Cantel Medical Corp. (NYSE: CMD) today announced financial results for its fourth quarter ended July 31, 2020.
Fourth quarter 2020 net sales were $233.4M, down 2.5% compared to the prior year. Excluding the impact of foreign currency, net sales decreased by 2.7%, driven by an organic decline of 18.0%, which was partially offset by the impact from acquisitions of 15.7%. Similar to the prior quarter, the decline in organic sales resulted from the reduction of elective procedures driven by the worldwide COVID pandemic, which impacted the Company's entire fourth quarter.
Fourth quarter 2020 GAAP earnings per diluted share decreased 125.5% to $(0.05), compared to GAAP earnings per diluted share of $0.21 in the prior year period. GAAP earnings per diluted share was negatively impacted by COVID, higher amortization, restructuring-related costs in the Dental segment and integration expenses related to the Hu-Friedy acquisition.
Fourth quarter 2020 Non-GAAP earnings per diluted share decreased 62.6% to $0.24, compared to Non-GAAP earnings per diluted share of $0.63 in the prior year. The decrease in earnings per share was driven by the impact of COVID, which negatively affected the Company's Medical and Dental segment revenues during the quarter.
George Fotiades, Chief Executive Officer, stated, "We are pleased with our fourth quarter performance in the face of the impact of COVID on procedures in our Medical and Dental segments. We executed very well in managing operating expenses and working capital, and we were able to pay down $75 million of our revolver earlier in September. While it will take a while longer to see a full recovery of procedures, we will remain agile in managing operating expenses and operating margins, while continuing to aggressively execute on our Cantel 2.0 initiatives. Furthermore, we will look to continue to pay down debt as the opportunity arises."
With the acquisition of Hu-Friedy, as well as the impact from COVID, the Company's balance sheet has changed from historical trends. The fourth quarter ended with cash of $277.9M and gross debt of $1,113.4M. The Company generated EBITDAS of $27.9M and adjusted EBITDAS of $37.9M in the quarter, down 19.6% compared to the prior year. Early in the fourth quarter, the Company made significant progress in solidifying its financial position. In May 2020, the Company amended its credit facilities with its lender group to provide ample flexibility to manage the anticipated negative impact created by the COVID pandemic. Later that month, the Company issued convertible senior notes of $168M in aggregate in a private offering to further enhance its liquidity position.
Following the end of the fourth quarter, given its extremely strong cash position, the Company paid down $75.0M of its outstanding revolver borrowings. The Company will continue to evaluate its ability to pay down debt and deleverage on a quarterly basis.
Fourth quarter financial results and key updates:
- Net cash provided by operating activities was $44.0M
- Life Sciences and Dialysis maintained revenue growth in line with previous expectations
- Dental revenue increased 59.0%, driven by the acquisition of Hu-Friedy, while organic revenue decreased 20.6% due to deferred elective procedures, which was partially offset by strong performance in face masks, face shields, surface disinfectants and wipes
- Medical revenue decreased 24.8% on an organic basis, with May revenue slightly increasing from April levels, and then strongly accelerating into June and July
- Management instituted key cost and cash saving measures which included the following:
- Deployed workforce furloughs across manufacturing sites experiencing declines in demand, along with temporary furloughs and decreases in pay for administrative personnel
- Deferred all non-essential capital expenditures
- Cancelled all non-essential travel
- Reduced inventory in areas where demand has decreased, including aggressive material management to limit purchasing
- Suspended any cash dividend through at least October 31, 2021
- Suspended and reduced executive salaries and board of director compensation
While the impact of COVID on elective procedures was significant in Medical and Dental, daily sales rates improved over the course of the fourth quarter ahead of expectations. Estimated procedure volume continuously improved, following a trough in late April, to a level today in the 80% - 85% range of the pre-COVID period and are strengthening. While the company anticipates an eventual full recovery of elective procedures to pre-COVID levels, the timing remains uncertain.
About Cantel Medical:
Cantel Medical is a leading global company dedicated to delivering innovative infection prevention products and services for patients, caregivers, and other healthcare providers which improve outcomes, enhance safety and help save lives. Our products include specialized medical device reprocessing systems for endoscopy and renal dialysis, advanced water purification equipment, sterilants, disinfectants and cleaners, sterility assurance monitoring products for hospitals and dental clinics, disposable infection control products primarily for dental and GI endoscopy markets, instruments and instrument reprocessing workflow systems serving the dental industry, dialysate concentrates, hollow fiber membrane filtration and separation products. Additionally, we provide technical service for our products.
For further information, visit the Cantel website at www.cantelmedical.com.
