-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HQuRT8Sw2Bwd0u/HB4Q3CwncIn+wYwHn3B7hOAxLpj1RN5S8V81vDLf+07n8F86F K3CsFfjdmjHNNA6uSHzHlg== 0000912057-00-053727.txt : 20001218 0000912057-00-053727.hdr.sgml : 20001218 ACCESSION NUMBER: 0000912057-00-053727 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20001215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTEL MEDICAL CORP CENTRAL INDEX KEY: 0000019446 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 221760285 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06132 FILM NUMBER: 789835 BUSINESS ADDRESS: STREET 1: 1135 BROAD STREET CITY: CLIFTON STATE: NJ ZIP: 07013 BUSINESS PHONE: 9734708700 MAIL ADDRESS: STREET 1: 1135 BROAD STREET STREET 2: 1135 BROAD STREET CITY: CLIFTON STATE: NJ ZIP: 07013 FORMER COMPANY: FORMER CONFORMED NAME: CANTEL INDUSTRIES INC DATE OF NAME CHANGE: 19920703 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-Q 1 a2033424z10-q.txt 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q / X / Quarterly Report pursuant to Section 13 or 15(d) ---- of the Securities Exchange Act of 1934 For the quarterly period ended October 31, 2000. or / / Transition Report pursuant to Section 13 or 15(d) of the ---- Securities Exchange Act of 1934 For the transition period from _____ to _____. Commission file number: 0-6132 CANTEL MEDICAL CORP. -------------------- (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.) 150 CLOVE ROAD, LITTLE FALLS, NEW JERSEY 07424 - ------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (973) 890-7220 -------------- 1135 BROAD STREET, CLIFTON, NEW JERSEY 07013 - ------------------------------------------------------------------ (Former address of principal executive offices) (Zip code) 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 --- --- Number of shares of Common Stock outstanding as of December 8, 2000: 4,443,777. PART I - FINANCIAL INFORMATION CANTEL MEDICAL CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollar Amounts in Thousands, Except Share Data) (Unaudited)
October 31, July 31, 2000 2000 ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 1,523 $ 2,169 Accounts receivable, net 6,150 8,970 Inventories 8,641 6,992 Net assets related to discontinued business 575 3,095 Prepaid expenses and other current assets 707 475 -------- -------- Total current assets 17,596 21,701 Property and equipment, net 909 901 Available-for-sale securities 708 -- Intangible assets, net 1,308 1,345 Other assets 1,205 1,008 -------- -------- $ 21,726 $ 24,955 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,002 $ 5,054 Compensation payable 703 943 Other accrued expenses 892 979 Income taxes 437 594 -------- -------- Total current liabilities 4,034 7,570 Long-term debt 62 125 Deferred income taxes 94 97 Stockholders' equity: Preferred Stock, par value $1.00 per share; authorized 1,000,000 shares; none issued -- -- Common Stock, $.10 par value; authorized 12,000,000 shares; October 31 - 4,607,320 shares issued and 4,443,777 shares outstanding; July 31 - 4,597,220 shares issued and 4,438,381 shares outstanding 461 460 Additional capital 19,579 19,502 Retained earnings 745 96 Accumulated other comprehensive income: Unrealized loss on securities (17) -- Unrealized gain on currency hedging 155 -- Cumulative foreign currency translation adjustment (2,541) (2,097) Treasury Stock, at cost; October 31- 163,543 shares; July 31 -158,839 shares (846) (798) -------- -------- Total stockholders' equity 17,536 17,163 -------- -------- $ 21,726 $ 24,955 ======== ========
See accompanying notes 1 CANTEL MEDICAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollar Amounts in Thousands, Except Per Share Data) (Unaudited)
Three Months Ended October 31, 2000 1999 -------- -------- Net sales: Product sales $ 7,165 $ 6,885 Product service 1,456 1,319 ------- ------- Total net sales 8,621 8,204 ------- ------- Cost of sales: Product sales 4,046 4,309 Product service 781 784 ------- ------- Total cost of sales 4,827 5,093 ------- ------- Gross profit 3,794 3,111 Expenses: Shipping and warehouse 135 130 Selling 1,273 1,179 General and administrative 1,080 982 Research and development 199 142 ------- ------- Total operating expenses 2,687 2,433 ------- ------- Income from continuing operations before interest expense, other income and income taxes 1,107 678 Interest expense 4 56 Other income (7) -- ------- ------- Income from continuing operations before income taxes 1,110 622 Income taxes 461 237 ------- ------- Income from continuing operations 649 385 Income from discontinued operations -- 110 ------- ------- Net income $ 649 $ 495 ======= ======= Earnings per common share: Basic: Continuing operations $ 0.15 $ 0.09 Discontinued operations -- 0.02 ------- ------- Net income $ 0.15 $ 0.11 ======= ======= Diluted: Continuing operations $ 0.14 $ 0.09 Discontinued operations -- 0.02 ------- ------- Net income $ 0.14 $ 0.11 ======= =======
See accompanying notes. 2 CANTEL MEDICAL CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar Amounts in Thousands) (Unaudited)
Three Months Ended October 31, 2000 1999 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Income from continuing operations $ 649 $ 385 Adjustments to reconcile income from continuing operations to net cash (used in) provided by operating activities: Income from discontinued operations -- 110 Depreciation and amortization of continuing operations 139 104 Depreciation and amortization of discontinued operations -- 17 Changes in assets and liabilities: Accounts receivable 2,688 2,388 Inventories (1,885) 655 Prepaid expenses and other current assets (88) (24) Accounts payable and accrued expenses (3,325) (1,092) Income taxes (145) (443) ------- ------- Net cash (used in) provided by operating activities (1,967) 2,100 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (130) (101) Purchases of available-for-sale securities (725) -- Cash provided by (used in) discontinued operations 1,289 (1,940) Proceeds from sale of discontinued operations 1,231 -- Other, net (311) (78) ------- ------- Net cash provided by (used in) investing activities 1,354 (2,119) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net (repayments) borrowings under credit facilities (63) 218 Proceeds from exercise of stock options 30 -- Purchases of Treasury Stock -- (126) ------- ------- Net cash (used in) provided by financing activities (33) 92 ------- ------- (Decrease) increase in cash and cash equivalents (646) 73 Cash and cash equivalents at beginning of period 2,169 534 ------- ------- Cash and cash equivalents at end of period $ 1,523 $ 607 ======= =======
See accompanying notes. 3 CANTEL MEDICAL CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and the requirements of Form 10-Q and Rule 10.01 of Regulation S-X. Accordingly, they do not include certain information and note disclosures required by generally accepted accounting principles for annual financial reporting and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report of Cantel Medical Corp. (the "Company" or "Cantel") on Form 10-K for the fiscal year ended July 31, 2000, and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. Cantel has two wholly-owned subsidiaries, Carsen Group Inc. ("Carsen"), its Canadian subsidiary, and MediVators, Inc. ("MediVators"), its United States subsidiary. The unaudited interim financial statements reflect all adjustments which management considers necessary for a fair presentation of the results of operations for these periods. The results of operations for the interim periods are not necessarily indicative of the results for the full year. The condensed consolidated balance sheet at July 31, 2000 was derived from the audited consolidated balance sheet of the Company at that date. Note 2. COMPREHENSIVE INCOME The Company has adopted Statement of Financial Accounting Standards No. 130, "REPORTING COMPREHENSIVE INCOME", which establishes standards for the reporting and disclosure of comprehensive income and its components in the financial statements. The adoption of this Statement had no impact on the Company's net income or stockholders' equity. The Company's comprehensive income for the three months ended October 31, 2000 and 1999 are set forth in the following table:
Three Months Ended October 31, ----------------------- 2000 1999 --------- --------- Net income $649,000 $ 495,000 Other comprehensive income (loss): Unrealized loss on securities (17,000) -- Unrealized gain on currency hedging 48,000 -- Foreign currency translation (444,000) 270,000 --------- --------- Comprehensive income $236,000 $ 765,000 ========= =========
4 Note 3. HEDGING ACTIVITIES Effective August 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, as amended, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS No. 133"). SFAS No. 133 requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives will either be offset against the change in the fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of the change in fair value of a derivative that is designated as a hedge will be immediately recognized in earnings. The Company's Canadian subsidiary purchases and pays for a substantial portion of its products in United States dollars and is therefore exposed to fluctuations in the rates of exchange between the United States dollar and Canadian dollar. In order to hedge against the impact of such currency fluctuations on the purchases of inventories, Carsen enters into foreign currency forward contracts on firm purchases of such inventories in United States dollars. Total commitments for such foreign currency forward contracts amounted to $4,000,000 (United States dollars) at October 31, 2000 and cover a portion of Carsen's projected purchases of inventories through July 2001. These foreign currency forward contracts are designated as hedges, and therefore recognition of gains and losses is deferred within other comprehensive income until settlement of the underlying commitments. Realized gains and losses are recorded within cost of sales upon settlement. The Company does not hold any derivative financial instruments for speculative or trading purposes. The adoption of SFAS No. 133 on August 1, 2000 did not have a material impact on operations; however, it resulted in a $107,000 gain being recorded in other comprehensive income. Additionally, the fair value of such derivatives was $155,000 at October 31, 2000, which resulted in an unrealized gain of $48,000 during the three months ended October 31, 2000. The entire October 31, 2000 deferred gain of $155,000 will be recognized in earnings during fiscal 2001. Note 4. DISCONTINUED OPERATIONS On October 6, 2000, Carsen closed a transaction under an Asset Purchase Agreement with Olympus America Inc. ("Olympus") pursuant to which Carsen terminated its consumer products business and sold its inventories of Olympus consumer products to Olympus. The transaction had an effective date of July 31, 2000. 5 The purchase price for the inventory was $1,026,000, net of adjustments related to estimated warranty claims and promotional program expenses payable to Carsen's customers. Carsen will receive additional consideration from Olympus under the Purchase Agreement, including amounts related to transition services provided by Carsen subsequent to July 31, 2000. Such consideration includes (i) fixed cash amounts aggregating approximately $615,000 and (ii) twelve and one-half percent (12 1/2%) of Olympus' net sales of consumer products in Canada in excess of $8,000,000 during the period from August 1, 2000 through March 31, 2001. Approximately $115,000 of the fixed cash amounts were received during the three months ended October 31, 2000, and the remaining amounts are payable on various dates through April 30, 2001. Olympus also reimbursed Carsen for certain expenses related to the termination of Carsen's consumer products business. The discontinuance of the Consumer Products business has been reflected as a discontinued operation and is presented separately in the Company's Condensed Consolidated Financial Statements. The Company's Condensed Consolidated Statements of Income and Cash Flows for the three months ended October 31, 1999 have been restated to conform to the current year's presentation. For the three months ended October 31, 1999, income from discontinued operations consisted of pretax income of $198,000 less related income taxes of $88,000. The components of net assets related to discontinued business in the Condensed Consolidated Balance Sheets and the activity during the three months ended October 31, 2000 are set forth below:
July 31, Settlement Other Cash October 31, 2000 on Closing Settlement 2000 ----------- ------------ ------------ ------------- Trade accounts receivable, net of allowance for doubtful accounts of $99,000 at July 31 and $94,000 at October 31 $ 3,047,000 $ -- $(2,977,000) $ 70,000 Consideration due under Purchase Agreement 1,989,000 (1,231,000) -- 758,000 Inventories 235,000 -- (49,000) 186,000 Accounts payable (1,531,000) -- 1,531,000 -- Accrued expenses: Customer promotions (332,000) -- 86,000 (246,000) Compensation and other (313,000) -- 120,000 (193,000) ----------- ----------- ----------- ----------- Net assets related to discontinued business $ 3,095,000 $(1,231,000) $(1,289,000) $ 575,000 =========== =========== =========== ===========
6 Note 5. EARNINGS PER COMMON SHARE Basic earnings per common share are computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed based upon the weighted average number of common shares outstanding during the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price for the period. The following table sets forth the computation of basic and diluted earnings per common share:
Three Months Ended October 31, -------------------------- 2000 1999 ---------- ------------- Numerator for basic and diluted earnings per common share: Income from continuing operations $ 649,000 $ 385,000 Income from discontinued operations -- 110,000 ---------- ------------- Net income $ 649,000 $ 495,000 ========== ============= Denominator for basic and diluted earnings per common share: Denominator for basic earnings per common share - weighted average number of shares outstanding 4,438,925 4,417,773 Dilutive effect of common stock equivalents using the treasury stock method and the average market price for the period 230,716 66,444 ---------- ------------- Denominator for diluted earnings per common share - weighted average number of shares outstanding and common stock equivalents 4,669,641 4,484,217 ========== ============= Basic earnings per common share: Continuing operations $ 0.15 $ 0.09 Discontinued operations -- 0.02 ---------- ------------- Net income $ 0.15 $ 0.11 ========== ============= Diluted earnings per common share: Continuing operations $ 0.14 $ 0.09 Discontinued operations -- 0.02 ---------- ------------- Net income $ 0.14 $ 0.11 ========== =============
7 Note 6. FINANCING ARRANGEMENTS The Company has two credit facilities, a $5,000,000 (United States dollars) revolving credit facility for Carsen expiring on December 31, 2002 and a $1,500,000 revolving credit facility for MediVators expiring on November 1, 2001. Borrowings under the Carsen revolving credit facility are in Canadian dollars and bear interest at rates ranging from lender's prime rate to .75% above the prime rate, depending upon Carsen's debt to equity ratio. At October 31, 2000, such rate was the lender's prime rate. Borrowings under the MediVators revolving credit facility bear interest at the lender's prime rate plus 1%. The prime rates associated with the Carsen and MediVators revolving credit facilities were 7.50% and 9.50%, respectively, at October 31, 2000. Each of the credit facilities provides for restrictions on available borrowings based primarily upon percentages of eligible accounts receivable and inventories; requires the subsidiary to meet certain financial covenants; is secured by substantially all assets of the subsidiary; and is guaranteed by Cantel. Note 7. INCOME TAXES Income taxes consist primarily of taxes imposed on the Company's Canadian operations. The effective tax rate on Canadian operations was 42.5% and 44.1% for the three months ended October 31, 2000 and 1999, respectively. For the three months ended October 31, 2000 and 1999, the consolidated effective tax rate was lower than the Canadian effective tax rate due to the fact that income generated by the United States operations is substantially offset by tax benefits resulting from the utilization of net operating loss carryforwards. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF CONTINUING OPERATIONS Reference is made to the discontinuance of the Company's Consumer Products business, as more fully described in note 4 to the Condensed Consolidated Financial Statements. The results of continuing operations reflect primarily the results of Carsen and MediVators. There was no significant impact upon the Company's results of operations for the three months ended October 31, 2000, compared with the three months ended October 31, 1999, as a result of fluctuations in the rate of exchange between the United States dollar and Canadian dollar. The ensuing discussion should also be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2000. The following table gives information as to the net sales and the percentage to the total net sales accounted for by each operating segment of the Company.
Three Months Ended October 31, ------------------------------ 2000 1999 ------------------------------- (Dollar amounts in thousands) $ % $ % ------- ----- ------- ----- Medical Products $ 3,636 42.2 $ 3,256 39.7 Infection Control Products 2,319 26.9 2,334 28.4 Scientific Products 1,331 15.4 1,400 17.1 Product Service 1,456 16.9 1,319 16.1 Elimination of intercompany sales of Infection Control Products (121) (1.4) (105) (1.3) ------- ----- ------- ----- $ 8,621 100.0 $ 8,204 100.0 ======= ===== ======= =====
Net sales increased by $417,000, or 5.1%, to $8,621,000 for the three months ended October 31, 2000, from $8,204,000 for the three months ended October 31, 1999. This increase was principally attributable to increased sales of Medical Products. The increased sales of Medical Products was due primarily to an increase in demand, a portion of which was attributable to the introduction of new flexible endoscopy products, and selling price increases. 9 Gross profit increased by $683,000, or 22.0%, to $3,794,000 for the three months ended October 31, 2000, from $3,111,000 for the three months ended October 31, 1999. Gross profit as a percentage of sales for the three months ended October 31, 2000 was 44.0% compared with 37.9% for the three months ended October 31, 1999. The higher gross profit percentage for the three months ended October 31, 2000 was primarily attributable to a buy-in of Medical Products inventories during fiscal 2000 prior to receiving a supplier price increase, a portion of which inventories were sold during the three months ended October 31, 2000; selling price increases in Medical Products and Product Service; favorable sales mix associated with Product Service; and favorable sales mix and manufacturing efficiencies associated with Infection Control Products. Shipping and warehouse expenses increased by $5,000 to $135,000 for the three months ended October 31, 2000, from $130,000 for the three months ended October 31, 1999. Selling expenses as a percentage of net sales were 14.8% for the three months ended October 31, 2000, compared with 14.4% for the three months ended October 31, 1999. For the three months ended October 31, 2000, the increase in selling expenses as a percentage of net sales was primarily attributable to an increase in personnel at MediVators to support both domestic and international sales. General and administrative expenses increased by $98,000 to $1,080,000 for the three months ended October 31, 2000, from $982,000 for the three months ended October 31, 1999. This increase was primarily attributable to personnel costs, including incentive compensation, consulting fees, and computer hardware and software depreciation and amortization. Research and development expenses increased by $57,000 to $199,000 for the three months ended October 31, 2000, from $142,000 for the three months ended October 31, 1999. This increase was primarily attributable to an increase in personnel. Interest expense decreased to $4,000 for the three months ended October 31, 2000, from $56,000 for the three months ended October 31, 1999. This decrease was attributable to a decrease in average outstanding borrowings under the Company's revolving credit facilities during the three months ended October 31, 2000. Income from continuing operations before income taxes increased by $488,000 to $1,110,000 for the three months ended October 31, 2000, from $622,000 for the three months ended October 31, 1999. 10 Income taxes consist primarily of taxes imposed on the Company's Canadian operations. The effective tax rate on Canadian operations was 42.5% and 44.1% for the three months ended October 31, 2000 and 1999, respectively. For the three months ended October 31, 2000 and 1999, the consolidated effective tax rate was lower than the Canadian effective tax rate due to the fact that income generated by the United States operations is substantially offset by tax benefits resulting from the utilization of net operating loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES At October 31, 2000, the Company's working capital was $13,562,000, compared with $14,131,000 at July 31, 2000. This decrease primarily reflects a decrease in cash and cash equivalents, accounts receivable and net assets related to discontinued business, partially offset by an increase in inventories and a decrease in accounts payable. Net cash used in operating activities was $1,967,000 for the three months ended October 31, 2000 compared with net cash provided by operating activities of $2,100,000 for the three months ended October 31, 1999. For the three months ended October 31, 2000, the net cash used in operating activities was primarily due to an increase in inventories and a decrease in accounts payable and accrued expenses, partially offset by net income, after adjusting for depreciation and amortization, and a decrease in accounts receivable. For the three months ended October 31, 1999, the net cash provided by operating activities was primarily due to net income, after adjusting for depreciation and amortization, and decreases in accounts receivable and inventories, partially offset by decreases in accounts payable and accrued expenses and income taxes. Net cash provided by investing activities was $1,354,000 for the three months ended October 31, 2000 compared with net cash used in investing activities of $2,119,000 for the three months ended October 31, 1999. For the three months ended October 31, 2000, the net cash provided by investing activities was primarily due to proceeds from sale of discontinued operations and a decrease in net assets related to discontinued business, partially offset by purchases of available-for-sale securities. For the three months ended October 31, 1999, net cash used in investing activities was primarily due to an increase in net assets related to discontinued business. Net cash used in financing activities was $33,000 for the three months ended October 31, 2000 compared with net cash provided by financing activities of $92,000 for the three months ended October 31, 1999. These changes were principally due to the 11 fluctuations in outstanding borrowings under the Company's revolving credit facilities, partially offset for the three months ended October 31, 1999 by purchases of Treasury Stock. The Company has two credit facilities, a $5,000,000 (United States dollars) revolving credit facility for Carsen expiring on December 31, 2002 and a $1,500,000 revolving credit facility for MediVators expiring on November 1, 2001. Borrowings under the Carsen revolving credit facility are in Canadian dollars and bear interest at rates ranging from lender's prime rate to .75% above the prime rate, depending upon Carsen's debt to equity ratio. At October 31, 2000, such rate was the lender's prime rate. Borrowings under the MediVators revolving credit facility bear interest at the lender's prime rate plus 1%. The prime rates associated with the Carsen and MediVators revolving credit facilities were 7.50% and 9.50%, respectively, at October 31, 2000. Each of the credit facilities provides for restrictions on available borrowings based primarily upon percentages of eligible accounts receivable and inventories; requires the subsidiary to meet certain financial covenants; is secured by substantially all assets of the subsidiary; and is guaranteed by Cantel. For the three months ended October 31, 2000, compared with the three months ended October 31, 1999, the average value of the Canadian dollar decreased by 1% relative to the value of the United States dollar. Changes in the value of the Canadian dollar against the United States dollar affects the Company's results of operations because the Company's Canadian subsidiary purchases substantially all of its products in United States dollars and sells its products in Canadian dollars. Such currency fluctuations also result in a corresponding change in the United States dollar value of the Company's assets that are denominated in Canadian dollars. Under the Carsen credit facility the Company's Canadian subsidiary has a $15,000,000 (United States dollars) foreign currency hedging facility which is available to be used to hedge against the impact of such currency fluctuations on the purchases of inventories. Total commitments for such foreign currency forward contracts amounted to $4,343,000 (United States dollars) at December 8, 2000 and cover a portion of Carsen's projected purchases of inventories through July 2001. The weighted average exchange rate of the forward contracts open at December 8, 2000 was $1.4843 Canadian dollar per United States dollar, or $.6737 United States dollar per Canadian dollar. The exchange rate published by the Wall Street Journal on December 8, 2000 was $1.5295 Canadian dollar per United States dollar, or $.6538 United States dollar per Canadian dollar. 12 Effective August 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, as amended, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS No. 133"). In accordance with SFAS No. 133, these foreign currency forward contracts are designated as hedges, and recognition of gains and losses is deferred within other comprehensive income until settlement of the underlying commitments. Realized gains and losses are recorded within cost of sales upon settlement. The adoption of SFAS No. 133 did not have a material impact on operations; however, it resulted in a $107,000 gain being recorded in other comprehensive income. Additionally, the fair value of such derivatives was $155,000 at October 31, 2000, which resulted in an unrealized gain of $48,000 during the three months ended October 31, 2000. For purposes of translating the balance sheet, at October 31, 2000 compared with July 31, 2000, the value of the Canadian dollar decreased by 3% relative to the value of the United States dollar. As a result, at October 31, 2000, the negative cumulative foreign currency translation adjustment was increased by $444,000 compared to July 31, 2000, thereby decreasing stockholders' equity. The Company believes that its current cash position, anticipated cash flow from operations, amounts to be received related to the discontinuance of the Company's Consumer Products business and the funds available under the credit facilities will be sufficient to satisfy the Company's cash operating requirements for its existing operations for the foreseeable future. At December 8, 2000, $6,420,000 was available under the credit facilities. Inflation has not significantly impacted the Company's operations. Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. All forward-looking statements involve risks and uncertainties, including, without limitation, acceptance and demand of new products, the impact of competitive products and pricing, the Company's ability to successfully integrate and operate acquired and merged businesses and the risks associated with such businesses, and the risks detailed in the Company's filings and reports with the Securities and Exchange Commission. Such statements are only predictions, and actual events or results may differ materially from those projected. 13 ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK. Foreign currency market risk: Carsen purchases and pays for a substantial portion of its products in United States dollars, and Carsen's business could be materially and adversely affected by the imposition of trade barriers, fluctuations in the rates of currency exchange, tariff increases and import and export restrictions between the United States and Canada. Additionally, Carsen's financial statements are translated using the accounting policies described in Note 2 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2000. During the three months ended October 31, 2000 compared with the three months ended October 31, 1999, fluctuations in the exchange rates between the United States dollar and Canadian dollar had an insignificant impact upon the Company's results of operations and an adverse impact upon stockholders' equity, as described in Management's Discussion and Analysis of Financial Condition and Results of Operations. Interest rate market risk: The Company has two credit facilities for which the interest rate on outstanding borrowings is variable. Therefore, interest expense is affected by the general level of interest rates in the United States and Canada. 14 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There was no submission of matters to a vote during the three months ended October 31, 2000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27, Financial Data Schedule (b) Reports on Form 8-K A report on Form 8-K was filed on October 20, 2000 indicating that the Company had terminated its consumer products business and sold its inventories of Olympus consumer products to Olympus. There were no other reports on Form 8-K filed during the three months ended October 31, 2000. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CANTEL MEDICAL CORP. Date: December 14, 2000 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) 16 EX-27 2 a2033424zex-27.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the condensed consolidated balance sheet at October 31, 2000 and the condensed consolidated statement of income for the three months ended October 31, 2000 and is qualified in its entirety by reference to such finacial statements. 3-MOS JUL-31-2000 OCT-31-2000 1,523,000 0 6,150,000 0 8,641,000 17,596,000 2,651,000 1,742,000 21,726,000 4,034,000 62,000 0 0 461,000 17,075,000 21,726,000 7,165,000 8,621,000 4,046,000 4,827,000 2,687,000 0 4,000 1,110,000 461,000 649,000 0 0 0 649,000 0.15 0.14
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