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To Our Shareholders:
During fiscal year 2007, Cantel responded to the increased world-wide demand for improved infection prevention and control. We solidified our six existing businesses by investing in the development, expansion and acquisition of new products to complement our existing product lines.
Five acquisitions were completed during the fiscal year and the first quarter of 2008, which added to the Water Purification and Filtration, Endoscope Reprocessing and Healthcare Disposables segments. The return on these investments is beginning to be realized, and momentum is building across the Company.


Our Results

We are pleased with fiscal 2007 revenues of $219,044,000, an increase of 14% over last year's revenues of $192,179,000. Organic revenue growth was 10%. Income from continuing operations of $8,104,000, or $0.50 per diluted share, was up 22%, compared with fiscal 2006 income from continuing operations of $6,653,000, or $0.41 per diluted share.
As of July 31, 2007, the Company's balance sheet included cash and cash equivalents of $15,860,000, bank debt of $57,000,000 and stockholders' equity of $155,070,000. Cash flow from operating activities on continuing operations was $10,834,000, or $0.67 per diluted share. Cash flow generated by net income from continuing operations, after adjusting for non-cash charges related only to depreciation and amortization and stock-based compensation expense (but excluding other elements of cash flow from operations), was $19,826,000, or $1.23 per diluted share.

Water Purification and Filtration
Cantel's acquisition of GE Water & Process Technologies' dialysis water business was a transformative event for our Mar Cor Purification division, further establishing it as a leader in the water purification industry. Our product portfolio ranges from small single-patient solutions to full-scale industrial ultra-purification systems that are utilized to produce U.S. Pharmacopeia-grade water. This breadth of offerings, coupled with our dedicated direct sales and service network, now reaches nearly 7,000 customer sites across the entire United States. The Company's priority is to drive operating efficiencies, to pursue more product and consumable sales and to expand our service business. We are very optimistic that Mar Cor Purification will continue to grow and flourish as we continue to launch new products and pursue other acquisitions in this segment.

Healthcare Disposables
During fiscal 2007, our Crosstex subsidiary acquired the Twist-2-It® line of branded proprietary prophy-angles, designed to eliminate splatter and frictional heat during routine dental hygienic procedures. Additionally, since yearend, Crosstex acquired Strong Dental Products, Inc. and its suite of barrier products for patient protection and comfort during dental x-ray procedures. Both acquisitions have added to Crosstex' growing Patient's Choice™ product line and expanded our focus on the dental hygienist community.
We believe there are significant growth opportunities for our Healthcare Disposable products in our core dental segment, as well as other areas of healthcare. We will continue to explore the acquisition and development of new and innovative products.

Endoscope Reprocessing
In August 2006, the Company launched a direct sales and service force to address the needs of our endoscope reprocessing customers for our Medivators® products. To date, approximately fifty sales and service professionals have been added in the U.S., and the team has achieved a solid first year performance. This approach enables us to communicate closely with our customers, leverage our expertise in the marketplace and gain access to enhancements and new growth opportunities.
With the recent acquisition of Verimetrix' Veriscan® endoscope leak and fluid detection product, we have expanded the Medivators product line. Our MDS™ premium-tier endoscope reprocessing product has been cleared by the FDA for sale in the U.S., and our efforts now are focused on commercialization. With continued growth in endoscopy procedures, we expect demand to remain strong for our products.

Dialysis
Our Renatron® product is utilized throughout the world as the standard for dialyzer reprocessing, a process by which dialyzers are prepared for reuse in a cost-effective, efficacious and environmentally responsible manner. Our customers continue to invest in our dialyzer reprocessing technology, and we experienced strong sales of Renatrons throughout the year, driven mostly by new clinic openings. Likewise, a record number of units were shipped to Asia during 2007. End-stage renal disease continues to plague the U.S. and international populations, and we expect that our Dialysis segment will continue to address the needs of dialysis clinics for the foreseeable future.

Other (Therapeutic Filtration and Specialty Packaging)
During 2007, a large customer re-launched its product that utilizes our pediatric filter after a lengthy FDA hold unrelated to our product. Therapeutic product sales have since returned to historical levels. Our proprietary Specialty Packaging products have grown at a solid pace during the year, reflecting progress related to significant marketing and sales initiatives.

Looking Forward
We believe that Cantel is well-positioned for growth and that our investments are well-placed. We participate in a vital area of healthcare that continues to receive significant attention around the world with infection-causing agents on the rise. As we look forward, we plan to enhance our product portfolio, through both internal development of new products and acquisitions to address customer needs.
We would like to offer a special acknowledgement and thanks to James P. Reilly, who retired in January 2007 after successfully leading Cantel as its President and CEO for 17 years. Jim led the Company through many challenges and, through his leadership, built Cantel to the successful and strong Infection Prevention and Control company that it is today.
During the past year, Dr. Spencer Foreman resigned from our Board of Directors. Dr. Foreman actively contributed to our board, and we thank him for his service. We welcome Mark N. Diker to the Board and look forward to his contributions.
Lastly, we are proud of the accomplishments and dedication of our employees. We thank our many loyal customers and shareholders and look forward to a prosperous 2008.

Charles M. Diker
Chairman of the Board

R. Scott Jones
President and Chief Executive Officer

 


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