Cantel Medical Corp. (CMN)

CMN 
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Cantel Medical Corporation (CMN)

F2Q08 Earnings Call

March 6, 2008 11:00 am ET

Executives

Charles M. Diker - Chairman of the Board

Andrew A. Krakauer – Executive Vice President, Chief Operating Officer

Craig A. Sheldon – Senior Vice President, Chief Financial Officer

Steven Anaya - Corporate Controller

Richard Moyer – Investor Relations, Cameron Associates

Analysts

Michael Gaugler- Brean Murray, Carret & Company

Mitra Ramgopal - Sidoti & Company

John Rogers - Ferris Baker Watts

Presentation

Operator

Greetings ladies and gentlemen and welcome to the Cantel Medical Corp. second quarter 2008 conference call. At this time, all participants are on listen-only mode. A brief question and answer session will follow the formal presentation.

If anyone should require the operator assistance during the call, please press “Star 0” on your telephone keypad. As a reminder, the conference is being recorded.

It is now my pleasure to introduce your host, Mr. Richard Moyer, from Cameron Associates. Thank you sir, you may begin.

Richard Moyer

Thank you Ryan. Before we get started, I would like to remind everyone that this conference call may contain forward-looking statements. Forward-looking statements involve risks and uncertainties, including without limitation the risks detailed in the filings and reports with Securities and Exchange Commission. Such statements are only projections and actual results may differ materially from those projected.

Now I would like to turn the call to over to Scott Jones, President and CEO of Cantel Medical. Go ahead Scott.

Scott Jones

Thanks, Dick and good morning everyone. Welcome to our second quarter 2008 earnings conference call.

With me today are Charles Diker, Chairman, Andrew Krakauer, Chief Operating Officer, Craig Sheldon, Chief Financial Officer, Steven Anaya, VP and Corporate Controller of the company.

We’ll all be available for questions and answers after our formal remarks.

I think what you’ll see here today is a Cantel from an operating perspective is on very solid footing. Our legacy issues in terms of the clean up of the Dyped MDS Unit in Europe are behind us.

We’ve reported strong top line growths, strong growths in EBITDA margins across our segments. We’ve either held or improved our operating margins, we have very strong balance sheet and now more than ever we have a strong flow of new product introductions in our pipeline.

So, the common substance as it is that we have really injected a marketing and R&D character to the company and we’re making terrific progress there. As we look forward into the future, the question we asked ourselves is, “Where is the catalyst, How do we create fast growth in an otherwise moderately growing industry?”

And as we look at those questions strategically, there are three very clear elements in our mind. Number one is to create breakthrough product introductions that will change the way that infection prevention and control is done.

Number two is to leverage our very solid branding reputation across the market by creating product extensions and successfully watching those. And number three is to leverage our existing and our new products and move them into alternative markets.

In all three cases, we are very active and in our forthcoming basis we will be announcing some exciting news in the not-too-distant future. About a year ago, 12 months ago, we delineated five key strategic priorities for the company.

And I personally, I’m a believer of saying what you do and doing what you say. So, in order to be accountable for the execution against those priorities, our first list down then will go back, will run through our progress to date and then we’ll go through the financials.

By way of reminder, the five goals were as follows:

1. Build in our water and healthcare disposables divisions both by acquisition and internal growth to achieve more significant scale.

2. Improve our endoscope reprocessing segment and successfully warrants the premium care MDS product in the US and Canada.

3. Acquiring developed proprietary products to fill out their product lines and distribution channels.

4. Manage and grow our dialysis business profitably.

5. Invest them and advance our marketing sales and R&D initiatives to capitalize on our innovation, distribution networks and long-standing customer relationships.

So, I will give you a brief update on those and I think you will agree that we’ve made substantial progress.

Number 1. Repeating a build on the water and healthcare disposable divisions. As you well know, we’ve closed on five acquisitions in the last 12 months. The GE and DFI acquisitions alone added approximately 50% to the size and scale of our water business.

The GE business, since closing last April has grown at sequentially at 15%. So, water is clearly our largest and fastest growing business at this point. In the healthcare disposable segment, we closed on the Twist and Strong acquisitions. Those are proprietary hard growth products that are being very well received in the markets.

So, in term of objective1, we’re going to go ahead and check the box there, we feel as though we’ve done a good job at that.

Number 2. Improve our endoscope reprocessing segment and launch to premium tier product. As you all know, the MDS was cleared by the FDA and Health Canada earlier this year. The product has been introduced; it has been very well received, since it is a very high quality product. In terms of revenues, our Medivator sales force is really hitting stride in achieving good steady growth. Net profitability has improved significantly last year although it’s been slower going than we would have liked.

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