive right to distribute the covered Jenoptik products in the United States, Canada and Mexico. The agreement expires December 31, 2003. During the term of the Jenoptik agreement, the Company has agreed that it will not manufacture, distribute, sell or represent for sale in the territory any products which are competitive with the products covered unless expressly agreed in writing by Jenoptik. The Jenoptik agreement imposes minimum purchase obligations commencing with the calendar year 1996 in the amount of DM 1,500,000. The minimum purchase requirement for calendar 1997 will be the average of the purchases during calendar years 1994, 1995 and 1996, and for each year thereafter, 110% of the preceding year's minimum purchase requirement. Failure to achieve the minimum purchase requirement in any year would give Jenoptik the right to terminate the agreement. The agreement will be automatically extended for a subsequent five year term commencing January 1, 2004 and every five years thereafter, as long as the Company continues to achieve the minimum purchase requirements. DISCONTINUED OPERATIONS On October 29, 1993, the Company consummated the sale of all of the assets and transferred certain liabilities of its Seating Division to the German manufacturer of the seating products for $2,809,000. The Company received $2,659,000 in cash and a $150,000 promissory note of the purchaser of the Seating Division which was paid in October 1994. An additional contingent payment of up to $150,000 could become due on the 90th day following the end of calendar year 1995, dependent upon the operating results of the Seating Division. The sale of the Seating Division has been reflected as a discontinued operation and is presented separately in the consolidated statements of operations. MARKETING The Company markets its products through a sales organization comprised of employees and independent sales representatives. Each industry segment has a separate, dedicated -9- sales force. Sales persons, who are paid on a salary and/or commission basis, are, among other things, responsible for identifying customers and demonstrating products in their respective geographic markets. EFFECT OF CURRENCY FLUCTUATIONS AND TRADE BARRIERS Substantially all of the Company's products have been imported from the Far East and Western Europe, and the Company's business could be materially and adversely affected by the imposition of trade barriers, fluctuations in the rates of exchange of various currencies, tariff increases and import and export restrictions, affecting both the United States and Canada. COMPETITION The Company distributes substantially all of its products in highly competitive markets, which contain many products available from nationally and internationally recognized competitors of the Company. Many of such competitors have greater financial and technical resources than the Company and are well-established, with reputations for success in the sale and service of their products. In addition, certain companies have developed or may be expected to develop technologies or products that could directly or indirectly compete with the products distributed by the Company. In some areas, the Company competes with manufacturers who distribute and service their own products and have greater financial and technical resources than the Company and, as manufacturers, may have certain other competitive advantages over the Company. The Company believes that the world-wide reputation for the quality and innovation of its products among consumers, the Company's reputation for providing quality product service, particularly with respect to medical products, and the numerous customer contacts developed during its lengthy service as a distributor of Olympus products, gives the Company a competitive advantage with respect to certain of its product segments. BACKLOG On October 6, 1995, the Company's consolidated backlog was approximately $1.2 million compared with approximately $1.0 million on October 21, 1994. EMPLOYEES As of October 6, 1995, the Company employed 111 persons. Of the Company's employees, 107 are located in Canada and 4 are located in the United States; 10 are executives and/or division managers, 43 are engaged in sales, 7 are engaged in customer service, 17 are engaged in product service, 9 are engaged in -10- shipping and warehouse functions, and 25 perform various administrative functions. None of the Company's employees is represented by labor unions. The Company considers its relations with its employees to be satisfactory. ITEM 2. PROPERTIES. The Company leases a building, containing approximately 41,000 square feet, located in Markham, Ontario. This facility is used for warehouse, service, showroom and office space for the Company's Canadian operations. The lease, as amended, expires in July 2000, subject to the Company's option to renew for five years. The lease provides for monthly base rent of approximately $9,400 for the next two years and approximately $10,000 for the last three years. The Company leases approximately 2,000 square feet of office space in Clifton, New Jersey, for its executive offices. The lease, which expires in January 1997, provides for monthly base rent of approximately $3,000. The Company believes that its facilities are adequate for its current needs. ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to any material litigation. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1995. -11- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Since March 18, 1994, the Company's Common Stock has been traded on the NASDAQ National Market under the symbol "CNTL." From August 17, 1992 through March 17, 1994, the Common Stock traded on the NASDAQ Small Cap Market. The following table sets forth, for the periods indicated, the high and low bid prices for the Common Stock as reported by NASDAQ. The Company has not paid any cash dividends on the Common Stock, and a change in this policy is not presently under consideration by the Board of Directors. HIGH LOW ---- --- FISCAL YEAR ENDED JULY 31, 1994 First Quarter 4 1/2 3 Second Quarter 5 1/2 3 3/4 Third Quarter 5 1/2 4 Fourth Quarter 6 1/4 4 3/4 FISCAL YEAR ENDED JULY 31, 1995 First Quarter 7 4 5/16 Second Quarter 6 3/4 3 1/4 Third Quarter 6 1/2 4 1/2 Fourth Quarter 7 3/4 5 1/2 On October 6, 1995, the closing price of the Company's Common Stock was $8.75 and the Company had 249 record holders of Common Stock. A number of such holders of record are brokers and other institutions holding shares of Common Stock in "street name" for more than one beneficial owner. -12- ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA. (Amounts in thousands, except per share data) CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Fiscal Year Ended July 31, ----------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Net sales. . . . . . . . . $31,079 $29,349 $28,633 $28,245 $24,672 Cost of sales. . . . . . . 21,056 19,790 19,557 18,558 15,967 Gross profit . . . . . . . 10,023 9,559 9,076 9,687 8,705 Income from continuing operations (1) . . . . . 2,481 2,601 1,432 2,242 2,041 Interest expense . . . . . 479 301 184 112 1,197 Income from continuing operations before income taxes . . . . . . 2,002 2,300 1,248 2,130 844 Income taxes . . . . . . . 1,001 1,054 1,160 1,051 880 Income (loss) from con- tinuing operations . . . 1,001 1,246 88 1,079 (36) Income (loss) from discontinued operations. - 562 (24) 763 639 Extraordinary gain on extinguishment of debt. . - 1,211 - - - Net income . . . . . . . . 1,001 3,019 64 1,842 603 Dividends on preferred stocks . . . . . . . . . - 314 1,185 890 419 Net income (loss) attri- butable to common stock. 1,001 2,705 (1,121) 952 184 Earnings (loss) per common and common equivalent shares: Primary: Continuing operations. . $ .32 $ .31 $ (.54) $ .09 $ (.20) Discontinued operations. . - .19 (.01) .33 .31 Extraordinary gain . . . . - .40 - - - ------- ------- ------- ------- ------- Net income (loss). . . . $ .32 $ .90 $ (.55) $ .42 $ .11 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Fully diluted: Continuing operations. . $ .32 $ .31 $ (.34) $ .22 $ (.20) Discontinued operations. - .18 (.01) .15 .30 Extraordinary gain . . . - .40 - - - ------- ------- ------- ------- ------- Net income (loss). . . . $ .32 $ .89 $ (.35) $ .37 $ .10 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Weighted average number of common and common equivalent shares: Primary . . . . . . . . . 3,142 3,011 2,033 2,293 2,078 Fully diluted . . . . . . 3,146 3,055 2,465 4,960 2,078
-13- CONSOLIDATED BALANCE SHEET DATA:
July 31, ----------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Total assets . . . . . . . $17,399 $14,115 $17,480 $19,508 $19,977 Current assets . . . . . . 16,016 12,777 16,119 18,039 18,243 Working capital. . . . . . 11,163 8,347 9,440 11,816 11,052 Current liabilities(2) . . 4,853 4,430 6,679 6,223 7,191 Long-term debt, less current portion(2) . . . 6,087 4,327 7,989 9,761 10,901 Stockholders' equity . . . 6,368 5,188 2,521 3,150 1,458 Book value per outstanding common share. . . . . . . . . . $2.30 $1.90 $1.02 $1.69 $ .78 Common shares outstanding. . . . . . . 2,768 2,735 2,466 1,864 1,864
- --------------- (l) Includes for fiscal 1993 a write-off of $135,000 in costs related to the termination of a proposed private placement of securities. Includes for fiscal 1992 a write-off of $175,000 in expenses related to the termination of a proposed public offering of securities. Includes for fiscal 1991 a restructuring gain of $50,000. (2) Current liabilities and long-term debt as of July 31, 1993, 1992 and 1991 include an aggregate of $1,388,000, $1,972,000 and $2,587,000, respectively, of deferred interest benefit arising out of the Company's debt restructuring which was consummated in January 1991 (the "1991 Debt Restructuring"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 5 of Notes to Consolidated Financial Statements. -14- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF CONTINUING OPERATIONS Reference is made to the sale of the Company's Seating Division (see Item 1. Business-Discontinued Operations). The results of continuing operations described hereafter reflect, for the most part, those results of the Company's Canadian subsidiary. Reference is also made hereafter to the effects of a weaker Canadian dollar against the United States dollar during fiscal 1995 and 1994, as compared with fiscal 1994 and 1993 (decreases in value of approximately 2% and 5%, respectively). In order to more accurately analyze the results of operations, some comparisons will be presented in Canadian dollars as well as United States dollars. FISCAL 1995 COMPARED WITH FISCAL 1994 Net sales in Canadian dollars increased by $3,211,000, or 8.1%, to $42,721,000 in fiscal 1995, from $39,510,000 in fiscal 1994; however, when translated into United States dollars, the net sales increased by $1,730,000, or 5.9%, to $31,079,000 in fiscal 1995 from $29,349,000 in fiscal 1994. This increase was principally attributable to the increased sales of the Medical Instruments, Precision Instruments and Industrial Technology Divisions, resulting from increased demand for existing products; the introduction of new products such as the MediVators endoscope disinfector and the Olympus B-Max microscope; and increases in selling prices for certain products, which increases were partially offset by decreased sales in the Consumer Products Division, resulting from lower demand for consumer products. Gross profit in Canadian dollars increased by $955,000, or 7.4%, to $13,791,000 in fiscal 1995 from $12,836,000 in fiscal 1994; however, when translated into United States dollars, the gross profit increased by $464,000, or 4.9%, to $10,023,000 in fiscal 1995 from $9,559,000 in fiscal 1994. The gross profit decreased as a percentage of net sales to 32.3% in fiscal 1995, from 32.6% in fiscal 1994. The lower gross profit margins for fiscal 1995 reflect the reduction in the selling prices of certain camera models in the Consumer Products Division to meet competition; supplier price increases, of which only a portion was passed along to customers; and changes in product mix. Shipping and warehouse expenses as a percentage of net sales were 2.5% for fiscal 1995, as compared with 2.4% for fiscal 1994. This percentage increase was principally attributable to higher occupancy costs, including insurance, utilities and -15- property tax, and increased costs of packing and shipping supplies. Selling expenses as a percentage of net sales were 13.7% for fiscal 1995 and 1994. Although selling expenses as a percentage of net sales were increased as a result of additional personnel costs in the sales and product management functions and related travel expenses, this increase was offset due to higher levels of sales as compared to the fixed portion of selling expenses, which decreased selling expenses as a percentage of net sales. General and administrative expenses increased by $268,000 to $2,491,000 for fiscal 1995 from $2,223,000 for fiscal 1994. This increase was principally attributable to higher personnel costs, including termination pay for several employees, and an increase in professional fees, which increases were partially offset by a decrease in foreign exchange losses which resulted from translating the Company's Canadian subsidiary's United States dollar denominated loans into Canadian dollars at the period-end exchange rates during the first quarter of fiscal 1994. In October 1993, the Company began borrowing in Canadian dollars which eliminated such foreign exchange losses. Interest expense increased to $479,000 in fiscal 1995 as compared with $301,000 in fiscal 1994. This increase principally reflects interest at market rates on borrowings outstanding under the Company's revolving credit facility, which was consummated on October 29, 1993 and an increase in average Canadian interest rates. Prior to October 29, 1993, the Company reported substantially reduced interest expense on its outstanding borrowings as a result of the 1991 Debt Restructuring. Income from continuing operations before income taxes and extraordinary gain decreased by $298,000 to $2,002,000 for fiscal 1995 from $2,300,000 for fiscal 1994. The provision for income taxes in fiscal 1995 and 1994 represent taxes imposed on the Company's Canadian operations and, in 1995, Canadian withholding taxes on dividends remitted by Carsen to Cantel in the United States. No tax benefits have been recognized on the Company's United States operations as a result of the losses generated in fiscal 1995 and prior years. Income from discontinued operations of $562,000 in fiscal 1994 principally reflects the gain on the sale of all of the assets and the transfer of certain liabilities of the Seating Division to the German manufacturer of the seating products. -16- During fiscal 1994, the Company paid in full its outstanding United States bank debt and refinanced its Canadian bank debt with a Canadian bank and recognized $1,211,000, which represents the remaining deferred interest benefit from the Company's 1991 Debt Restructuring with its lending banks and subordinated debenture holders, as an extraordinary gain on the extinguishment of debt. Dividends on preferred stocks of $314,000 for fiscal 1994, represent non-cash imputed dividends of approximately $205,000 and cash dividends payable of $109,000 on the Series A Preferred Stock. FISCAL 1994 COMPARED WITH FISCAL 1993 Net sales in Canadian dollars increased by $3,487,000, or 9.7%, to $39,510,000 in fiscal 1994, from $36,023,000 in fiscal 1993; however, when translated into United States dollars, the net sales increased by $716,000, or 2.5%, to $29,349,000 in fiscal 1994 from $28,633,000 in fiscal 1993. This increase was principally attributable to the increased sales of the Medical Instruments, Precision Instruments and Industrial Technology Divisions, resulting from the introduction of new products and/or increased demand for existing products, which increases were partially offset by decreased sales in the Consumer Products Division, resulting from lower demand for consumer products. Gross profit in Canadian dollars increased by $1,423,000, or 12.5%, to $12,836,000 in fiscal 1994 from $11,413,000 in fiscal 1993; however, when translated into United States dollars, the gross profit increased by $483,000, or 5.3%, to $9,559,000 in fiscal 1994 from $9,076,000 in fiscal 1993. The gross profit increased as a percentage of net sales to 32.6% in fiscal 1994, from 31.7% in fiscal 1993. The higher gross profit margins for fiscal 1994 reflect the benefits of increased selling prices which were implemented during the second quarter of fiscal 1993 and the foreign exchange hedging program initiated in November 1993, partially offset by increased discounting in the Medical Instruments and Precision Instruments Divisions to meet competitive pricing. Shipping and warehouse expenses as a percentage of net sales were 2.4% for fiscal 1994, as compared with 2.6% for fiscal 1993. This percentage decrease was principally attributable to the reorganization of the warehouse operations which resulted in lower labor and freight costs. Selling expenses as a percentage of net sales were 13.7% for fiscal 1994, as compared with 14.0% for fiscal 1993. This percentage decrease was principally attributable to the -17- increased sales as well as the cost savings resulting from the restructuring of certain sales representatives' remuneration packages. General and administrative expenses decreased by $652,000 to $2,223,000 for fiscal 1994 from $2,875,000 for fiscal 1993. The decrease reflects certain reductions in the Company's corporate overhead, resulting from the sale of the Seating Division on October 29, 1993, and a reduction in foreign exchange losses resulting principally from translating the Company's Canadian subsidiary's United States dollar denominated loans into Canadian dollars at the period-end exchange rates during the first quarter of fiscal 1994. On October 29, 1993, the Company began borrowing in Canadian dollars under the revolving credit facility, which eliminated future foreign exchange gains or losses related to bank borrowings. Interest expense increased to $301,000 in fiscal 1994 as compared with $184,000 in fiscal 1993. This increase principally reflects interest at market rates on borrowings outstanding under the Company's revolving credit facility, which was consummated on October 29, 1993. Prior to such date, the Company reported substantially reduced interest expense on its outstanding borrowings as a result of the 1991 Debt Restructuring. Income from continuing operations before income taxes and extraordinary gain increased by $1,052,000 to $2,300,000 for fiscal 1994 from $1,248,000 for fiscal 1993. The provision for income taxes in fiscal 1994 and 1993 represent taxes imposed on the Company's Canadian operations and, in 1993, Canadian withholding taxes on dividends remitted or deemed to have been remitted by Carsen to Cantel in the United States. During fiscal 1994, Carsen received notice of reassessment for federal and provincial income taxes and withholding taxes from Revenue Canada for the taxable years 1990 through 1992. This notice was based upon the disallowance as a deduction for income tax purposes and treatment as a taxable dividend, of all of the payments made to Cantel by Carsen during this period with respect to a purchasing fee charged by Cantel for negotiating certain distribution agreements on behalf of Carsen. The Company disagrees with the position of Revenue Canada and is pursuing its available remedies. However, the Company recorded a charge of $413,000 in its income tax provision for the year ended July 31, 1993, which represents management's estimated cost to settle this matter as well as related provincial income taxes for the period. In addition, the Company provided interest charges of approximately $34,000 -18- and $120,000 in fiscal 1994 and 1993, respectively, which represent interest on the federal and provincial income taxes and withholding taxes. Such provisions approximated the full amount of the reassessment for the federal and provincial income taxes and withholding taxes and the related interest thereon. The federal and provincial income taxes and the withholding taxes and related interest thereon have been paid under protest. No tax benefits have been recognized on the Company's United States operations as a result of the losses generated in fiscal 1994 and prior years. Income from discontinued operations of $562,000 principally reflects the gain on the sale of all of the assets and the transfer of certain liabilities of the Seating Division to the German manufacturer of the seating products. The Company paid in full its outstanding United States bank debt and refinanced its Canadian bank debt with a Canadian bank and recognized $1,211,000, which represents the remaining deferred interest benefit from the Company's 1991 Debt Restructuring with its lending banks and subordinated debenture holders, as an extraordinary gain on the extinguishment of debt. Dividends on preferred stocks of $314,000 for fiscal 1994, represent non-cash imputed dividends of approximately $205,000 and cash dividends payable of $109,000 on the Series A Preferred Stock, as compared with $867,000 of non-cash imputed dividends on the Series A and B Preferred Stocks and cash dividends of $218,000 on the Series A Preferred Stock for fiscal 1993. Fiscal 1993 also reflects a stock dividend on the Series B Preferred Stock of $100,000. The non-cash dividends were imputed at rates which would increase the value of such preferred stocks from the value recorded at the date of issuance to the stated liquidation preference at the time each series of preferred stock became convertible into the Company's Common Stock. During April 1993, all outstanding shares of the Series B Preferred Stock were converted into shares of Common Stock of the Company; therefore, there were no dividends on the Series B Preferred Stock for fiscal 1994. LIQUIDITY AND CAPITAL RESOURCES At July 31, 1995, the Company's working capital was $11,163,000 as compared with $8,347,000 at July 31, 1994. This increase primarily reflects an increase in accounts receivable and a decrease in income taxes payable, partially offset by an -19- increase in accounts payable, principally resulting from increased sales in the fourth quarter of fiscal 1995. The significant increase in accounts receivable at July 31, 1995 was partially due to customer "buy ins" of products prior to price increases from the Company's principal supplier, which were being passed along to customers in August 1995. The increase in working capital was partially achieved through an increase in long-term debt, which increased from $4,327,000 at July 31, 1994 to $6,087,000 at July 31, 1995. Net cash used in operating activities was $1,628,000 for fiscal 1995, as compared with net cash provided by operating activities of $1,404,000 for fiscal 1994. This change was primarily due to an increase in accounts receivable and decreases in income from continuing operations and income taxes payable, partially offset by an increase in accounts payable. Net cash used in investing activities was $59,000 for fiscal 1995, as compared with net cash provided by investing activities of $2,130,000 in fiscal 1994. This change principally reflects proceeds from the sale of the Seating Division in fiscal 1994. Net cash provided by financing activities was $1,686,000 in fiscal 1995, as compared with net cash used in financing activities of $4,368,000 in fiscal 1994. This change was principally due to refinancing and reduction of long-term debt in fiscal 1994, and an increase in borrowings under the revolving credit facility in fiscal 1995. The revolving credit facility, as amended, entered into during fiscal 1994 is comprised of a $7,500,000 revolving credit facility to the Company's Canadian subsidiary. The maximum borrowing availability under this facility will decrease annually over a three year period commencing January 1, 1996 and must be paid in full no later than December 31, 1998. The Company is permitted to borrow an amount up to (i) 75%-85% of certain eligible accounts receivable, depending on the customer, and (ii) 50% of qualifying inventory, depending on the type of goods in inventory; however, any trade letters of credit issued under the Canadian revolver will reduce the maximum available borrowings by 50% of the amount of such trade letters of credit, while any standby letters of credit, including the $500,000 letter of credit issued to Olympus America Inc. during November 1993, reduces the maximum available borrowings by the full amount of such standby letters of credit. The Company has the right to borrow funds under this facility in either United States dollars or Canadian dollars, a portion of which may be drawn in the form of bankers acceptances. United States dollar borrowings will bear interest at .5% above the lender's United States base rate, and Canadian dollar borrowings will bear interest at .75% above the lender's Canadian prime rate. A commitment fee on the unused portion of this facility is payable in arrears at a rate of .25% per annum, with interest on borrowings payable monthly. Borrowings under -20- this facility are guaranteed by Cantel and secured by substantially all assets of the Company's Canadian subsidiary and require the Canadian subsidiary to meet certain financial covenants, including a minimum working capital ratio, a minimum interest coverage ratio, a maximum debt to tangible net worth ratio, and an annual limitation on capital expenditures. A further decrease in the value of the Canadian dollar against the United States dollar could adversely affect the Company because the Company's Canadian subsidiary purchases substantially all of its products in United States dollars and sells its products in Canadian dollars. Such adverse currency fluctuations could also result in a corresponding adverse change in the United States dollar value of the Company's assets that are denominated in Canadian dollars. Under the credit facility, as amended, the Company's Canadian subsidiary has a foreign exchange hedging arrangement of up to $15,000,000 (U.S. dollars) which could be used to minimize future adverse currency fluctuations as they relate to purchases of inventories. The Company's Canadian subsidiary had forward exchange contracts at October 6, 1995 aggregating $9,000,000 (United States dollars) to hedge against possible declines in the value of the Canadian dollar which would otherwise result in higher inventory costs. Such contracts represent the Canadian subsidiary's projected purchases of inventories through February 29, 1996. The average exchange rate of the contracts open at October 6, 1995 is $1.3686 Canadian dollar per United States dollar, or $.7307 United States dollar per Canadian dollar. The exchange rate published by the Wall Street Journal on October 24, 1995, was $1.3704 Canadian dollar per United States dollar, or $.7297 United States dollar per Canadian dollar. The Company believes that its anticipated cash flow from operations and the funds available under the revolving credit facility will be sufficient to satisfy the Company's cash operating requirements for the foreseeable future based upon the current level of operations. As of July 31, 1995, the Company had net operating loss carryforwards for United States income tax purposes ("NOLs") of approximately $10,789,000 which will expire through July 31, 2010. In addition, the Company and its Canadian subsidiary cannot file consolidated tax returns, for Canadian or United States income tax purposes. Therefore, neither net losses sustained by the Company in the United States nor the NOLs can be used to reduce Canadian federal or provincial income taxes payable by the Canadian subsidiary on its taxable income nor can losses sustained by the Canadian subsidiary, if any, be used to offset taxable -21- income earned by the Company in the United States. This has resulted in the payment of income taxes by the Company in Canada, notwithstanding net losses sustained by the Company in the United States. Inflation has not significantly impacted the Company's operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See Index to Consolidated Financial Statements, which is Item 14(a), and the Consolidated Financial Statements and schedule attached to this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The Company has not had any disagreements with its accountants on accounting or financial disclosure. -22- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The current directors and executive officers of the Company are as follows: Name Age Position - ---- --- -------- Charles M. Diker 60 Chairman of the Board and Director Alan J. Hirschfield 60 Vice Chairman of the Board, Director and a member of the Compensation Committee James P. Reilly 55 President, Chief Executive Officer and Director Edward E. Meltz 62 Vice President Darwin C. Dornbush 65 Secretary, Director and a member of both the Audit Committee and the Compensation Committee Richard L. Bloch 66 Director Robert L. Barbanell 65 Director and a member of the Audit Committee Morris W. Offit 58 Director Bruce Slovin 59 Director and a member of both the Audit Committee and the Compensation Committee Craig A. Sheldon 33 Vice President Mr. Diker, who became Chairman of the Board of the Company in April 1986, is a private investor and a non-managing principal of Weiss, Peck & Greer, an investment management company. Mr. Diker is also a director of BeautiControl Cosmetics, Inc. (OTC), a manufacturer of cosmetics marketed by direct sales, International Specialty Products (NYSE), a specialty chemical company, Data Broadcasting Corp. (OTC), a communication services and technology company, and Chyron Corporation (NYSE), a supplier of graphics for the television industry. Mr. Hirschfield has served as Vice Chairman of the Board of the Company since January 1988. Since July 1992, he has served as Co-Chairman and Co-Chief Executive Officer of Data Broadcasting Corp. (OTC), a communication services and technology company. From October 1990 to July 1992, he served as Co-Chief Executive Officer of FNN, Inc., the predecessor of Data Broadcasting Corp. From April 1990 to December 1992, he served as a managing director of Wertheim Schroder, Inc., an investment banking firm. Mr. Hirschfield is also a director of Chyron Corporation (NYSE), a supplier of graphics for the television industry. -23- Mr. Reilly has served as President and Chief Executive Officer of the Company since June 1989. Mr. Reilly is a certified public accountant. Mr. Dornbush, Secretary of the Company since July 1990, has been a partner in the law firm of Dornbush Mensch Mandelstam & Schaeffer LLP, general counsel to the Company, for more than the past five years. Mr. Barbanell has served as President of Robert L. Barbanell Associates, Inc., a financial consulting company, since July 1994. From September 1981 to June 1994, Mr. Barbanell was employed in various capacities by Bankers Trust New York Corporation, most recently as Managing Director of European Merchant Bank of Bankers Trust International PLC. Mr. Barbanell is also a director of Marine Drilling Companies, Inc. (NASDAQ), a drilling contractor, and Kaye Group Inc. (NASDAQ), an insurance brokerage and insurance underwriting company. Mr. Bloch has served as President of Pinon Farm, Inc., a horse training and breeding farm, since its inception in 1982. From 1968 to October 1987, Mr. Bloch served as President of the Phoenix Suns Basketball Club, a member of the National Basketball Association. Mr. Bloch was Chairman of the Board of Governors of the National Basketball Association from 1985 to June 1987. He is a director of City National Bank of Beverly Hills, California (NYSE), a bank holding company, and serves as Chairman of the Board of Columbus Realty Trust (NYSE), a real estate investment trust. Mr. Offit has served as Chief Executive Officer of OFFITBANK, a limited purpose trust company chartered by the New York State Banking Department, since July 1990. Prior thereto, Mr. Offit served as President of Offit Associates, Inc., an investment counselling firm. Mr. Offit is Chairman of the Board of Trustees of Johns Hopkins University and a former partner of Salomon Brothers, Inc. He serves as a director of Mercantile Bankshares Corp. (OTC), a bank holding company, and Hasbro Inc. (AMEX), a toy manufacturer. Mr. Slovin has served as President and a director of MacAndrews & Forbes Holdings Inc. and Revlon Group, Inc., privately held industrial holding companies, since 1985. Mr. Slovin is also a director of Continental Health Affiliates, Inc. (OTC), a health care services company; Oak Hill Sportswear Corp. (OTC), a sportswear manufacturer; The Coleman Company, Inc. (NYSE), a manufacturer of outdoor recreation products; Meridian Sports Incorporated (OTC), a watersports company; Infu-Tech, Inc. (NASDAQ), a home health care company; Mafco Consolidated Group, Inc. (NYSE), a manufacturer of cigars and licorice extract and flavorings; and Power Control Technologies, Inc. (NYSE), a -24- manufacturer of machinery and hydraulics for the aerospace industry. Mr. Meltz has been employed by the Company in various capacities since 1981, most recently as a Vice President. From 1982 to January 1988, he served as Vice President-Finance, Treasurer and Chief Financial Officer of the Company. Mr. Meltz currently serves as President of Carsen, where he has served as an executive officer since 1982. Mr. Meltz is a chartered accountant. Mr. Sheldon has been employed by the Company as Vice President and Controller since November 1994. From November 1993 until October 1994, Mr. Sheldon was Vice President and Controller of Imaging Technologies, Inc., a private software development company. From January 1992 until October 1993, Mr. Sheldon was Corporate Accounting Manager of Toys "R" Us, Inc. From September 1984 until December 1991, Mr. Sheldon was employed as an audit manager by the accounting firm of Ernst & Young LLP. Mr. Sheldon is a certified public accountant. Mr. William J. Vella (age 39) has been employed by Carsen in various capacities since October 1981. He has served as Executive Vice President of Carsen since December 1994. ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth, for the fiscal years ended July 31, 1995, 1994 and 1993, compensation, including salary, bonuses, stock options and certain other compensation, paid by the Company to the Chief Executive Officer and to the other executive officers of the Company who received more than $100,000 in salary and bonus during fiscal year 1995: Summary Compensation Table Long Term Compensation Annual Compensation (1) Awards (2) - -------------------------------------------------------------------------------- Name and Salary Bonus Options (#) Principal Position Year ($) ($) - -------------------------------------------------------------------------------- James P. Reilly 1995 250,000 0 1,000 President and Chief 1994 250,000 84,900 1,000 Executive Officer of 1993 250,000 0 1,000 the Company Edward E. Meltz 1995 157,242 (3) 0 2,000 Vice President of the 1994 146,518 (3) 23,100 2,500 Company and President 1993 167,284 (3) 0 4,000 of Carsen -25- William J. Vella 1995 110,670 (4) 0 2,000 Executive Vice President 1994 101,951 (4) 24,316 5,000 of Carsen 1993 106,927 (4) 10,906 5,000 - --------------- (1) The Company did not pay or provide other forms of annual compensation (such as perquisites) to the above-named executive officers having a value exceeding the lesser of $50,000 or 10% of the total annual salary and bonus reported for such officers. (2) The Company has no long term incentive compensation plan other than its Employee Stock Option Plan and Directors' Stock Option Plan described herein and various individually granted options. The Company does not award stock appreciation rights, restricted stock awards or long term incentive plan pay-outs. (3) Mr. Meltz received a salary of $210,000 Canadian dollars in each of the last three fiscal years and a bonus of $33,102 Canadian dollars in fiscal 1994. (4) Mr. Vella received a salary of $152,620 Canadian dollars in fiscal 1995, a salary of $137,215 and a bonus of $32,726 Canadian dollars in fiscal 1994, and a salary of $134,420 and a bonus of $13,710 Canadian dollars in fiscal 1993. OPTIONS GRANTED IN FISCAL 1995 The following information is furnished for the fiscal year ended July 31, 1995 with respect to the Company's Chief Executive Officer and the other executive officers of the Company named in the Compensation Table above, for stock options granted during such fiscal year. Stock options were granted without tandem stock appreciation rights. Potential Realizable Value at % of Total Assumed Annual Options Rates of Stock Granted to Exercise Price Employees Price Appreciation Options During the Per Expiration for Option Name Granted(#) Fiscal Year Share($) Date Term ($)(1) - ---- ---------- ----------- -------- ---------- --------------- 5% 10% ------ ------ James P. Reilly 1,000(2) 3.7 5.50 7/30/05 8,890 14,200 Edward E. Meltz 2,000(3) 7.4 4.25 12/4/99 10,800 13,640 William J. Vella 2,000(3) 7.4 4.25 12/4/99 10,800 13,640 - --------------- -26- (1) Represents the potential value of the options granted at assumed 5% and 10% rates of compounded annual stock price appreciation from the date of grant of such options. (2) The options were granted under the Company's 1991 Directors' Stock Option Plan. The exercise price per share of the options was the market value per share on the date of grant. The options are subject to vesting as follows: 50% of the total shares covered by the options vest on the first anniversary of the date of grant and the remaining 50% vest from and after the second anniversary of such date of grant. (3) The options were granted under the Company's 1991 Employee Stock Option Plan. The exercise price per share of the options was the market value per share on the date of grant. The options are subject to vesting as follows: 25% of the total shares covered by the options vest on each of the first four anniversaries of the date of the grant. AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FISCAL YEAR END OPTION VALUES The following information is furnished for the fiscal year ended July 31, 1995 with respect to the Company's Chief Executive Officer and the other executive officers of the Company named in the Compensation Table above, for stock option exercises during such fiscal year.
Value of Number of Unexercised Unexercised in the Money Shares Options at 7/31/95 (#) Options at 7/31/95 ($) Acquired Value ----------------------------- ----------------------------- Name On Exercise(#) Realized($) Exercisable Non-Exercisable Exercisable Non-Exercisable - ---- -------------- ----------- ----------------------------- ----------------------------- James P. Reilly 0 0 192,315 1,500 711,216 250 Edward E. Meltz 9,000 52,062 0 7,750 0 11,411 William J. Vella 10,000 52,500 5,500 9,500 8,525 13,575
STOCK OPTIONS An aggregate of 250,000 shares of Common Stock are reserved for issuance or available for grant under the Company's 1991 Employee Stock Option Plan (the "Employee Plan"). Options granted under the Employee Plan are intended to qualify as incentive stock options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). The Employee Plan is administered in all respects by a committee composed of at least two non- employee members of the Company's Board of Directors who are designated by the Board (the "Stock Option Committee"). The Stock Option Committee may determine the employees to whom options are to be granted and the number of shares subject to each option. -27- Under the terms of the Employee Plan, all employees of the Company or subsidiaries of the Company are eligible for option grants. The option exercise price of options granted under the Employee Plan is fixed by the Stock Option Committee but must be no less than 100% of the fair market value of the shares of Common Stock subject to the option at the time of grant, except that in the case of an employee who possesses more than 10% of the total combined voting power of all classes of stock of the Company (a "10% Holder"), the exercise price must be no less than 110% of said fair market value. Options may be exercised by the payment in full in cash or by the tendering or cashless exchange of shares of Common Stock or of options to acquire shares of Common Stock having a fair market value, as determined by the Stock Option Committee, equal to the option exercise price. Options granted under the Employee Plan may not be exercised more than ten years after the date of grant, five years in the case of an incentive stock option granted to a 10% Holder. All currently outstanding options have a term of five years. At July 31, 1995, options to purchase 64,250 shares of Common Stock at prices between $2.50 and $4.38 per share were outstanding under the Employee Plan, and 164,125 shares were available for grant under the Employee Plan. An aggregate of 200,000 shares of Common Stock are reserved for issuance or available for grant under the Company's 1991 Directors' Stock Option Plan (the "Directors' Plan"). Options granted under the Directors' Plan do not qualify as incentive stock options within the meaning of Section 422A of the Code. The Directors' Plan provides for the automatic grant to each of the Company's directors of options to purchase 1,000 shares of Common Stock on the last business day of the Company's fiscal year. In addition, an option to purchase 500 shares of Common Stock is granted automatically on the last business day of each fiscal quarter to each director (exclusive of Messrs. Diker, Reilly and Dornbush and any other director who serves as an officer or employee of the Company) provided that the director attended any regularly scheduled meeting of the Board, if any, held during such quarter. Each such option grant is at an exercise price equal to the fair market value of the Common Stock on the date of grant and has a ten year term (but in no event more than three months following the optionee's ceasing to serve as a director of the Company). The fiscal year options are exercisable in two equal annual installments commencing on the first anniversary of the grant thereof and the quarterly options are exercisable in full immediately. At July 31, 1995, options to purchase 144,000 shares of Common Stock at prices between $2.00 and $6.00 per share were outstanding under the Directors' Plan, and 56,000 shares were available for grant under the Directors' Plan. In June 1991, the Company adopted the Employee Plan and terminated its 1981 Incentive Stock Option Plan (the "1981 Plan"), in order to have stock option plans which comply with Rule 16b-3, -28- as amended, under the Securities Exchange Act of 1934. The termination of the prior plan did not affect the options then outstanding under such plan. At July 31, 1995, options to purchase up to an aggregate of 2,375 shares of Common Stock at $1.25 per share were outstanding under the 1981 Plan. In June 1990, Mr. Reilly was granted a ten-year non-plan option to purchase 139,815 shares of Common Stock at an exercise price of $1.75 per share. This option is exercisable in full. In addition, in July 1990, Mr. Reilly was granted a ten-year non-plan option to purchase 50,000 shares at an exercise price of $1.875 per share. This option is exercisable in full. In February 1994, Mr. Dornbush was granted a non-plan option to purchase 25,000 shares of Common Stock at an exercise price of $5.00 per share. This option is currently exercisable in full and expires in February 1997. In December 1994, Mr. Barbanell was granted a five-year non-plan option to purchase 25,000 shares of Common Stock at an exercise price of $3.75 per share. This option is exercisable in four equal quarterly installments commencing March 1995 through December 1995 when the option will be fully exercisable. The option expires December 1999. COMPENSATION POLICY The Compensation Committee of the Company's Board of Directors (the "Compensation Committee") is responsible for setting and administering the policies which govern annual executive salaries, raises and bonuses. The Compensation Committee is currently comprised of three members, all of whom are non-employee directors. Executive compensation for the fiscal year ended July 31, 1995 consisted of base salary for the Chief Executive Officer and the other executive officers of the Company named in the Compensation Table. None of these individuals received a bonus in fiscal 1995. The policy of the Compensation Committee, in consultation with the Chief Executive Officer, is to provide compensation to the Chief Executive Officer and the Company's other executive officers reflecting the contribution of such executives to the Company's growth in sales and earnings, the implementation of strategic plans consistent with the Company's long term objectives, and the enhancement of shareholder value. Mr. Reilly, the President and Chief Executive Officer of the Company, served the Company pursuant to a written employment agreement from June 1989 through July 1992 and was compensated -29- pursuant to the express terms of such agreement. Although the agreement expired in accordance with its terms, the Compensation Committee has agreed to compensate Mr. Reilly at the same base salary and bonus formula as was in effect during the last year of the agreement. Long term incentive compensation policy consists exclusively of the award of stock options under the Company's Employee Option Plan and, in the case of officers who serve as directors of the Company, non-discretionary annual option grants of 1,000 shares under the Company's 1991 Directors' Stock Option Plan. The Stock Option Committee is responsible for the award of stock options. Two non-employee directors, Alan J. Hirschfield and Bruce Slovin, currently serve on the Stock Option Committee, which administers the granting of options under the Employee Option Plan. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No officer of the Company served on the Company's Compensation Committee during its last fiscal year. James P. Reilly, however, participated in deliberations concerning executive compensation, except with respect to his own compensation. ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth stock ownership information as of October 6, 1995 concerning (i) each director and persons nominated to become directors of Cantel, (ii) each person (including any "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) who is known by Cantel to beneficially own more than five (5%) percent of the outstanding shares of Cantel's Common Stock, (iii) the Chief Executive Officer and the other executive officers named in the Compensation Table, and (iv) Cantel's executive officers and directors as a group: Amount and Nature of Names and Addresses of Position with Beneficial Percentage Beneficial Owners Company Ownership(1) of Class - ---------------------- ---------------- ------------ ---------- Charles M. Diker Chairman of the 720,833 (2) 25.5 One New York Plaza Board and Director New York, New York Alan J. Hirschfield Vice Chairman of the 213,833 (3) 7.7 P.O. Box 7443 Board and Director Jackson, Wyoming -30- Richard L. Bloch Director 358,500 (4) 12.5 123 E. Marcy Street Santa Fe, New Mexico James P. Reilly President (CEO) and 215,648 (5) 7.3 1135 Broad Street Director Clifton, New Jersey Bruce Slovin Director 156,000 (6) 5.6 35 East 62nd Street New York, New York Morris W. Offit Director 48,000 (7) 1.7 Darwin C. Dornbush Secretary and 31,680 (8) 1.1 Director Robert L. Barbanell Director 46,750 (9) 1.7 Edward E. Meltz Vice President 38,743 (10) 1.4 William J. Vella Executive Vice 13,885 (11) .5 President of Carsen All officers and directors as a group of 11 persons 1,847,622 (12) 56.6 - --------------- (1) Unless otherwise noted, Cantel believes that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from October 6, 1995 upon the exercise of warrants or options. Each beneficial owner's percentage ownership is determined by assuming that options or warrants that are held by such person (but not those held by any other person) and which are exercisable within 60 days from October 6, 1995 have been exercised. (2) Includes 55,500 shares which Mr. Diker may acquire pursuant to stock options and warrants. Does not include an aggregate of 279,750 shares and warrants to purchase 34,998 shares owned by (i) Mr. Diker's wife, (ii) certain trusts for the benefit of Mr. Diker's children, (iii) certain accounts with Weiss, Peck and Greer, an investment firm of which Mr. Diker is a non-managing principal, over which accounts Mr. Diker exercises investment discretion, (iv) the DicoGroup, Inc., a corporation of which Mr. Diker serves as Chairman of the Board, and (v) a non-profit corporation of which Mr. Diker and his wife are the principal officers and -31- directors. Mr. Diker disclaims beneficial ownership as to all of the foregoing shares. (3) Includes 25,833 shares which Mr. Hirschfield may acquire pursuant to stock options and warrants. (4) Includes 102,500 shares which Mr. Bloch may acquire pursuant to stock options and warrants. (5) Includes 192,315 shares which Mr. Reilly may acquire pursuant to stock options. Does not include 2,000 shares owned by Mr. Reilly's son as to which Mr. Reilly disclaims beneficial ownership. (6) Includes 42,000 shares which Mr. Slovin may acquire pursuant to stock options and warrants. Does not include an aggregate of 5,000 shares owned by certain trusts for the benefit of Mr. Slovin's children as to which Mr. Slovin disclaims beneficial ownership. (7) Includes 16,000 shares which Mr. Offit may acquire pursuant to stock options. (8) Includes 30,500 shares which Mr. Dornbush may acquire pursuant to stock options. (9) Includes 21,750 shares which Mr. Barbanell may acquire pursuant to stock options. Does not include 2,500 shares owned by Mr. Barbanell's wife as to which Mr. Barbanell disclaims beneficial ownership. (10) Includes 500 shares which Mr. Meltz may acquire pursuant to stock options. (11) Includes 6,000 shares which Mr. Vella may acquire pursuant to stock options. (12) Includes 496,648 shares which may be acquired pursuant to stock options and warrants. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. -32- PART IV ITEM 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, EXHIBITS, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Annual Report on Form 10-K for the fiscal year ended July 31, 1995. 1. CONSOLIDATED FINANCIAL STATEMENTS: (i) Report of Independent Auditors. (At page 40 of sequentially numbered copy.) (ii) Consolidated Balance Sheets as of July 31, 1995 and 1994. (At page 41 of sequentially numbered copy.) (iii) Consolidated Statements of Operations for the years ended July 31, 1995, 1994, and 1993. (At page 42 of sequentially numbered copy.) (iv) Consolidated Statements of Changes in Stockholders' Equity for the years ended July 31, 1995, 1994, and 1993. (At pages 43 and 44 of sequentially numbered copy.) (v) Consolidated Statements of Cash Flows for the years ended July 31, 1995, 1994, and 1993. (At page 45 of sequentially numbered copy.) (vi) Notes to Consolidated Financial Statements. (At pages 46 to 58 of sequentially numbered copy.) 2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES: (i) Schedule II - Valuation and Qualifying Accounts for the years ended July 31, 1995, 1994, and 1993. (At page 59 of sequentially numbered copy.) All other financial statement schedules are omitted since they are not required, not applicable, or the information has been included in the Consolidated Financial Statements or Notes thereto. -33- 3. EXHIBITS: 3(a) - Registrant's Restated Certificate of Incorporation dated July 20, 1978. (Incorporated herein by reference to Exhibit 3(a) to Registrant's 1981 Annual Report on Form 10-K.) 3(b) - Certificate of Amendment of Certificate of Incorporation of Registrant, filed on February 16, 1982. (Incorporated herein by reference to Exhibit 3(b) to Registrant's 1982 Annual Report on Form 10-K.) 3(c) - Certificate of Amendment of Certificate of Incorporation of Registrant, filed on May 4, 1984. (Incorporated herein by reference to Exhibit 3(c) to Registrant's Quarterly Report on Form 10-Q for the quarter ended April 30, 1984.) 3(d) - Certificate of Amendment of Certificate of Incorporation of Registrant, filed on August 19, 1986. (Incorporated herein by reference to Exhibit 3(d) of Registrant's 1986 Annual Report on Form 10-K.) 3(e) - Certificate of Amendment of Certificate of Incorporation of Registrant, filed on December 12, 1986. (Incorporated herein by reference to Exhibit 3(e) of Registrant's 1987 Annual Report on Form 10-K [the "1987 10-K"].) 3(f) - Certificate of Amendment of Certificate of Incorporation of Registrant, filed on April 3, 1987. (Incorporated herein by reference to Exhibit 3(f) of Registrant's 1987 10-K). 3(g) - Certificate of Change of Registrant, filed on July 12, 1988. (Incorporated herein by reference to Exhibit 3(g) of Registrant's 1988 Annual Report on Form 10-K.) 3(h) - Certificate of Amendment of Certificate of Incorporation of Registrant filed on April 17, 1989. (Incorporated herein by reference to Exhibit 3(h) to Registrant's 1989 Annual Report on Form 10-K [the "1989 10-K"].) 3(i) - Registrant's By-Laws adopted June 1, 1976, as amended through the date of this Report. (Incorporated herein by reference to Exhibit 3(d) to Registrant's 1985 Annual Report on Form 10-K.) 10(a) - Registrant's 1991 Employee Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit 10(a) to Registrant's 1991 Annual Report on Form 10-K (the "1991 10-K".) 10(b) - Form of Stock Option Agreement under Registrant's 1991 Employee Stock Option Plan. (Incorporated herein by reference to Exhibit 10(b) to Registrant's 1991 10-K.) -34- 10(c) - Registrant's 1991 Directors' Stock Option Plan. (Incorporated herein by reference to Exhibit 10(c) to Registrant's 1991 10-K.) 10(d) - Form of Stock Option Agreement under the Registrant's 1991 Directors Stock Option Plan. (Incorporated herein by reference to Exhibit 10(d) to Registrant's 1991 10-K.) 10(e) - Stock Option Agreement, dated as of June 20, 1990, between the Registrant and James P. Reilly. (Incorporated by reference to Exhibit 10(g) to Registrant's 1990 Annual Report on Form 10-K (the "1990 10-K".) 10(f) - Stock Option Agreement, dated as of July 25, 1990 between the Registrant and James P. Reilly. (Incorporated by reference to Exhibit 10(q) to Registrant's 1990 10-K.) 10(g) - Agreement between Carsen Group Inc. and Olympus America, Inc., dated April 1, 1994. (Incorporated by reference to Exhibit 10(g) to Registrant's 1994 Annual Report on Form 10-K (the "1994 10-K".) 10(h) - Form of Registrant's Common Stock Purchase Warrants dated December 27, 1988. (Incorporated herein by reference to Exhibit 10(t) to Registrant's 1989 10-K.) 10(i) - Form of Registrant's Common Stock Purchase Warrants dated July 14, 1989. (Incorporated herein by reference to Exhibit 10(w) to Registrant's 1989 10-K.) 10(j) - Loan Agreement dated as of October 29, 1993 among Registrant, Carsen Group Inc. and National Bank of Canada. (Incorporated herein by reference to Exhibit 10(v) of Registrant's 1993 10-K.) 10(k) - Agreement between Cantel Industries, Inc. and Jenoptik Technologie GmbH, dated May 1, 1994. (Incorporated herein by reference to Exhibit 10(q) of Registrant's 1994 10-K.) 10(l) - Stock Option Agreement, dated as of February 3, 1994, between the Registrant and Darwin C. Dornbush. (At page 60 of sequentially numbered copy.) -35- 10(m) - Stock Option Agreement, dated as of December 15, 1994, between the Registrant and Robert L. Barbanell. (At page 66 of sequentially numbered copy.) 10(n) - Amendment to Loan Agreement, dated as of August 28, 1995, among Registrant, Carsen Group Inc. and National Bank of Canada. (At page 72 of sequentially numbered copy.) 11 - Computation of Earnings per Share Data. (At page 88 of sequentially numbered copy.) 22 - Subsidiaries of Registrant. (At page 90 of sequentially numbered copy.) 24 - Consent of Ernst & Young LLP. (At page 91 of sequentially numbered copy.) 27 - Financial Data Schedule. (At page 92 of sequentially numbered copy.) (b) REPORTS ON FORM 8-K: None -36- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 INDUSTRIES, INC. Date: October 17, 1995 By: /s/ James P. Reilly -------------------------- James P. Reilly, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) By: /s/ Craig A. Sheldon -------------------------- Craig A. Sheldon, Vice President and Controller (Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: /s/ Charles M. Diker Date: October 17, 1995 - ------------------------------- Charles M. Diker, a Director and Chairman of the Board /s/ James P. Reilly Date: October 17, 1995 - ------------------------------- James P. Reilly, a Director and President /s/ Robert L. Barbanell Date: October 17, 1995 - ------------------------------- Robert L. Barbanell, a Director /s/ Richard L. Bloch Date: October 17, 1995 - ------------------------------- Richard L. Bloch, a Director /s/ Darwin C. Dornbush Date: October 17, 1995 - ------------------------------- Darwin C. Dornbush, a Director /s/ Alan J. Hirschfield Date: October 17, 1995 - ------------------------------- Alan J. Hirschfield, a Director /s/ Morris W. Offit Date: October 17, 1995 - ------------------------------- Morris W. Offit, a Director /s/ Bruce Slovin Date: October 17, 1995 - ------------------------------- Bruce Slovin, a Director -37- C A N T E L I N D U S T R I E S, I N C. CONSOLIDATED FINANCIAL STATEMENTS JULY 31, 1995 CANTEL INDUSTRIES, INC. CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994 and 1993 CONTENTS Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . 1 Financial Statements Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . 2 Consolidated Statements of Operations. . . . . . . . . . . . . . . . . 3 Consolidated Statements of Changes in Stockholders' Equity . . . . . . 4 Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 7 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Cantel Industries, Inc. We have audited the accompanying consolidated balance sheets of Cantel Industries, Inc. as of July 31, 1995 and 1994, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended July 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cantel Industries, Inc. at July 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Princeton, New Jersey September 20, 1995 CANTEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Dollar Amounts in Thousands, Except Share Data)
July 31, 1995 1994 ----------------------- ASSETS Current assets: Cash $ 520 $ 521 Accounts receivable, net of allowance for doubtful accounts of $34 in 1995 and $52 in 1994 7,961 4,710 Inventories (Notes 2 and 3) 7,232 7,122 Prepaid expenses and other current assets 303 424 ------- ------- Total current assets 16,016 12,777 Property and equipment, at cost (Note 2): Furniture and equipment 1,135 1,069 Leasehold improvements 634 593 ------- ------- 1,769 1,662 Less accumulated depreciation and amortization 1,289 1,152 ------- ------- 480 510 Other assets, including goodwill of $167 in 1995 and $166 in 1994 (Note 2) 903 828 ------- ------- $17,399 $14,115 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,147 $ 2,458 Compensation payable 849 690 Other accrued expenses 493 458 Income taxes payable (Note 6) 364 824 ------- ------- Total current liabilities 4,853 4,430 Long-term debt (Note 5) 6,087 4,327 Deferred income taxes (Note 6) 91 63 Deferred compensation (Note 7) - 107 Commitments and contingencies (Note 7) Stockholders' equity (Note 8): Preferred Stock, par value $1.00 per share; authorized 1,000,000 shares; none issued - - Common Stock, $.10 par value per share; authorized 7,500,000 shares; issued and outstanding, 1995 - 2,768,193 shares; 1994 - 2,735,128 shares 277 274 Additional capital 8,539 8,477 Accumulated deficit (1,187) (2,188) Cumulative foreign currency translation adjustment (Note 2) (1,261) (1,375) ------- ------- Total stockholders' equity 6,368 5,188 ------- ------- $17,399 $14,115 ------- ------- ------- -------
See accompanying notes. 2 CANTEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollar Amounts in Thousands, Except Per Share Data)
Year Ended July 31, 1995 1994 1993 --------------------------- Net sales $31,079 $29,349 $28,633 Cost of sales 21,056 19,790 19,557 ------- ------- ------- Gross profit 10,023 9,559 9,076 Expenses: Shipping and warehouse 786 719 755 Selling 4,265 4,016 4,014 General and administrative 2,491 2,223 2,875 ------- ------- ------- Total operating expenses 7,542 6,958 7,644 ------- ------- ------- Income from continuing operations before interest expense, income taxes and extraordinary gain 2,481 2,601 1,432 Interest expense (Notes 5 and 6) 479 301 184 ------- ------- ------- Income from continuing operations before income taxes and extraordinary gain 2,002 2,300 1,248 Income taxes (Note 6): Current 975 1,044 1,135 Deferred 26 10 25 ------- ------- ------- Total income taxes 1,001 1,054 1,160 ------- ------- ------- Income from continuing operations before extraordinary gain 1,001 1,246 88 Loss from discontinued operations (Note 4) - (94) (24) Income on disposal of discontinued operations (Note 4) - 656 - ------- ------- ------- Net income before extraordinary gain 1,001 1,808 64 Extraordinary gain on extinguishment of debt (Note 5) - 1,211 - ------- ------- ------- Net income 1,001 3,019 64 Dividends on preferred stocks (Notes 2 and 8) - 314 1,185 ------- ------- ------- Net income (loss) attributable to common stock $ 1,001 $ 2,705 $(1,121) ------- ------- ------- ------- ------- ------- Earnings per common share (Note 2): Primary: Continuing operations $ 0.32 $ 0.31 $ (0.54) Discontinued operations - 0.19 (0.01) Extraordinary gain on extinguishment of debt - 0.40 - ------- ------- ------- Net income (loss) $ 0.32 $ 0.90 $ (0.55) ------- ------- ------- ------- ------- ------- Fully diluted: Continuing operations $ 0.32 $ 0.31 $ (0.34) Discontinued operations - 0.18 (0.01) Extraordinary gain on extinguishment of debt - 0.40 - ------- ------- ------- Net income (loss) $ 0.32 $ 0.89 $ (0.35) ------- ------- ------- ------- ------- -------
See accompanying notes. 3 CANTEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollar Amounts in Thousands, except share data) Years Ended July 31, 1995, 1994 and 1993
Preferred Stock ------------------------------ Common Series A Series B Stock -------------- -------------- -------------- Number Number Number of of of Shares Amount Shares Amount Shares Amount ------------------------------------------------ Balance, July 31, 1992 1,000 $1 200,000 $200 1,864,199 $186 Issuance of stock dividend of Series B Preferred Stock (Note 8) 10,000 10 Conversion of Series B Preferred Stock into Common Stock (Note 8) (210,000) (210) 600,000 60 Exercise of options into Common Stock 1,702 1 Translation loss Net income Cash dividends payable (Note 8) Imputed dividends on Series A and Series B Preferred Stocks (Note 8) ------------------------------------------------ Balance, July 31, 1993 1,000 1 - - 2,465,901 247 Repurchase and redemption of Series A Preferred Stock (Note 8) (1,000) (1) 133,950 13 Exercise of options and warrants into Common Stock 135,277 14 Translation loss Net income Cash dividends payable (Note 8) Imputed dividends on Series A Preferred Stock (Note 8) ------------------------------------------------ Balance, July 31, 1994 - - - - 2,735,128 274 Exercise of options into Common Stock 33,065 3 Expense related to grant of non-employee options Translation gain Net income ------------------------------------------------ Balance, July 31, 1995 - - - - 2,768,193 $277 ------------------------------------------------ ------------------------------------------------
See accompanying notes. Continued...... 4 CANTEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Dollar Amounts in Thousands, except share data) Years Ended July 31, 1995, 1994 and 1993
Cumulative Foreign Currency Total Additional Accumulated Translation Stockholders' Capital Deficit Adjustment Equity -------------------------------------------------- Balance, July 31, 1992 $10,212 $(6,989) $ (460) $3,150 Issuance of stock dividend of Series B Preferred Stock (Note 8) 90 (100) - Conversion of Series B Preferred Stock into Common Stock (Note 8) 150 - Exercise of options into Common Stock 1 Translation loss (476) (476) Net income 64 64 Cash dividends payable (Note 8) (218) (218) Imputed dividends on Series A and Series B Preferred Stocks (Note 8) 867 (867) - -------------------------------------------------- Balance, July 31, 1993 11,319 (8,110) (936) 2,521 Repurchase and redemption of Series A Preferred Stock (Note 8) (3,256) 3,217 (27) Exercise of options and warrants into Common Stock 209 223 Translation loss (439) (439) Net income 3,019 3,019 Cash dividends payable (Note 8) (109) (109) Imputed dividends on Series A Preferred Stock (Note 8) 205 (205) - -------------------------------------------------- Balance, July 31, 1994 8,477 (2,188) (1,375) 5,188 Exercise of options into Common Stock 56 59 Expense related to grant of non-employee options 6 6 Translation gain 114 114 Net income 1,001 1,001 -------------------------------------------------- Balance, July 31, 1995 $ 8,539 $(1,187) $(1,261) $6,368 -------------------------------------------------- --------------------------------------------------
See accompanying notes. 5 CANTEL INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar Amounts in Thousands, except per share data)
YEAR ENDED JULY 31, 1995 1994 1993 -------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations $ 1,001 $ 1,246 $ 88 Adjustments to reconcile income from continuing operations to net cash (used in) provided by operating activities: Discontinued operations - (94) (24) Depreciation and amortization of continuing operations 136 124 133 Depreciation and amortization of discontinued operations - 13 39 Deferred income taxes 26 10 23 Imputed interest 21 37 47 Changes in assets and liabilities: Accounts receivable (3,251) 615 811 Inventories (110) (53) (13) Prepaid expenses and other current assets 121 (99) 48 Accounts payable and accrued expenses 888 (545) (590) Income taxes payable (460) 150 377 -------------------------- Net cash (used in) provided by operating activities (1,628) 1,404 939 -------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions of property and equipment of continuing operations (79) (58) (72) Additions of property and equipment of discontinued operations - (4) (10) Cash provided by discontinued operations - 88 1,475 Proceeds from sale of discontinued operations - 2,613 - Other, net 20 (509) (457) -------------------------- Net cash (used in) provided by investing activities (59) 2,130 936 -------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 15,079 14,103 - Repayment of long-term debt (13,319) (18,320) (1,339) Repurchase of Series A Preferred Stock - (207) - Expenses associated with extinguishment of debt - (33) - Deferred compensation payments (133) (134) (135) Proceeds from exercise of stock options and warrants 59 223 - -------------------------- Net cash provided by (used in) financing activities 1,686 (4,368) (1,474) -------------------------- (Decrease) increase in cash (1) (834) 401 Cash at beginning of year 521 1,355 954 -------------------------- Cash at end of year $ 520 $ 521 $ 1,355 -------------------------- --------------------------
See accompanying notes. 6 CANTEL INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended July 31, 1995, 1994 and 1993 1. BUSINESS DESCRIPTION Cantel Industries, Inc. ("Cantel") and its wholly-owned Canadian subsidiary, Carsen Group Inc. ("Carsen" or "Canadian subsidiary") (collectively known as the "Company") are engaged in the marketing, distribution and service of scientific products and consumer products in Canada. On October 29, 1993, the Company consummated the sale of all of the assets and transferred certain liabilities of its Charvoz Seating Division ("Seating Division"), and the results of the Seating Division have been presented as a discontinued operation, as described in Note 4. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Cantel Industries, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS Assets and liabilities of Carsen are translated into United States dollars at year-end exchange rates; income and expenses are translated using average exchange rates during the year. The cumulative effect of the translation of the subsidiary's financial statements is presented as a separate component of stockholders' equity. Foreign exchange gains and losses related to the purchase of inventories are included in cost of sales. Non-cash foreign exchange losses resulting from translating Carsen's United States dollar denominated loans into Canadian dollars at the period-end exchange rate through October 29, 1993 are included in general and administrative expenses ($103,000 and $499,000 for the years ended July 31, 1994 and 1993, respectively). INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. 7 PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Additions and improvements are capitalized, while maintenance and repair costs are expensed. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in income. Depreciation and amortization are provided on either the declining-balance or straight-line methods over the estimated useful lives of the assets. OTHER ASSETS Inventories of sales samples and medical loaners available for customers, which have not turned over within one year, are included in other assets and are carried at the lower of cost or net realizable value. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109) "ACCOUNTING FOR INCOME TAXES". SFAS No. 109 requires an asset and liability approach to accounting for income taxes and establishes less restrictive criteria for recognizing deferred tax assets. Deferred income tax assets and liabilities arise from differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. Deferred tax balances are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received. Deferred income taxes are provided with respect to items of income and expense which enter into the determination of taxable income in years other than those in which they are recognized for financial reporting purposes. No income taxes have been provided on the undistributed earnings ($8,433,000 at July 31, 1995) of Carsen since the Company does not intend to repatriate such earnings unless no additional United States taxes would result upon such repatriation. GOODWILL Goodwill with respect to Carsen is not being amortized since, in the opinion of management, there has been no diminution of value since acquisition prior to l970. The carrying value of the goodwill is reviewed if the facts and circumstances suggest that it may be permanently impaired. Such review is based upon the undiscounted expected future operating profit 8 derived from such business. In the event such result is less than the carrying value of the goodwill, the carrying value of the goodwill is reduced to an amount that reflects the expected future benefit. EARNINGS PER COMMON SHARE Primary earnings per common share are computed based upon the weighted average number of common shares outstanding during the year plus common stock equivalents where dilutive. Primary earnings per common share for fiscal 1994 and 1993 have been calculated reflecting imputed dividends on the Series A and B Preferred Stocks aggregating $205,000 and $867,000, respectively. Fiscal 1994 and 1993 also reflect cash dividends of $109,000 and $218,000, respectively, on the Series A Preferred Stock and fiscal 1993 includes a Series B Preferred Stock Dividend of $100,000. Fully diluted earnings per common share are computed on the assumption that the weighted average number of common shares outstanding during the year was further increased by the exercise of those stock options and warrants for which the year-end market price of Common Stock exceeded the average market price. Fully diluted earnings per share for fiscal 1993 was computed reflecting imputed dividends of $715,000 and cash dividends of $218,000 on the Series A Preferred Stock and the assumed conversion, as of August 1, 1992, of the Series B Preferred Stock into an aggregate of 600,000 shares of Common Stock. Fully diluted earnings per share for 1994 was computed reflecting imputed dividends of $205,000 and cash dividends of $109,000 on the Series A Preferred Stock. The following average shares were used for the computation of primary and fully diluted earnings per share: Year Ended July 31, 1995 1994 1993 --------------------------------- Primary 3,142,339 3,011,226 2,033,080 --------------------------------- --------------------------------- Fully Diluted 3,145,536 3,054,858 2,465,400 --------------------------------- --------------------------------- RECLASSIFICATIONS Certain reclassifications have been made in the accompanying financial statements for the years ended July 31, 1994 and 1993 to conform to the presentation for the year ended July 31, 1995. 9 3. INVENTORIES A summary of inventories is as follows: July 31, 1995 1994 ------------------------ Parts $1,148,000 $1,298,000 Samples 1,685,000 1,713,000 Finished Goods 4,399,000 4,111,000 ------------------------ Total $7,232,000 $7,122,000 ------------------------ ------------------------ 4. DISCONTINUED OPERATIONS On October 29, 1993, the Company consummated the sale of all of the assets and transferred certain liabilities of its Seating Division to the German manufacturer of the seating products for $2,809,000. The Company received $2,659,000 in cash and a $150,000 promissory note of the purchaser of the Seating Division (included in accounts receivable). The promissory note was paid in October 1994. An additional contingent payment of up to $150,000 could become due on the 90th day following the end of the calendar year 1995, dependent upon the operating results of the Seating Division. 5. FINANCING ARRANGEMENTS Simultaneous with the sale of its Seating Division, the Company paid in full its then outstanding United States bank debt of $1,300,000 plus accrued interest and refinanced the Company's Canadian credit facility with a Canadian bank. The remaining deferred interest benefit of $1,211,000 arising from the Company's 1991 Debt Restructuring with its lending banks and subordinated debenture holders was recognized as an extraordinary gain on extinguishment of debt. Since October 29, 1993, the Company's interest expense reflects a market rate of interest on its borrowings. A summary of the Company's long-term debt is as follows: July 31, 1995 1994 ----------------------- Revolving credit facility $6,087,000 $4,327,000 ----------------------- ----------------------- The revolving credit facility entered into during fiscal 1994, as amended, is comprised of a $7,500,000 revolving credit facility to the Company's Canadian subsidiary. The maximum 10 borrowing availability under this facility decreases annually over a three year period commencing January 1, 1996 and must be paid in full no later than December 31, 1998. The Company is permitted to borrow an amount up to (i) 75%- 85% of certain eligible accounts receivable, depending on the customer, and (ii) 50% of qualifying inventory, depending on the type of goods in inventory; however, any trade letters of credit issued under this facility will reduce the maximum available borrowings by 50% of the amount of such trade letters of credit, while any standby letters of credit, including the $500,000 letter of credit issued to Olympus America Inc. during November 1993, reduces the maximum available borrowings by the full amount of such standby letters of credit. The Company has the right to borrow funds under this facility in either United States dollars or Canadian dollars, a portion of which may be in the form of bankers acceptances. The borrowings outstanding at July 31, 1995 and 1994 are in Canadian dollars. United States dollar borrowings bear interest at .5% above the lender's United States base rate, and Canadian dollar borrowings bear interest at .75% above the lender's Canadian prime rate. The lender's Canadian prime rate was 8.25% at July 31, 1995. A commitment fee on the unused portion of this facility is payable in arrears at a rate of .25% per annum, with interest on borrowings payable monthly. Borrowings under this facility are guaranteed by Cantel and are secured by substantially all assets of the Company's Canadian subsidiary and require the subsidiary to meet certain financial covenants, including a minimum working capital ratio, a minimum interest coverage ratio, a maximum debt to tangible net worth ratio, and an annual limitation on capital expenditures. 6. INCOME TAXES During fiscal 1994, Carsen received notice of reassessment for federal and provincial income taxes and withholding taxes from Revenue Canada for the taxable years 1990 through 1992. This notice was based upon the disallowance as a deduction for income tax purposes and treatment as a taxable dividend, of all of the payments made to Cantel by Carsen during this period with respect to a purchasing fee charged by Cantel for negotiating certain distribution agreements on behalf of Carsen. The Company disagrees with the position of Revenue Canada and is pursuing its available remedies. However, the Company recorded a charge of $413,000 in its income tax provision for the year ended July 31, 1993, which represents management's estimated cost to settle this matter as well as related provincial income taxes for the period. In addition, the Company provided interest charges of approximately $34,000 and $120,000 in fiscal 1994 and 1993, respectively, which represents interest on the federal and provincial income taxes 11 and withholding taxes. Such provisions approximated the full amount of the reassessment for the federal and provincial income and withholding taxes and the related interest thereon. The federal and provincial income taxes and the withholding taxes and related interest thereon have been paid under protest. Deferred income taxes recorded in the consolidated balance sheet at July 31, 1995 and 1994 include deferred tax assets related to net operating loss carryforwards of $3,668,000 and $3,545,000, respectively, which have been fully offset by valuation allowances, and deferred tax liabilities related to the use of accelerated methods of depreciation for income tax purposes of $91,000 and $63,000, respectively. The valuation allowances have been established equal to the full amount of the deferred tax assets, as the Company was not assured at July 31, 1995 and 1994, that it is more likely than not that a benefit will be realized. For financial statement and domestic tax reporting purposes, the Company has net operating loss carryforwards of approximately $10,789,000 at July 31, 1995, which expire through July 31, 2010. The net operating loss carryforwards presented are based upon the tax returns as filed and are subject to examination by the Internal Revenue Service. The provision for income taxes consists of the following: Year Ended July 31, 1995 1994 1993 --------------------------------------------------------------- Current Deferred Current Deferred Current Deferred --------------------------------------------------------------- United States $ 14,000 $ - $ 2,000 $ - $ 63,000 $ - Canada 961,000 26,000 1,042,000 10,000 1,072,000 25,000 --------------------------------------------------------------- Total $975,000 $26,000 $1,044,000 $10,000 $1,135,000 $25,000 --------------------------------------------------------------- --------------------------------------------------------------- The components of income (loss) from continuing operations before income taxes are as follows: Year Ended July 31, 1995 1994 1993 --------------------------------------- United States $ (278,000) $ (52,000) $ (149,000) Canada 2,280,000 2,352,000 1,397,000 --------------------------------------- Total $2,002,000 $2,300,000 $1,248,000 --------------------------------------- --------------------------------------- 12 The effective rate on continuing operations differs from the U.S. statutory rate (34%) due to the following: Year Ended July 31, 1995 1994 1993 ----------------------------------- Expected statutory tax expense $ 680,000 $ 782,000 $ 424,000 Canadian dividend withholding taxes 12,000 - 57,000 Canadian tax reassessment - - 413,000 Differential attributable to Canadian operations 212,000 252,000 199,000 Benefit not recognized on domestic operating losses 95,000 18,000 61,000 U.S. state and local taxes 2,000 2,000 6,000 ----------------------------------- Total $1,001,000 $1,054,000 $1,160,000 ----------------------------------- ----------------------------------- 7. COMMITMENTS AND CONTINGENCIES LEASE OBLIGATIONS Aggregate future minimum rental commitments at July 31, l995 under operating leases for warehouse and office space are approximately $645,000 through the year ended July 31, 2000. Rent expense aggregated $210,000, $187,000 and $160,000 for the years ended July 31, 1995, 1994 and 1993, respectively. FOREIGN EXCHANGE CONTRACTS The Company's Canadian subsidiary enters into foreign exchange forward contracts to purchase United States dollars to hedge against currency fluctuations affecting purchases of inventory. Total commitments for such forward contracts amounted to $9,000,000 at July 31, 1995, and cover projected purchases of inventory through December 1995. The fair value of such contracts at July 31, 1995, based upon current market quotes for contracts with similar terms, approximated the carrying value of such contracts. DISTRIBUTION AGREEMENT The majority of the Company's sales of scientific products and consumer products are made under a distribution agreement with Olympus America Inc. ("Olympus"). The distribution agreement, which expires in March 1998, imposes minimum purchase and service obligations upon the Company and restricts the Company from selling products competitive with those covered by the agreement and gives the Company the exclusive right to distribute the covered Olympus products in Canada. Subject to an allowance of a 10% shortfall from the minimum purchase requirements in certain situations, Olympus has the right to terminate the agreement with respect to each product 13 group (defined in the agreement as medical instruments, precision instruments, industrial technology equipment and consumer products) for which the Company has failed to meet the minimum purchase requirements. If the Company fails to meet such requirements for both precision instruments and industrial technology equipment, or for medical instruments, then Olympus has the right to terminate the entire agreement. Olympus may also terminate the agreement if the Company breaches certain other obligations and requirements under the agreement, or if the Company fails to meet any Olympus credit requirements for sale on open account and does not provide Olympus with a letter of credit to secure the Company's payment obligations after demand by Olympus. The Company has delivered to Olympus a letter of credit to secure payment of the Company's first $500,000 of monthly purchases. DEFERRED COMPENSATION Under an agreement with a former officer and director, the Company is obligated to make payments on a monthly basis through April 1996, subject to cost of living increases. The individual will receive approximately $105,000 in fiscal 1996. The Company has recorded a liability for the present value of these obligations. 8. STOCKHOLDERS' EQUITY In connection with the Company's 1991 Debt Restructuring with its lending banks and Subordinated Debenture holders, the Company issued shares of Series A and Series B Preferred Stocks. The Series A Preferred Stock, which was redeemed on October 29, 1993, had a $6,000 per share liquidation preference and was senior to the Company's Common Stock with respect to dividend and liquidation preference. Quarterly dividends of $90 per share were due for the period from February 1, 1993 through the date the stock was redeemed. Dividends were imputed at a rate of approximately 23% on the Series A Preferred Stock from the date of issuance to the date of redemption. On October 29, 1993, the Company redeemed all 1,000 issued and outstanding shares of the Series A Preferred Stock which were owned by the Company's lending banks, including any rights the banks may have had to receive warrants and/or dividends thereunder, for a cash payment of $200,000, the assignment of the $150,000 note of the purchaser of the Seating Division, which was paid in October 1994, and the assignment of 50% of the contingent payment of up to $150,000 which could become due on the 90th day following the end of the calendar year 1995, dependent upon the operating results of the Seating 14 Division. The banks also received 133,950 shares of the Company's Common Stock. Series B Preferred Stock had a $10 per share liquidation preference and was senior to the Company's Common Stock with respect to dividend and liquidation preference. The holders of the Series B Preferred Stock had the option to convert such stock into the Company's Common Stock at a rate of exchange determined by dividing the liquidation value of the Series B Preferred Stock by the market price of the Common Stock. Dividends were imputed at a rate of approximately 19% on the Series B Preferred Stock from the date of issuance through the date of conversion. During January 1993, the Company issued 10,000 shares of Series B Preferred Stock valued at $100,000, which shares represented 5% of the liquidation preference of the outstanding Series B Preferred Stock, as a dividend to the holders of such stock. During April 1993, all 210,000 outstanding shares of the Series B Preferred Stock were converted into an aggregate of 600,000 shares of Common Stock at a conversion rate of $3.50 per share. At July 31, 1995 and 1994, respectively, there was an aggregate of 239,164 warrants outstanding to purchase shares of Common Stock at $1.50 per share. The Company's 1991 Employee Stock Option Plan provides for the granting of options to employees to purchase up to 250,000 shares of the Company's Common Stock through January 2, 2001. Options under this plan are granted at no less than 100% of the market price at the time of the grant, and become exercisable in four equal annual installments and expire up to a maximum of ten years from the date of the grant. At July 31, 1995, 164,125 shares were available for grant under this plan. The Company's 1991 Directors' Stock Option Plan provides for the granting of options to directors to purchase up to 200,000 shares of its Common Stock. Options under this plan may be granted to directors only. Under the plan, options to purchase 1,000 shares are granted annually on the last business day of the Company's fiscal year to each member of the Company's Board of Directors. The annual options are exercisable, as to 50% of the number of shares, on the first anniversary of the grant of such options and are exercisable for the balance of such shares on the second anniversary of the grant of such options. On a quarterly basis, options to purchase 500 shares are granted to each member of the Company's Board, except for employees or officers of the Company, in attendance at that quarter's Board of Directors meeting. The quarterly options are exercisable immediately. 15 The exercise price of each option is the fair market value on the date the option is granted. At July 31, 1995, 56,000 shares were available for grant under this plan. A summary of stock option activity follows: July 31, 1995 1994 1993 --------------------------------- Outstanding at beginning of year 428,940 458,940 456,165 Granted 83,500 60,000 45,500 Cancelled (12,000) (43,750) (36,600) Exercised (40,000) (46,250) (6,125) --------------------------------- Outstanding at end of year 460,440 428,940 458,940 --------------------------------- --------------------------------- Exercisable at end of year 385,065 375,690 369,440 --------------------------------- --------------------------------- Average price of options outstanding $2.98 $2.65 $2.34 --------------------------------- --------------------------------- 9. PROFIT SHARING PLAN Carsen has a profit-sharing plan for the benefit of eligible employees. Contributions by Carsen are discretionary and aggregate contributions are limited in any year to the amount allowable as a deduction in computing taxable income. Operations were charged for contributions under the Carsen plan aggregating $53,000, $40,000 and $39,000 for the years ended July 31, 1995, 1994 and 1993, respectively. 10. SUPPLEMENTAL INCOME STATEMENT AND CASH FLOW INFORMATION Advertising costs charged to expenses were $340,000, $441,000 and $530,000 for the years ended July 31, 1995, 1994 and 1993, respectively. Interest paid was $460,000, $434,000 and $43,000 for the years ended July 31, 1995, 1994 and 1993, respectively. Federal, state and foreign income tax payments were $949,000, $835,000 and $772,000 for the years ended July 31, 1995, 1994 and 1993, respectively. 11. INFORMATION AS TO OPERATIONS IN DIFFERENT INDUSTRIES AND FOREIGN AND DOMESTIC OPERATIONS The Company is engaged in the marketing, distribution and service of scientific products and consumer products in Canada. The scientific products distributed by the Company consist of medical instruments, including flexible and rigid endoscopes, 16 endoscope washers/disinfectors and air cleaning equipment, surgical equipment and related accessories that are sold to hospitals; precision instruments, including microscopes and related accessories that are sold to educational institutions, hospitals and government and industrial laboratories; and industrial technology equipment, including borescopes, fiberscopes, video image scopes, laser distance measurement and thermal imaging products and on-line optical inspection and quality assurance systems, that are sold primarily to large industrial companies. The consumer products distributed by the Company consist of photographic and optical equipment, including cameras, binoculars, slide projectors and screens, light meters, darkroom equipment and supplies, camera luggage, and other photographic products and accessories. The Company also distributes hand-held dictation equipment and two lines of paper shredders. The consumer products are distributed mostly to major department stores, large retail store chains, independent retailers and cooperative buying groups. (a) Information as to continuing operations in different industries is summarized below: Year Ended July 31, 1995 1994 1993 --------------------------------------- Net sales from continuing operations: Scientific products: Medical instruments $15,912,000 $13,754,000 $13,147,000 Precision instruments 3,086,000 2,512,000 2,345,000 Industrial technology equipment 1,925,000 1,765,000 1,597,000 Product service 4,030,000 4,059,000 3,827,000 Consumer products 6,126,000 7,259,000 7,717,000 --------------------------------------- Total $31,079,000 $29,349,000 $28,633,000 --------------------------------------- --------------------------------------- Operating income (loss) from continuing operations: Scientific products: Medical instruments $ 2,595,000 $ 2,289,000 $ 1,981,000 Precision instruments 122,000 116,000 129,000 Industrial technology equipment (15,000) 85,000 177,000 Product service 1,247,000 1,210,000 1,186,000 Consumer products (662,000) (309,000) (571,000) --------------------------------------- Total 3,287,000 3,391,000 2,902,000 General corporate expenses (806,000) (790,000) (1,470,000) Interest expense (479,000) (301,000) (184,000) --------------------------------------- Income from continuing operations before income taxes and extraordinary gain $ 2,002,000 $ 2,300,000 $ 1,248,000 --------------------------------------- --------------------------------------- 17 Year Ended July 31, 1995 1994 1993 --------------------------------------- Identifiable assets: Scientific products: Medical instruments $ 8,706,000 $ 5,718,000 $ 6,303,000 Precision instruments 2,412,000 2,346,000 2,248,000 Industrial technology equipment 1,390,000 797,000 604,000 Product service 1,500,000 1,564,000 1,486,000 Consumer products 2,664,000 2,722,000 2,955,000 --------------------------------------- 16,672,000 13,147,000 13,596,000 General corporate 727,000 968,000 1,680,000 Discontinued operations - - 2,204,000 --------------------------------------- Total $17,399,000 $14,115,000 $17,480,000 --------------------------------------- --------------------------------------- Capital expenditures: Scientific products: Medical instruments $ 38,000 $ 22,000 $ 30,000 Precision instruments 7,000 4,000 5,000 Industrial technology equipment 4,000 3,000 4,000 Product service 10,000 7,000 9,000 Consumer products 14,000 12,000 17,000 General corporate 6,000 10,000 7,000 --------------------------------------- Total from continuing operations 79,000 58,000 72,000 Discontinued operations - 4,000 10,000 --------------------------------------- Total $ 79,000 $ 62,000 $ 82,000 --------------------------------------- --------------------------------------- Depreciation and amortization: Scientific products: Medical instruments $ 68,000 $ 57,000 $ 56,000 Precision instruments 13,000 10,000 10,000 Industrial technology equipment 8,000 7,000 6,000 Product service 17,000 17,000 26,000 Consumer products 26,000 29,000 34,000 General corporate 4,000 4,000 1,000 --------------------------------------- Total from continuing operations 136,000 124,000 133,000 Discontinued operations - 13,000 39,000 --------------------------------------- Total $ 136,000 $ 137,000 $ 172,000 --------------------------------------- --------------------------------------- 18 (b) Information as to geographic area is summarized below: Year Ended July 31, 1995 1994 1993 --------------------------------------- Net sales from continuing operations: United States $ 52,000 $ - $ - Canada 31,027,000 29,349,000 28,633,000 --------------------------------------- Total $31,079,000 $29,349,000 $28,633,000 --------------------------------------- --------------------------------------- Operating income from continuing operations: United States $ 30,000 $ 32,000 $ - Canada 3,257,000 3,359,000 2,902,000 --------------------------------------- Total $ 3,287,000 $ 3,391,000 $ 2,902,000 --------------------------------------- --------------------------------------- Total assets: United States $ 152,000 $ 349,000 $ 2,458,000 Canada 17,247,000 13,766,000 15,022,000 --------------------------------------- Total $17,399,000 $14,115,000 $17,480,000 --------------------------------------- --------------------------------------- 19 CANTEL INDUSTRIES, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended July 31, 1995, 1994 and 1993 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ------------------------------------------------------------------------ BALANCE AT BALANCE BEGINNING AT END OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD --------------------------------------------------- Allowance for doubtful accounts: Year ended July 31, 1995 $ 52,000 $ 8,000 $ 26,000 $34,000 --------------------------------------------------- --------------------------------------------------- Year ended July 31, 1994 $ 54,000 $26,000 $ 28,000 $52,000 --------------------------------------------------- --------------------------------------------------- Year ended July 31, 1993 $124,000 $41,000 $111,000 $54,000 --------------------------------------------------- --------------------------------------------------- EX-10.(L) 2 EXHIBIT 10(L) STOCK OPTION AGREEMENT made as of the 3rd day of February 1994, by and between CANTEL INDUSTRIES, INC., a Delaware corporation with principal offices located at 1135 Broad Street, Clifton, New Jersey 07013 (the "Company"), and DARWIN C. DORNBUSH (the "Optionee"). -------------------- The Optionee is presently a director of the Company and is hereby granted an option to purchase shares of the Company's Common Stock, par value $.10 per share ("Common Stock"), on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company hereby grants the Optionee the option to acquire shares of the Common Stock of the Company upon the following terms and conditions: 1. GRANT OF OPTION. (a) The Company hereby grants to the Optionee the right and option (the "Option") to purchase at any time on or prior to the Expiration Date (as hereinafter defined), up to 25,000 shares of Common Stock (the "Shares"), to be issued upon the exercise hereof. (b) The Option granted hereby shall expire and terminate at 5:00 p.m. local time in New York, New York on February 2, 1997 (the "Expiration Date") at which time the Optionee shall have no further right to purchase any Shares not then purchased. 2. EXERCISE PRICE. The exercise price of the Option shall be $5.00 per Share, and shall be payable in cash or by certified check; provided, however, that in lieu of payment in full in cash or by such check, the exercise price (or balance thereof) may be paid in full or in part by the delivery and transfer to the Company of Shares already owned by the Optionee and having a fair market value (as determined by the Board of Directors in its absolute discretion) equal to the cash exercise price (or balance thereof) for the number of Shares as to which the Option is being exercised. The Company shall pay all original issue or transfer taxes on the exercise of the Option. 3. EXERCISE OF OPTION. The Optionee shall notify the Company by registered or certified mail, return receipt requested, addressed to its principal office, as to the number of Shares which he desires to purchase under the Option, which notice shall be accompanied by payment of the Option exercise price therefor as specified in Paragraph 2 above. As soon as practicable after the receipt of such notice, the Company shall, at its principal office or another mutually convenient location, tender to the Optionee certificates issued in the Optionee's name evidencing the Shares purchased by the Optionee hereunder. -2- 4. CONDITIONS OF EXERCISE. The Optionee (or his legal representative following the death of the Optionee) shall have the right to exercise the Option only while the Optionee is a director of the Company; provided, however, the Option may be exercised at any time within three (3) months after the date the Optionee ceases to be a director, but only to the extent that it was exercisable upon such date of termination and in no event after the Expiration Date. 5. NON-ASSIGNABILITY OF OPTION. The Optionee may not give, grant, sell, exchange, transfer legal title, pledge, assign or otherwise encumber or dispose of the Option herein granted or any interest therein, otherwise than by will or the laws of descent and distribution and, except as provided in Paragraph 4 hereof, the Option shall be exercisable only by the Optionee. 6. THE SHARES AS INVESTMENT. By accepting the Option, the Optionee agrees for himself, his heirs and legatees that any and all Shares purchased upon the exercise thereof shall be acquired for investment and not for distribution, and upon the issuance of any or all of the Shares subject to the Option, the Optionee, or his heirs or legatees receiving such Shares, shall deliver to the Company a representation in writing that such Shares are being acquired in good faith for investment and not -3- for distribution. The Company may place a "stop transfer" order with respect to such Shares with its transfer agent and may place an appropriate restrictive legend on the certificate(s) evidencing such Shares. 7. RESTRICTION ON ISSUANCE OF SHARES. The Optionee shall, if so requested by the Company, represent and agree, in writing and in such form as the Company shall determine, that any securities purchased by the Optionee upon the exercise of this Option are being purchased for investment and not with a view to the distribution thereof, and shall make such other or additional representations and agreements and furnish such information as the Company may in its reasonable discretion deem necessary or desirable to assure compliance by the Company, on terms acceptable to the Company, with provisions of the Securities Act of 1933 and any other applicable legal requirements. If at any time the Company shall reasonably determine that the listing, registration or qualification of the Shares subject to this Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, are necessary or desirable in connection with the issuance or purchase of the Shares subject thereto, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. The Optionee shall -4- have no rights against the Company if this Option is not exercisaeble by virtue of the foregoing provision. The certificate representing any securities issued pursuant to the exercise of this Option may, at the discretion of the Company, bear a legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933. The securities have been acquired for investment and may not be pledged or hypothecated and may not be sold or transferred in the absence of an effective Registration Statement for the securities under the Securities Act of 1933 or an opinion of counsel to the Company that registration is not required under said Act. In the event that a Registration Statement becomes effective covering the securities or counsel to the Company delivers a written opinion that registration is not required under said Act, this certificate may be exchanged for a certificate free from this legend." 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. (a) In the event of changes in the outstanding Shares by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combination, exchanges of shares, separations, reorganizations, liquidations and the like, the number and class of Shares or the amount of cash or other assets or securities available upon the exercise of the Option and the exercise price thereof shall be correspondingly adjusted by the Company, to the end that the Optionee's proportionate interest in the Company, any successor thereto or in the cash, assets or other securities into which -5- shares are converted or exchanged shall be maintained to the same extent, as near as may be practicable, as immediately before the occurrence of any such event. (b) Any adjustment in the number of Shares shall apply proportionately to only the then unexercised portion of the Option. If fractional Shares would result from any such adjustment, the adjustment shall be revised to the next higher whole number. 9. NO RIGHTS AS SHAREHOLDERS. The Optionee shall have no rights as a shareholder in respect of the Shares as to which the Option shall not have been exercised and payment made as herein provided. 10. BINDING EFFECT. Except as herein otherwise expressly provided, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their legal representatives and assigns. 11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to agreements made and to be performed wholly within the State of New Jersey. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. CANTEL INDUSTRIES, INC. By: /s/ James P. Reilly ----------------------------------- James P. Reilly, President /s/ Darwin C. Dornbush ----------------------------------- Darwin C. Dornbush -6- EX-10.(M) 3 EXHIBIT 10(M) STOCK OPTION AGREEMENT made as of the 15th day of December 1994, by and between CANTEL INDUSTRIES, INC., a Delaware corporation with principal offices located at 1135 Broad Street, Clifton, New Jersey 07013 (the "Company"), and ROBERT L. BARBANELL, 35 Sutton Place, New York, New York 10022 (the "Optionee"). -------------------- The Optionee is presently a director of the Company and is hereby granted an option to purchase shares of the Company's Common Stock, par value $.10 per share ("Common Stock"), on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company hereby grants the Optionee the option to acquire shares of the Common Stock of the Company upon the following terms and conditions: 1. GRANT OF OPTION. (a) The Company hereby grants to the Optionee the right and option (the "Option") to purchase up to 25,000 shares of Common Stock (the "Shares"), to be issued upon the exercise hereof, fully paid and non-assessable, during the following periods: (i) No shares may be purchased hereunder prior to December 15, 1994; (ii) 6,250 Shares may be purchased commencing March 15, 1995; (iii) an additional 6,250 Shares may be purchased commencing June 15, 1995; (iv) an additional 6,250 Shares may be purchased commencing September 15, 1995; and (v) an additional 6,250 Shares may be purchased commencing December 15, 1995. (b) The Option granted hereby shall expire and terminate at 5:00 p.m. local time in New York, New York on December 14, 1999 (the "Expiration Date") at which time the Optionee shall have no further right to purchase any Shares not then purchased. 2. EXERCISE PRICE. The exercise price of the Option shall be $3.75 per Share, and shall be payable in cash or by certified check; provided, however, that in lieu of payment in full in cash or by such check, the exercise price (or balance thereof) may be paid in full or in part by the delivery and transfer to the Company of Shares already owned by the Optionee and having a fair market value (as determined by the Board of Directors in its absolute discretion) equal to the cash exercise price (or balance thereof) for the number of Shares as to which the Option is being exercised. The Company shall pay all original issue or transfer taxes on the exercise of the Option. 3. EXERCISE OF OPTION. The Optionee shall notify the Company by registered or certified mail, return receipt requested, addressed to its principal office, as to the number of Shares which he desires to purchase under the Option, which notice shall be accompanied by payment of the Option exercise price therefor as specified in Paragraph 2 above. As soon as practicable after the receipt of such notice, the Company shall, at its principal office or another mutually convenient location, tender to the Optionee certificates issued in the Optionee's name evidencing the Shares purchased by the Optionee hereunder. -2- 4. CONDITIONS OF EXERCISE. The Optionee (or his legal representative following the death of the Optionee) shall have the right to exercise the Option only while the Optionee is a director of the Company; provided, however, the Option may be exercised at any time within three (3) months after the date the Optionee ceases to be a director, but only to the extent that it was exercisable upon such date of termination and in no event after the Expiration Date. 5. NON-ASSIGNABILITY OF OPTION. The Optionee may not give, grant, sell, exchange, transfer legal title, pledge, assign or otherwise encumber or dispose of the Option herein granted or any interest therein, otherwise than by will or the laws of descent and distribution and, except as provided in Paragraph 4 hereof, the Option shall be exercisable only by the Optionee. 6. THE SHARES AS INVESTMENT. By accepting the Option, the Optionee agrees for himself, his heirs and legatees that any and all Shares purchased upon the exercise thereof shall be acquired for investment and not for distribution, and upon the issuance of any or all of the Shares subject to the Option, the Optionee, or his heirs or legatees receiving such Shares, shall deliver to the Company a representation in writing that such Shares are being acquired in good faith for investment and not -3- for distribution. The Company may place a "stop transfer" order with respect to such Shares with its transfer agent and may place an appropriate restrictive legend on the certificate(s) evidencing such Shares. 7. RESTRICTION ON ISSUANCE OF SHARES. The Optionee shall, if so requested by the Company, represent and agree, in writing and in such form as the Company shall determine, that any securities purchased by the Optionee upon the exercise of this Option are being purchased for investment and not with a view to the distribution thereof, and shall make such other or additional representations and agreements and furnish such information as the Company may in its reasonable discretion deem necessary or desirable to assure compliance by the Company, on terms acceptable to the Company, with provisions of the Securities Act of 1933 and any other applicable legal requirements. If at any time the Company shall reasonably determine that the listing, registration or qualification of the Shares subject to this Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, are necessary or desirable in connection with the issuance or purchase of the Shares subject thereto, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. The Optionee shall -4- have no rights against the Company if this Option is not exerciseable by virtue of the foregoing provision. The certificate representing any securities issued pursuant to the exercise of this Option may, at the discretion of the Company, bear a legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933. The securities have been acquired for investment and may not be pledged or hypothecated and may not be sold or transferred in the absence of an effective Registration Statement for the securities under the Securities Act of 1933 or an opinion of counsel to the Company that registration is not required under said Act. In the event that a Registration Statement becomes effective covering the securities or counsel to the Company delivers a written opinion that registration is not required under said Act, this certificate may be exchanged for a certificate free from this legend." 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. (a) In the event of changes in the outstanding Shares by reason of stock dividends, split-ups, recapitalizations, mergers, consolidations, combination, exchanges of shares, separations, reorganizations, liquidations and the like, the number and class of Shares or the amount of cash or other assets or securities available upon the exercise of the Option and the exercise price thereof shall be correspondingly adjusted by the Company, to the end that the Optionee's proportionate interest in the Company, any successor thereto or in the cash, assets or other securities into which -5- shares are converted or exchanged shall be maintained to the same extent, as near as may be practicable, as immediately before the occurrence of any such event. (b) Any adjustment in the number of Shares shall apply proportionately to only the then unexercised portion of the option. if fractional Shares would result from any such adjustment, the adjustment shall be revised to the next higher whole number. 9. NO RIGHTS AS SHAREHOLDERS. The Optionee shall have no rights as a shareholder in respect of the Shares as to which the Option shall not have been exercised and payment made as herein provided. 10. BINDING EFFECT. Except as herein otherwise expressly provided, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their legal representatives and assigns. 11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to agreements made and to be performed wholly within the State of New Jersey. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. CANTEL INDUSTRIES, INC. By: /s/ James P. Reilly ----------------------------------- James P. Reilly, President /s/ Robert L. Barbanell ----------------------------------- Robert L. Barbanell -6- EX-10.(N) 4 EXHIBIT 10(N) CARSEN GROUP INC. as Borrower - and - CANTEL INDUSTRIES INC. as Guarantor - and - NATIONAL BANK OF CANADA AS LENDER - -------------------------------------------------------------------------------- FIRST LOAN AMENDING AGREEMENT - -------------------------------------------------------------------------------- DATED AS OF AUGUST 28, 1995 FIRST LOAN AMENDING AGREEMENT dated as of August 28, 1995 among Carsen Group Inc. (the "Borrower"), Cantel Industries Inc. ("Cantel") and National Bank of Canada (the "Lender"). WHEREAS the Borrower, Cantel and the Lender are parties to a loan agreement dated as of October 29, 1993 (the "Loan Agreement") pursuant to which the Lender has agreed to make extensions of credit to the Borrower on the terms and conditions contained therein and Cantel agreed to make certain commitments with respect to the Borrower's obligations to the Lender; AND WHEREAS Section 8.05 of the Loan Agreement provides, INTER ALIA, that no amendment or waiver of any provision of the Loan Agreement shall be effective unless consented to in writing by the Lender; AND WHEREAS the Borrower has requested that the Lender, INTER ALIA, (i) extend the Repayment Date to December 31, 1996; (ii) increase the Notional Amount of Foreign Exchange Hedging Arrangements to U.S. $15,000,000; (iii) reduce the interest rate on Canadian Dollar Advances to the Prime Rate plus 0.75% per annum; (iv) reduce the stand-by fee charged on the undrawn portion of the Credit Facility to 0.25% per annum; and (v) make Bankers' Acceptances available to the Borrower under the Credit Facility; AND WHEREAS the Lender has agreed, subject to the terms and conditions set out herein, to permit such amendments to the Loan Agreement; AND WHEREAS Cantel wishes to confirm the continuing validity of the Letter of Guarantee and its agreement with the terms and conditions of this First Loan Amending Agreement; NOW THEREFORE in consideration of the premises and for other good and valuable consideration, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. Unless otherwise defined herein, terms defined in the Loan Agreement are used in this First Loan Amending Agreement, including the recitals hereto, as defined in the Loan Agreement. SECTION 2. AMENDMENTS TO SECTION 1.01 OF THE LOAN AGREEMENT. (1) The definition of "Accommodation" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "ACCOMMODATION" means, (i) an Advance made by the Lender on the occasion of any Borrowing; (ii) the issue of a Letter of Credit by the Lender; (iii) the acceptance of a Trade Letter of Credit by the Lender; (iv) the provision of any Foreign Exchange Hedging Arrangement by the Lender; and (v) the creation and purchase of Bankers' Acceptances or the purchase of completed Drafts by the Lender on the occasion of any Drawing." (2) The following definition of "Bankers' Acceptance" is hereby added to Section 1.01 of the Loan Agreement after the definition of "Associate" and before the definition of "Beneficiary": "BANKERS' ACCEPTANCE" has the meaning specified in Section 2.16." (3) The definition of "Commitment" in Subsection 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "COMMITMENT" means (i) for the period from the Closing Date to December 31, 1995, up to U.S. $7,500,000; (ii) for the period from January 1, 1996 to December 31, 1996, up to U.S. $6,500,000; (iii) for the period from January 1, 1997 to December 31, 1997, up to U.S. $4,500,000; and (iv) for the period from January 1, 1998 to December 31, 1998, up to U.S. $2,500,000." (4) The definition of "Distribution Agreement" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "DISTRIBUTION AGREEMENT" means the agreement between the Borrower and Olympus dated as of April 1, 1994 or any subsequent renewal thereof." (5) The following definitions shall be added to Section 1.01 of the Loan Agreement after the definition of "Division Sample Inventory" and before the definition of "Earnings Available for Interest": "DRAFT" means at any time a blank bill of exchange, within the meaning of the Bills of Exchange Act (Canada), drawn by the Borrower on the Lender or any other Person and bearing such distinguishing letters and numbers as the Lender or such Person may determine, but which at such time has not been completed or accepted by the Lender or such Person. "DRAWING" means (i) the creation and purchase of Bankers' Acceptances by the Lender or by any other Person pursuant to Article 2; or (ii) the purchase of completed Drafts by the Lender or by any other Person pursuant to Article 2. "DRAWING FEE" means, with respect to each Draft drawn by the Borrower hereunder and purchased by any Person on any Drawing Date, an amount equal to 1.75% of the aggregate Face Amount of such Draft, calculated on the basis of the term to maturity of such Draft and a year of 365 days. "DRAWING DATE" means any Business Day fixed pursuant to Section 2.18 for a Drawing. "DRAWING NOTICE" has the meaning specified in Section 2.18(1)." (6) The definition of Event of Default in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "EVENT OF DEFAULT" shall have the meaning specified in Section 7.01 and "DEFAULT" means an event which, with the giving of notice or passage of time, or both, would constitute an Event of Default." (7) The definition of "Face Amount" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "FACE AMOUNT" means (i) in respect of a Draft or a Bankers' Acceptance, as the case may be, the amount payable to the holder thereof on its maturity; and (ii) in respect of a Letter of Credit or Trade Letter of Credit the maximum amount payable to the Beneficiary." (8) The definition of "Lending Limit" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "LENDING LIMIT" means (i) for the period from the Closing Date to December 31, 1995, the lesser of U.S. $7,500,000 and the Margin Requirement,; (ii) for the period from January 1, 1996 to December 31, 1996, the lesser of U.S. $6,500,000 and the Margin Requirement; (iii) for the period from January 1, 1997 to December 31, 1997, subject to extension of the Repayment Date, the lesser of U.S. $4,500,000 and the Margin Requirement; and (iv) for the period from January 1, 1998 to December 31, 1998, subject to extension of the Repayment Date, the lesser of U.S. $2,500,000 and the Margin Requirement." (9) The definition of "Loan Documents" in Section 1.01 of the Loan Agreement is hereby amended by adding the phrase "the Drafts, the Bankers' Acceptances", after the phrase "means this Agreement", and before the phrase "the Security Documents". (10) The definition of "Margin Requirement" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "MARGIN REQUIREMENT" means the amount by which: (A) the sum of: (i) 85% of Division Eligible Accounts Receivable; and (ii) 75% of Eligible Accounts Receivable; and (iii) the lesser of (y) the sum of 85% of Division Eligible Accounts Receivable and 75% of Eligible Accounts Receivable, and (z) 50% of Eligible Inventory, and 40% of Division Sample Inventory to a maximum of, in the case of Division Sample Inventory, $1,000,000 (reducing to (i) 30% to a maximum of $750,000,000 from and after January 1, 1996; (ii) 20% to a maximum of $500,000 from and after January 1, 1997; and (iii) 10% to a maximum of $250,000 from and after January 1, 1998, exceeds (B) the amount of liabilities owing by the Borrower which are capable of comprising a lien or trust claim under relevant legislation in respect of the assets of the Borrower ranking or capable of ranking in priority to the Security." (11) The definition of "Outstanding Principal Obligations" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: "OUTSTANDING PRINCIPAL OBLIGATIONS" means, at any time, the sum of (i) the aggregate principal amount of all Advances made by the Lender outstanding at such time; (ii) the aggregate Face Amount of all outstanding Letters of Credit; (iii) the aggregate Face Amount of all outstanding Trade Letters of Credit accepted by the Lender; and (iv) the aggregate Face Amount of all outstanding Bankers' Acceptances and completed Drafts which the Lender has purchased or arranged to have purchased." (12) The definition of "Repayment Date" in Section 1.01 of the Loan Agreement is hereby deleted and the following substituted therefor: REPAYMENT DATE" means in respect to all Accommodations made hereunder, December 31, 1996, or such other date as determined pursuant to Section 8.06." SECTION 3. ADDITION OF SCHEDULE 12 TO LOAN AGREEMENT. Schedule 12, entitled "Form of Drawing Notice", attached hereto shall form an integral part of the Loan Agreement. SECTION 4. AMENDMENT TO ARTICLE II OF THE LOAN AGREEMENT. The title of Article II of the Loan Agreement "Advances and Letters of Credit" is hereby deleted and the following title substituted therefor: "Advances, Letters of Credit and Bankers' Acceptances". SECTION 5. AMENDMENT TO SECTION 2.03(1) OF THE LOAN AGREEMENT. Section 2.03(1) of the Loan Agreement is hereby amended by deleting the phrase "specified in the applicable Notice of Borrowing" appearing after the phrase "Type of Advance" and substituting the phrase "resulting from the Lender's actions pursuant to Section 2.02(1)(ii)". SECTION 6. AMENDMENT TO SECTION 2.06 OF THE LOAN AGREEMENT. Section 2.06 of the Loan Agreement is hereby amended by deleting the first sentence of such Section which begins with the phrase "Subject to Section 2.08," and substituting the following therefor: "Subject to Section 2.08, the Borrower shall pay interest on the unpaid principal amount of each Canadian Dollar Advance made to it from the date of such Canadian Dollar Advance until such principal amount shall be repaid in full, at a rate per annum equal, (x) at any time prior to February 1, 1995, to the sum of the Prime Rate in effect from time to time plus 1.0% per annum; and (y) at any time on or after February 1, 1995, to the sum of the Prime Rate in effect from time to time plus .75% per annum, in each case, calculated daily and payable (i) in arrears on the last Business Day of each month in each year; and (ii) when such Canadian Dollar Advance become due and payable in full or is changed to a U.S. Base Dollar Advance pursuant to Section 2.03(2)." SECTION 7. AMENDMENT TO ARTICLE II OF THE LOAN AGREEMENT. The following provisions shall be added to the Loan Agreement after Section 2.15 of the Loan Agreement: "SECTION 2.16 ACCEPTANCES AND DRAFTS. The Lender agrees, on the terms and conditions of this Agreement and from time to time on any Business Day prior to the Repayment Date to create acceptances ("Bankers' Acceptances") by accepting Drafts of the Borrower provided that (i) no Default or Event of Default shall have occurred and be continuing, (ii) the Outstanding Principal Obligations shall not, at the time of creation of each Bankers' Acceptance and shall not as a result of such issue, exceed the Lending Limit, and (iii) the amounts outstanding under Bankers' Acceptances at the time of creation of each Bankers' Acceptance and shall not as a result of such issue, exceed the lesser of (x) U.S. $3,750,000 and (y) 50% of the Outstanding Principal Obligations. Bankers' Acceptances shall be created by the Lender (i) upon the Borrower paying the Drawing Fee into the Canadian Dollar Account; or (ii) at the option of the Lender, upon the purchase of such Bankers' Acceptances by the Lender pursuant to Section 2.18(3). SECTION 2.17. FORM OF DRAFTS. Each Draft presented by the Borrower for acceptance by the Lender (i) shall be for a Face Amount of not less than Cdn. $500,000 and in multiples of Cdn. $100,000 thereafter; (ii) shall be dated the date of the Drawing; and (iii) shall mature and be payable by the Borrower (in common with all other Drafts presented in connection with such Drawing) on a Business Day which occurs not less than 30 and not more than 180 days after the Drawing Date and on or prior to the Repayment Date and which would not, in the opinion of the Lender, conflict with the repayment schedule set out in Section 2.05. SECTION 2.18. PROCEDURE FOR DRAWING. (1) Each Drawing shall be made on notice (a "Drawing Notice") given by the Borrower to the Lender not later than 10:00 a.m. (Toronto time) on 2 Business Days' notice. Each Drawing Notice shall be in substantially the form of Schedule 12, or by telephone promptly confirmed in writing, containing the same information as would be contained in a Drawing Notice, shall be irrevocable and binding on the Borrower and shall specify (i) the Drawing Date; (ii) the aggregate Face Amount of Drafts to be created; (iii) the contract maturity date for such Drafts; and (iv) in respect of any Bankers' Acceptances which are not to be purchased by the Lender pursuant to Section 2.18(3), (x) the serial numbers of the Drafts' to be accepted, (y) the name of the purchaser of such Drafts, and (3) the proceeds to be received by the Borrower for such Drafts. (2) Not later than 12:00 noon (Toronto time) on the Drawing Date specified for a relevant Drawing, the Lender (i) shall complete one or more Drafts dated the date of such Drawing in an aggregate Face Amount equal to the amount of such Drawing and with the maturity date specified by the Borrower in its Drawing Notice; (ii) shall accept the Drafts; and (iii) may purchase the Bankers' Acceptances thereby created in the manner provided in Section 2.18(3). (3) The Borrower shall request a quotation from the Lender for the purchase of any and all Bankers' Acceptances created hereunder on or before the Drawing Date for such Bankers' Acceptances. The purchase price for any Bankers' Acceptances which may be purchased by the Lender shall be paid and satisfied by the Lender crediting the Canadian Dollar Account with Canadian Dollars in an amount equal thereto. (4) Bankers' Acceptances purchased by the Lender, hereunder may be held by it for its own account until the contract maturity date or sold by it at any time prior thereto in any relevant market therefor in Canada, in the Lender's sole discretion. SECTION 2.19. PRESIGNED DRAFT FORMS. To enable the Lender to make Drawings in the manner specified in this Article 2, the Borrower shall supply the Lender with such number of Drafts as the Lender may reasonably request, duly endorsed and executed on behalf of the Borrower. The Lender shall exercise such care in the custody and safekeeping of Drafts as it would exercise in the custody and safekeeping of similar property owned by it. The Lender will, upon request by the Borrower, promptly advise the Borrower of the number and designations, if any, of the uncompleted Drafts then held by it. The signature of any daily authorized officer of the Borrower on a Draft may be mechanically reproduced in facsimile and Drafts and Bankers' Acceptances bearing such facsimile signature shall be binding upon the Borrower as if they had been manually signed by such officers. Notwithstanding that any of the individuals whose manual or facsimile signature appears on any Draft as one of such officers may no longer hold office at the date thereof or at the date of its acceptance by the Lender hereunder or at any time thereafter, any Draft or Bankers' Acceptance so signed shall be valid and binding upon the relevant Borrower. SECTION 2.20. PAYMENT, CONVERSION OR RENEWAL OF BANKERS' ACCEPTANCES. (1) Upon the maturity of a Bankers' Acceptance or Draft, the Borrower may (i) elect to issue a replacement Bankers' Acceptance or Draft, by giving a Drawing Notice in accordance with Section 2.18(1); or (ii) pay, on or before 11:00 a.m. (Toronto time) on the maturity date such Bankers' Acceptance or Draft, an amount in Canadian Dollars equal to the Face Amount of such Bankers' Acceptance or Draft (notwithstanding that the Lender may be the holder thereof at maturity) by deposit of the required funds to the Canadian Dollar Account. Any such payment shall satisfy the Borrower's obligations under the Bankers' Acceptances to which it relates and the Lender shall thereafter be solely responsible for the payment of such Bankers' Acceptances. (2)If the Borrower fails to pay any Bankers' Acceptance when due, or to issue a replacement Bankers' Acceptance or Draft, in the Face Amount of such Bankers' Acceptance or Draft, pursuant to Section 2.20(1) the unpaid amount due and payable in respect thereof shall be converted, as of such date, to a Canadian Dollar Advance made by the Lender under the Credit Facility and shall bear interest calculated and payable as provided in this Article 2. SECTION 2.21 CIRCUMSTANCES MAKING BANKERS' ACCEPTANCES UNAVAILABLE. (1) If the Lender determines in good faith, which determination shall be final, conclusive and binding upon the Borrower, and notifies the Borrower that, by reason of circumstances affecting the money market, there is no market for Bankers' Acceptances, then, (a)the right of the Borrower to request a Drawing shall be suspended until the Lender determines that the circumstances causing such suspension no longer exist and the Lender so notifies the Borrower; and (b)any Drawing Notice which is outstanding shall be cancelled and the Drawing requested therein shall not be made. (2)The Lender shall promptly notify the Borrower of the suspension of the Borrower's right to request a Drawing and of the termination of any such suspension. SECTION 2.22 PREPAYMENTS. Except as required by Section 8.01, no prepayment of Bankers' Acceptances shall be made by the Borrower to the Lender prior to the maturity date of such Bankers' Acceptances. If the Borrower shall prepay any Bankers' Acceptances as required by Section 8.01, then (unless such prepayment has been rescinded or otherwise is required to be returned by the Lender for any reason), as between the Borrower and the Lender, the Lender shall thereafter be solely responsible for the payment of the Face Amount of such Bankers' Acceptances to the holder or holders thereof in accordance with the terms thereof and shall indemnify the Borrower and hold the Borrower harmless against any liabilities, costs or expenses incurred by the Borrower as a result of any failure to pay such Bankers' Acceptances in accordance with their terms." SECTION 8. AMENDMENT TO SUBSECTION 3.01(2) OF THE LOAN AGREEMENT. Subsection 3.01(2) of the Loan Agreement is hereby deleted and the following substituted therefor: "(2) The aggregate Notional Amount of all Foreign Exchange Hedging Arrangements at any time shall not exceed (i) U.S. $10,000,000 or the Equivalent Cdn. $Amount, in the case of any time prior to February 1, 1995; and (ii) U.S. $15,000,000 or the Equivalent Cdn. $Amount, in the case of any time on and after February 1, 1995". SECTION 9. AMENDMENT TO SECTION 7.01 OF THE LOAN AGREEMENT. The phrase "("Events of Default", and "Default" means any event which constitutes an Event of Default)", which appears in the second line of the Section, is hereby deleted and the following substituted therefor: "(each being an "Event of Default")". SECTION 10. AMENDMENT TO SUBSECTION 8.07(1) OF THE LOAN AGREEMENT. Subsection 8.07(1) of the Loan Agreement is hereby deleted and the following substituted therefor: "(1) A non-refundable standby fee shall be paid by the Borrower calculated on the average daily difference between the Commitment at that time and the Outstanding Principal Obligations, at a rate of (i) at any time prior to February 1, 1995, .375% per annum; and (ii) on and after February 1, 1995, .25% per annum, in each case, payable monthly in arrears, on the last Business Day of each month in accordance with the terms hereof up to and including the Repayment Date". SECTION 11. EFFECTIVENESS. This First Loan Amending Agreement shall become effective on and as of the date (such date being referred to as the "First Amendment effective Date") on which the Lender receives: (i) counterparts of this First Loan Amending Agreement executed and delivered by duly authorized officers of the Borrower and Cantel respectively; and (ii) a favourable opinion from counsel to each of the Borrower and Cantel respectively; (in each case together with original, certified or photostatic copies of all certificates on which reliance is made in such opinions). SECTION 12. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. On and as of the First Amendment Effective Date and after giving effect to this First Loan Amending Agreement, the Borrower and Cantel jointly and severally (a) confirm, reaffirm and restate the representations and warranties set forth in Article 5 of the Loan Agreement, as amended by this First Loan Amending Agreement, except to the extent that such representations and warranties relate solely to an earlier date in which case the Borrower and Cantel jointly and severally confirm, reaffirm and restate such representations and warranties for such earlier date in all material respects, provided that the references therein shall be deemed to be to the Loan Agreement as amended by this First Loan Amending Agreement; and (b) represent that no Default or Event of Default has occurred and is continuing. SECTION 13. EFFECT ON LOAN DOCUMENTS. Except as the Loan Agreement is specifically amended hereby, the Loan Agreement shall remain in full force and effect, unamended, and is hereby ratified and confirmed, and each of the parties hereto acknowledges and agrees that nothing contained in this First Loan Amending Agreement shall be construed as a rescission, novation or replacement of the Loan Agreement, or as a repayment and readvance thereunder. SECTION 14. REFERENCE TO THE LOAN AGREEMENT. On and after the date hereof, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference to the Loan Agreement in the Security Documents and all other agreements, documents and instruments delivered by all or any one or more of the Bank, The Borrower and any other Person, shall mean and be a reference to the Loan Agreement as amended hereby. SECTION 15. CONFIRMATION OF SECURITY. The Borrower hereby confirms that the Security Documents to which it is a party continue to remain in full force and effect, unamended, for the benefit of the Lender and continue to extend to all liabilities of the Borrower under the Loan Agreement as amended hereby. SECTION 16. CONFIRMATION OF GUARANTEE. Cantel hereby confirms that the Letter of Guarantee remains in full force and effect, unamended, for the benefit of the Lender and continues to extend to all liabilities and obligations of the Borrower under the Loan Agreement as amended hereby. SECTION 17. CONFIRMATION OF POSTPONEMENT AGREEMENT. Cantel hereby confirms that the Postponement Agreement remains in full force and effect, unamended, for the benefit of the Lender and continues to extend to all liabilities of the Borrower under the Loan Agreement as amended hereby. SECTION 18. NO WAIVER. The execution, delivery and effectiveness of this First Loan Amending Agreement shall into operate as a waiver of any right, power or remedy of the Lenders under the Loan Agreement or any other agreements or instruments delivered in connection therewith or pursuant thereto. SECTION 19. EXPENSES. The Borrower shall be obligated to reimburse the Lender for all its reasonable costs and expenses (including without limitation, reasonable legal expenses) incurred in connection with the preparation, execution and delivery of this First Loan Amending Agreement. SECTION 20. GOVERNING LAW. This First Loan Amending Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and Canada applicable therein and shall be treated in all respects as an Ontario contract. SECTION 21. COUNTERPARTS. This First Loan Amending Agreement may be executed in any number of counterparts, each of which shall be deemed an original and which, taken together, shall constitute one and the same instrument. IN THE WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CARSEN GROUP INC. Per: ___/s/_Edward E. Meltz___________ Authorized Signing Officer Per: ___/s/_William Vella_____________ Authorized Signing Officer CANTEL INDUSTRIES INC. Per: _________________________________ Authorized Signing Officer Per: _________________________________ Authorized Signing Officer NATIONAL BANK OF CANADA Per: _________________________________ Authorized Signing Officer Per: _________________________________ Authorized Signing Officer SECTION 21. COUNTERPARTS. This First Loan Amending Agreement may be executed in any number of counterparts, each of which shall be deemed an original and which, taken together, shall constitute one and the same instrument. IN THE WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CARSEN GROUP INC. Per: _________________________________ Authorized Signing Officer Per: _________________________________ Authorized Signing Officer CANTEL INDUSTRIES INC. Per: ___/s/_James P. Reilly___________ Authorized Signing Officer Per: ___/s/Darwin C. Dornbush_________ Authorized Signing Officer NATIONAL BANK OF CANADA Per: ___/s/_William Crossland_________ Authorized Signing Officer Per: ___/s/_Lili Shane________________ Authorized Signing Officer 12 SECTION 21. COUNTERPARTS. This First Loan Amending Agreement may be executed in any number of counterparts, each of which shall be deemed an original and which, taken together, shall constitute one and the same instrument. IN THE WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. CARSEN GROUP INC. Per: ___/s/_Edward E. Meltz___________ Authorized Signing Officer Per: ___/s/_William Vella______________ Authorized Signing Officer CANTEL INDUSTRIES INC. Per: _________________________________ Authorized Signing Officer Per: _________________________________ Authorized Signing Officer NATIONAL BANK OF CANADA Per: ___/s/_William Crossland_________ Authorized Signing Officer Per: ___/s/_Lili Shane________________ Authorized Signing Officer 12 SCHEDULE 12 FORM OF DRAWING NOTICE [DATE] National Bank of Canada Attention: - Dear Sirs: The undersigned, Carsen Group Inc. (the "Borrower"), refers to the loan agreement dated as of October 29, 1993, as amended, supplemented or restated from time to time (the "Loan Agreement", the terms defined therein being used herein as therein defined) among the Borrower, Cantel and the Lender and hereby gives you notice pursuant to Section 2.18(1) of the Loan Agreement that the Borrower hereby requests a Drawing under the Loan Agreement, and, in that connection sets forth below the information relating to such Drawing (the "Proposed Drawing") as required by Section 2.18(1) of the Loan Agreement: (a) The Drawing Date of the Proposed Drawing, being a Business Day, is -. (b) The aggregate Face Amount of Drafts to be accepted and purchased in Cdn. $-(1). (c) The maturity date for such Drafts is -, representing a term to maturity of approximately - days(2). (d) The serial numbers of such Drafts are -(3). (e) The name of the purchaser of such Drafts is -. (f) The proceeds to be received by the Borrower for such Drafts are Cdn. $-. [(g)In the case of a conversion, insert principal amount and the particulars of the Type of Advance to be converted.] Yours truly, CARSEN GROUP INC. Per: Authorized Signatory - ------------------------ (1) Specify a minimum of $500,000 and an integral multiple of $100,000. (2) Specify number of days between 30 and 180 days. (3) Omit items (d), (e) and (f) if the Lender is to purchase the Bankers' Acceptances. 13 EX-11 5 EXHIBIT 11 CANTEL INDUSTRIES, INC. Computation of Earnings per Share Exhibit 11
For the Years Ended July 31, ---------------------------------- PRIMARY 1995 1994 1993 ---------- ---------- ---------- Weighted average number of shares outstanding 2,747,533 2,592,597 2,033,080 Dilutive effect of options and warrants using the modified treasury stock method and average market price for the period 394,806 418,629 - ---------- ---------- ---------- Weighted average number of shares and common stock equivalents assuming no redemption or conversion of preferred stocks 3,142,339 3,011,226 2,033,080 ---------- ---------- ---------- ---------- ---------- ---------- Income from continuing operations before extraordinary gain and dividends on preferred stocks $1,001,000 $1,246,000 $ 88,000 Dividends on preferred stocks - (314,000) (1,185,000) ---------- ---------- ---------- Income (loss) from continuing operations before extraordinary gain assuming no redemption or conversion of preferred stocks 1,001,000 932,000 (1,097,000) Discontinued operations - 562,000 (24,000) Extraordinary gain on extinguishment of debt - 1,211,000 - ---------- ---------- ---------- Net income (loss) attributable to common stock $1,001,000 $2,705,000 $(1,121,000) ---------- ---------- ---------- ---------- ---------- ---------- Primary earnings per share assuming no conversion or redemption of preferred stocks: Continuing operations $0.32 $0.31 $(0.54) Discontinued operations - 0.19 $(0.01) Extraordinary gain on extinguishment of debt - 0.40 - ----- ----- ------- Net income (loss) $0.32 $0.90 ($0.55) ----- ----- ------- ----- ----- -------
CANTEL INDUSTRIES, INC. Computation of Earnings per Share Exhibit 11
For the Years Ended July 31, ---------------------------------- FULLY DILUTED 1995 1994 1993 ----------- ---------- ---------- Weighted average number of shares outstanding 2,747,533 2,592,597 2,465,400 Dilutive effect of options and warrants using the modified treasury stock method and the higher of the period-end or average market price for the period 398,003 462,261 - ----------- ---------- ---------- Weighted average number of shares and common stock equivalents assuming no redemption or conversion of preferred stocks 3,145,536 3,054,858 2,465,400 ----------- ---------- ---------- ----------- ---------- ---------- Income from continuing operations before extraordinary gain and dividends on preferred stocks $1,001,000 $1,246,000 $ 88,000 Dividends on preferred stocks (1) - (314,000) (933,000) ----------- ---------- ---------- Income (loss) from continuing operations before extraordinary gain assuming no redemption or conversion of preferred stocks 1,001,000 932,000 (845,000) Discontinued operations - 562,000 (24,000) Extraordinary gain on extinguishment of debt - 1,211,000 - ----------- ---------- ---------- Net income (loss) attributable to common stock (1) $1,001,000 $2,705,000 $(869,000) ----------- ---------- ---------- ----------- ---------- ---------- Fully diluted earnings per share assuming no redemption or conversion of preferred stocks (1): Continuing operations $0.32 $0.31 $(0.34) Discontinued operations - 0.18 $(0.01) Extraordinary gain on extinguishment of debt - 0.40 - ----- ----- ------- Net income (loss) $0.32 $0.89 ($0.35) ----- ----- ------- ----- ----- -------
(1) Includes the adding back, in fiscal 1993, of Series B Preferred Stock dividends of $100,000 and Series B Preferred Stock imputed dividends of $152,000 to reflect the conversion of the Series B Preferred Stock into 600,000 shares of common stock as of the beginning of the fiscal year. EX-22 6 EXHIBIT 22 EXHIBIT 22 CANTEL INDUSTRIES, INC. SUBSIDIARIES OF REGISTRANT - JULY 31, 1995 _____________________________________________________ Carsen Group Inc. (Amalgamated under the laws of Ontario, Canada) EX-24 7 EXHIBIT 24 EXHIBIT 24 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 33-73492) of Cantel Industries, Inc. and in the related Prospectus and to the incorporation by reference in the Registration Statement (Form S-8 No. 33-73446) pertaining to the 1991 Employee Stock Option Plan, 1991 Directors' Stock Option Plan, 1987 Directors' Stock Option Plan and 1991 Incentive Stock Option Plan of Cantel Industries, Inc. and the Employment Agreement and Stock Option Agreement between James P. Reilly and Cantel Industries, Inc., of our report dated September 20, 1995, with respect to the consolidated financial statements and schedule of Cantel Industries, Inc. included in this Annual Report on Form 10-K for the year ended July 31, 1995. ERNST & YOUNG LLP Princeton, New Jersey November 3, 1995 EX-27 8 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT JULY 31, 1995 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 JUL-31-1995 JUL-31-1995 YEAR 520000 0 7961000 34000 7232000 16016000 1769000 1289000 17399000 4853000 6087000 277000 0 0 6091000 17399000 31079000 31079000 21056000 7542000 0 0 479000 2002000 1001000 1001000 0 0 0 1001000 0.32 0.32