Cover Page
Cover Page - shares | 3 Months Ended | |
Oct. 31, 2020 | Nov. 30, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Oct. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-31337 | |
Entity Registrant Name | Cantel Medical Corp. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 22-1760285 | |
Entity Address, Address Line One | 150 Clove Road | |
Entity Address, City or Town | Little Falls | |
Entity Address, State or Province | NJ | |
Entity Address, Postal Zip Code | 07424 | |
City Area Code | (973) | |
Local Phone Number | 890-7220 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | CMD | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 42,244,649 | |
Entity Central Index Key | 0000019446 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --07-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Assets | ||
Cash and cash equivalents | $ 258,021 | $ 277,871 |
Accounts receivable, net of allowance for doubtful accounts of $4,029 and $3,905 | 158,763 | 148,419 |
Inventories, net | 163,880 | 167,960 |
Prepaid expenses and other current assets | 19,429 | 18,443 |
Income taxes receivable | 27,036 | 33,933 |
Total current assets | 627,129 | 646,626 |
Property and equipment, net | 223,510 | 225,222 |
Right-of-use assets, net | 47,901 | 48,684 |
Intangible assets, net | 471,337 | 480,032 |
Goodwill | 660,421 | 660,172 |
Other long-term assets | 6,467 | 6,231 |
Deferred income taxes | 3,738 | 4,787 |
Total assets | 2,040,503 | 2,071,754 |
Liabilities and stockholders’ equity | ||
Accounts payable | 46,891 | 42,008 |
Compensation payable | 47,788 | 47,769 |
Accrued expenses | 45,525 | 41,480 |
Deferred revenue | 28,454 | 26,223 |
Current portion of long-term debt | 14,750 | 7,375 |
Income taxes payable | 6,759 | 4,373 |
Current portion of lease liabilities | 10,044 | 10,268 |
Total current liabilities | 200,211 | 179,496 |
Long-term debt | 845,142 | 926,834 |
Convertible debt | 126,617 | 124,835 |
Deferred income taxes | 49,533 | 49,533 |
Long-term lease liabilities | 40,296 | 40,679 |
Other long-term liabilities | 20,323 | 20,778 |
Total liabilities | 1,282,122 | 1,342,155 |
Commitments and contingencies (Note 12) | ||
Preferred Stock, par value $1.00 per share; authorized 1,000,000 shares; none issued | 0 | 0 |
Common Stock, par value $0.10 per share; authorized 75,000,000 shares; issued 46,924,945 shares and outstanding 42,243,881 shares at October 31, 2020; issued 46,812,750 shares and outstanding 42,162,218 shares at July 31, 2020 | 4,693 | 4,681 |
Additional paid-in capital | 276,450 | 273,040 |
Retained earnings | 572,798 | 548,334 |
Accumulated other comprehensive loss | (25,249) | (27,599) |
Treasury Stock; 4,681,064 shares at October 31, 2020; 4,650,532 shares at July 31, 2020 | (70,311) | (68,857) |
Total stockholders’ equity | 758,381 | 729,599 |
Total liabilities and stockholders’ equity | $ 2,040,503 | $ 2,071,754 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 4,029 | $ 3,905 |
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred Stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred Stock, issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common Stock, authorized (in shares) | 75,000,000 | 75,000,000 |
Common Stock, issued (in shares) | 46,924,945 | 46,812,750 |
Common Stock, outstanding (in shares) | 42,243,881 | 42,162,218 |
Treasury Stock (in shares) | 4,681,064 | 4,650,532 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Net sales | ||
Net sales | $ 297,029 | $ 257,246 |
Cost of sales | ||
Cost of sales | 149,663 | 141,377 |
Gross profit | 147,366 | 115,869 |
Expenses: | ||
Selling | 40,063 | 38,411 |
General and administrative | 49,378 | 55,287 |
Research and development | 7,573 | 7,747 |
Total operating expenses | 97,014 | 101,445 |
Income from operations | 50,352 | 14,424 |
Interest expense, net | 16,293 | 5,719 |
Income before income taxes | 34,059 | 8,705 |
Income taxes | 9,595 | 2,938 |
Net income | $ 24,464 | $ 5,767 |
Earnings per common share: | ||
Basic (in dollars per share) | $ 0.58 | $ 0.14 |
Diluted (in dollars per share) | 0.57 | 0.14 |
Dividends per common share (in dollars per share) | $ 0 | $ 0 |
Product sales | ||
Net sales | ||
Net sales | $ 263,570 | $ 225,678 |
Cost of sales | ||
Cost of sales | 129,655 | 120,586 |
Product service | ||
Net sales | ||
Net sales | 33,459 | 31,568 |
Cost of sales | ||
Cost of sales | $ 20,008 | $ 20,791 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 24,464 | $ 5,767 |
Other comprehensive income: | ||
Foreign currency translation | 502 | 3,932 |
Interest rate swap, net of tax | 1,848 | 1,245 |
Total other comprehensive income: | 2,350 | 5,177 |
Comprehensive income | $ 26,814 | $ 10,944 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury stock, at cost |
Beginning Balance (in shares) at Jul. 31, 2019 | 41,771,228 | |||||
Beginning Balance at Jul. 31, 2019 | $ 661,537 | $ 4,636 | $ 204,795 | $ 539,097 | $ (22,197) | $ (64,794) |
Increase (Decrease) in Stockholders' Equity | ||||||
Repurchases of shares (in shares) | (49,614) | |||||
Repurchases of shares | (3,613) | (3,613) | ||||
Stock-based compensation | 2,404 | 2,404 | ||||
Issuance of shares (in shares) | 751,471 | |||||
Issuance of shares | 60,000 | $ 75 | 59,925 | |||
Equity vests/option exercises (in shares) | 104,686 | |||||
Equity vests/option exercises | 919 | $ 11 | 908 | |||
Cancellations of restricted stock (in shares) | (946) | |||||
Net income (loss) | 5,767 | 5,767 | ||||
Other comprehensive income (loss) | 5,177 | 5,177 | ||||
Ending Balance (in shares) at Oct. 31, 2019 | 42,576,825 | |||||
Ending Balance at Oct. 31, 2019 | $ 732,191 | $ 4,722 | 268,032 | 544,864 | (17,020) | (68,407) |
Beginning Balance (in shares) at Jul. 31, 2020 | 42,162,218 | 42,162,218 | ||||
Beginning Balance at Jul. 31, 2020 | $ 729,599 | $ 4,681 | 273,040 | 548,334 | (27,599) | (68,857) |
Increase (Decrease) in Stockholders' Equity | ||||||
Repurchases of shares (in shares) | (30,532) | |||||
Repurchases of shares | (1,454) | (1,454) | ||||
Stock-based compensation | $ 3,422 | 3,422 | ||||
Equity vests/option exercises (in shares) | 15,000 | 112,195 | ||||
Equity vests/option exercises | $ 12 | (12) | ||||
Net income (loss) | $ 24,464 | 24,464 | ||||
Other comprehensive income (loss) | $ 2,350 | 2,350 | ||||
Ending Balance (in shares) at Oct. 31, 2020 | 42,243,881 | 42,243,881 | ||||
Ending Balance at Oct. 31, 2020 | $ 758,381 | $ 4,693 | $ 276,450 | $ 572,798 | $ (25,249) | $ (70,311) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2020 | |
Cash flows from operating activities | |||
Net income | $ 24,464 | $ 5,767 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation | 8,409 | 6,338 | |
Amortization | 8,918 | 6,029 | |
Stock-based compensation expense | 3,422 | 2,404 | |
Deferred income taxes | 441 | 1,454 | |
Amortization of right-of-use assets | 2,982 | 2,310 | |
Non-cash interest expense | 4,445 | 925 | |
Inventory step-up amortization | 0 | 4,772 | |
Other non-cash items, net | 8 | (1,061) | |
Changes in assets and liabilities, net of effects of acquisitions/dispositions: | |||
Accounts receivable | (10,302) | (348) | |
Inventories | 4,214 | (6,254) | |
Prepaid expenses and other assets | (1,206) | 1,147 | |
Accounts payable and other liabilities | 10,221 | (13,664) | |
Income taxes | 9,284 | 1,450 | |
Operating lease payments | (3,293) | (2,338) | |
Net cash provided by operating activities | 62,007 | 8,931 | |
Cash flows from investing activities | |||
Capital expenditures | (5,495) | (10,390) | |
Proceeds from sale of businesses, net of cash retained | 348 | 0 | |
Acquisition of businesses, net of cash acquired | 0 | (658,932) | |
Net cash used in investing activities | (5,147) | (669,322) | |
Cash flows from financing activities | |||
Proceeds from issuance of long term debt | 0 | 400,000 | |
Repayments of long-term debt | 0 | (2,375) | |
Borrowings under revolving credit facility | 0 | 291,400 | |
Repayments under revolving credit facility | (75,000) | (10,900) | |
Dividends paid | 0 | (9,234) | |
Contingent consideration payments | (103) | (127) | |
Purchases of treasury stock | (1,454) | (3,613) | |
Net cash (used in) provided by financing activities | (76,557) | 665,151 | |
Effect of exchange rate changes on cash and cash equivalents | (153) | (10) | |
(Decrease) increase in cash and cash equivalents | (19,850) | 4,750 | |
Cash and cash equivalents at beginning of period | 277,871 | 44,535 | $ 44,535 |
Cash and cash equivalents at end of period | $ 258,021 | $ 49,285 | $ 277,871 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Oct. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | Basis of Presentation Throughout this document, references to “Cantel,” “us,” “we,” “our,” and the “Company” are references to Cantel Medical Corp. and its subsidiaries, except where the context makes it clear the reference is to Cantel itself and not its subsidiaries. Cantel is a leading provider of infection prevention products and services in the healthcare market, specializing in the following reportable segments: Medical, Life Sciences, Dental and Dialysis. See Note 15, “Reportable Segments.” Most of our equipment, consumables and supplies are used to help prevent the occurrence or spread of infections. The unaudited Condensed Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) 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 GAAP 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. on Form 10-K for the fiscal year ended July 31, 2020 (the “2020 Annual Report on Form 10-K”) and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein. The unaudited interim financial statements reflect all adjustments (of a normal and recurring nature) 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, 2020 was derived from the audited Consolidated Balance Sheet of Cantel at that date. Certain prior year amounts have been reclassified to conform to the current year presentation. COVID-19 In March 2020, the World Health Organization categorized the novel Coronavirus disease 2019, or (COVID-19) as a pandemic. We are subject to risks and uncertainties as a result of the COVID-19 pandemic. Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of responses taken on international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, continue to create significant negative economic impacts on a global basis. The extent of the impact of the COVID-19 pandemic on our business remains uncertain and difficult to predict, as the response to the pandemic continues to evolve. During the second half of fiscal 2020, the COVID-19 pandemic negatively impacted net sales and the related operations of both our Medical and Dental segments as a result of the postponement of elective medical procedures and routine dental procedures. Towards the end of fiscal 2020, we experienced gradual improvements in these respective businesses as restrictions were lifted and limitations eased. In the first quarter of fiscal 2021, patient procedure volume trends have improved as demand for both medical and dental procedures have increase during this period. While we currently expect to see improvement in the remainder of fiscal 2021, the effects of the COVID-19 pandemic remains fluid and continues to evolve differently across various geographies. We believe it is likely to continue to experience unexpected impacts on our business due to the resurgence of the virus occurring in cities across the globe. In preparing the Condensed Consolidated Financial Statements, management is required to make estimates and assumptions, including estimates and assumptions specific to any impact that the COVID-19 pandemic will have on our operations and cash flows. The estimates and assumptions used by management affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of net sales and expenses during the reporting periods. Changes to estimates related to the COVID-19 disruptions could result in other impacts, including but not limited to goodwill and long-lived asset impairment charges, inventory write downs and bad debt expense. Actual results could differ from these estimates and the differences could be material. If historical experience and other factors used by management to make these estimates do not reasonably reflect future activity, our results of operations, financial position and cash flows could be adversely impacted. Subsequent Events We performed a review of events subsequent to October 31, 2020 through the date of issuance of the accompanying unaudited consolidated interim financial statements. |
Accounting Pronouncements
Accounting Pronouncements | 3 Months Ended |
Oct. 31, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
Accounting Pronouncements | Accounting Pronouncements Newly Adopted Accounting Standards In March 2020, the FASB issued ASU 2020-04, “(Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” (“ASU 2020-04”) to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was subject to election as of March 20, 2020 and can be elected for both interim and annual periods through December 31, 2022. We adopted ASU 2020-04 on August 1, 2020. The adoption of ASU 2020-04 did not have a material impact on our financial position, results of operations or cash flows. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. We adopted ASU 2018-15 on August 1, 2020. The adoption of ASU 2018-15 did not have a material impact on our financial position, results of operations or cash flows. In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”) to modify the disclosure requirements on fair value measurements in ASC 820, “Fair Value Measurement.” ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. We adopted ASU 2018-13 on August 1, 2020. The adoption of ASU 2018-13 did not have a material impact on our financial position, results of operations or cash flows. In January 2017, the FASB issued ASU 2017-04, “(Topic 350) Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”) to simplify the test for goodwill impairment. The revised guidance eliminates the existing Step 2 of the goodwill impairment test which required an entity to compute the implied fair value of its goodwill at the testing date in order to measure the amount of the impairment charge when the fair value of the reporting unit failed Step 1 of the goodwill impairment test. The guidance will be applied on a prospective basis on or after the effective date. ASU 2017-04 is effective for fiscal years beginning after December 31, 2019 (our fiscal year 2021) and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted ASU 2017-04 on August 1, 2020. The adoption of ASU 2017-04 did not have a material impact on our financial position, results of operations or cash flows. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”) to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021). We adopted ASU 2016-13 on August 1, 2020. The adoption of ASU 2016-13 did not have a material impact on our financial position, results of operations or cash flows. Recently Issued Accounting Standards In August 2020, the FASB issued ASU 2020-06, “(Subtopic 470-20): Debt—Debt with Conversion and Other Options” (“ASU 2020-06”) to address the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity. The ASU includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, the ASU will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 (our fiscal year 2022), including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our financial position, results of operations or cash flows. The impact on our diluted earnings per share could be material upon the adoption of ASU 2020-06. In December 2019, the FASB issued ASU 2019-12, “(Topic 740) Simplifying the Accounting for Income Taxes,” (“ASU 2019-12”) to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and |
Acquisitions
Acquisitions | 3 Months Ended |
Oct. 31, 2020 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisitions Hu-Friedy: On October 1, 2019, we purchased all of the issued and outstanding membership interests of Hu-Friedy Mfg. Co. LLC (“Hu-Friedy”), for total consideration (net of cash acquired), excluding acquisition-related costs, of $716,542, consisting of $662,151 of cash and $54,391 of common stock consideration (subject to adjustment), plus contingent consideration payable in cash. The additional contingent consideration payments are (i) subject to the achievement of certain commercial milestones through March 31, 2021 ranging from zero to a maximum of $50,000 and (ii) contingent upon changes in our stock price from the date of closing through a future date subject to a registration rights agreement. See Note 9, “Fair Value Measurements,” for further details regarding these contingent payments. Hu-Friedy is a leading global manufacturer of instruments and instrument reprocessing systems serving the dental industry and is included in our Dental segment. The following table presents our purchase price allocation of our material acquisition (which was accounted for as a business combination in accordance with ASC Topic 805 “ Business Combinations ”): 2020 Purchase Price Allocation Hu-Friedy (1)(2) (Final) Purchase Price: Cash paid $ 662,151 Fair value of contingent consideration 38,371 Common stock issued 54,391 Total $ 754,913 Allocation: Property and equipment 38,613 Intangible assets: Customer relationships 225,000 Technology 32,000 Brand names 112,000 Goodwill 276,744 Deferred income taxes (222) Inventories 63,680 Other working capital 7,098 Total $ 754,913 _______________________________________________ (1) During the second quarter of fiscal 2020, we paid $25,000 to settle a portion of the contingent consideration, and during the third quarter of fiscal 2020, we paid $35,000 to repurchase a portion of the common stock issued, both of which were included in Acquisitions, net of cash acquired in the Condensed Consolidated Statement of Cash Flows. See Note 9, “Fair Value Measurements” for additional information. (2) The excess purchase price over net assets acquired was assigned to goodwill, all of which is deductible for income tax purposes. Unaudited Pro Forma Summary of Operations The following pro forma summary of operations presents our operations as if the Hu-Friedy acquisition had occurred as of the beginning of fiscal 2019. In addition to including the results of operations of this acquisition, the pro forma information gives effect to amortization of the step-up in inventory, depreciation of the step-up in property and equipment, the interest on additional borrowings, the amortization of intangible assets and the issuance of shares of common stock. On an actual basis, the Hu-Friedy acquisition contributed $60,806 and $18,725 to our consolidated net sales for the three months ended October 31, 2020 and 2019 respectively. Pro Forma Summary of Operations Three Months Ended Net sales $ 296,454 Net income $ 952 Earnings per common share: Basic $ 0.02 Diluted $ 0.02 The pro forma information presented above does not purport to be indicative of the results that actually would have been attained had the Hu-Friedy acquisition occurred as of the beginning of fiscal 2019. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Oct. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation 2016 Equity Incentive Plan At October 31, 2020, 763,315 nonvested restricted stock awards were outstanding under the 2016 plan. No options were outstanding under the 2016 plan. At October 31, 2020, 51,760 shares were collectively available for issuance pursuant to restricted stock and other stock awards, stock options and stock appreciation rights. The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income: Three Months Ended October 31, 2020 2019 Cost of sales $ 299 $ 260 Operating expenses: Selling 826 536 General and administrative 2,208 1,527 Research and development 89 81 Total operating expenses 3,123 2,144 Stock-based compensation expense $ 3,422 $ 2,404 At October 31, 2020, total unrecognized stock-based compensation expense related to total nonvested stock options and restricted stock awards was $36,996 with a remaining weighted average period of 21 months over which such expense is expected to be recognized. We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions: Three Months Ended October 31, 2020 2019 Volatility of common stock 57.27 % 30.73 % Average volatility of peer companies 45.37 % 36.28 % Average correlation coefficient of peer companies 34.81 % 24.63 % Risk-free interest rate 0.20 % 1.49 % A summary of nonvested stock award activity for the three months ended October 31, 2020 is as follows: Number of Number of Performance-based Awards Number of Market-based Awards Number of Weighted Average At July 31, 2020 318,702 29,174 63,839 411,715 $ 76.29 Granted 388,605 (4,455) 86,915 471,065 $ 46.80 Vested (1) (103,819) (3,037) (6,383) (113,239) $ 82.34 Forfeited (5,255) — (971) (6,226) $ 74.10 At October 31, 2020 598,233 21,682 143,400 763,315 $ 57.53 _______________________________________________ (1) The aggregate fair value of all nonvested stock awards which vested was approximately $9,328. A summary of stock option activity for the three months ended October 31, 2020 is as follows: Number of shares Weighted Average Exercise Price Outstanding at July 31, 2020 15,000 $ 55.36 Expired (15,000) $ 55.36 Outstanding at October 31, 2020 — $ — Excess tax benefits arise when the ultimate tax effect of the deduction for tax purposes is greater than the income tax benefit on stock-based compensation. For the three months ended October 31, 2020, income tax deductions of $1,698 were generated, of which $2,778 was recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax expense of $1,080 was recorded as an increase in income tax expense. For the three months ended October 31, 2019, income tax deductions of $2,022 were generated, of which $2,581 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax expense of $559 was recorded as an increase to income tax expense. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Oct. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition The following table gives information as to the net sales disaggregated by geography and product line: Three Months Ended October 31, Net sales by geography 2020 2019 United States $ 215,087 $ 190,084 Europe/Africa/Middle East 47,785 41,018 Asia/Pacific 19,931 17,065 Canada 11,499 7,833 Latin America/South America 2,727 1,246 Total $ 297,029 $ 257,246 Net sales by product line Capital equipment $ 48,640 $ 58,748 Consumables 167,350 153,279 Product service 33,459 31,568 Instrument 45,430 13,520 All other (1) 2,150 131 Total $ 297,029 $ 257,246 _______________________________________________ (1) Primarily includes software licensing revenues. Remaining Performance Obligations At October 31, 2020, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $81,556, primarily within the Medical segment. We expect to recognize revenue on approximately 70% of these remaining performance obligations over the remainder of fiscal 2021 and fiscal 2022. These performance obligations primarily reflect the future product service revenues for multi-period service arrangements. Contract Liabilities A summary of contract liabilities activity follows: Three Months Ended October 31, 2020 2019 Beginning balance $ 26,520 $ 28,235 Revenue deferred in current year 18,300 2,007 Deferred revenue recognized (15,590) (2,982) Foreign currency translation 33 104 Ending balance 29,263 27,364 Contract liabilities included in Other long-term liabilities (809) (384) Deferred revenue $ 28,454 $ 26,980 |
Leases
Leases | 3 Months Ended |
Oct. 31, 2020 | |
Leases [Abstract] | |
Leases | Leases Adoption of “Leases (ASC 842)” We adopted ASC 842, effective August 1, 2019, using the modified retrospective transition approach with optional transition relief, and recognized the cumulative effect of applying the new leasing standard to existing contracts on our condensed consolidated balance sheet on August 1, 2019. Our lease portfolio consists primarily of real estate, equipment and vehicles. We have approximately 90 real estate leases with lease terms ranging from 1 year to 16 years, which include our corporate headquarters, regional headquarters, and other facilities for sales and administration, warehousing, manufacturing and training. Our equipment leases primarily consist of furniture, computers and other office equipment. Supplemental balance sheet information related to our leases follows: Lease Type October 31, 2020 July 31, 2020 Assets: Operating lease assets $ 43,679 $ 44,267 Finance lease assets 4,222 4,417 Right-of-use assets, net $ 47,901 $ 48,684 Liabilities: Operating lease liabilities $ 9,602 $ 9,852 Finance lease liabilities 442 416 Current portion of lease liabilities 10,044 10,268 Operating lease liabilities 36,263 36,515 Finance lease liabilities 4,033 4,164 Long-term lease liabilities 40,296 40,679 Total lease liabilities $ 50,340 $ 50,947 Additional Lease Data Weighted average remaining lease term: Operating leases 6.04 years 6.11 years Finance leases 5.61 years 5.86 years Weighted average discount rate: Operating leases 2.75 % 2.73 % Finance leases 22.84 % 23.39 % At October 31, 2020, maturities of lease liabilities for the periods set forth below were as follows: Fiscal year Operating Finance Total Remaining 2021 $ 8,324 $ 1,086 $ 9,410 2022 9,410 1,432 10,842 2023 8,332 1,425 9,757 2024 7,037 1,434 8,471 2025 5,264 1,422 6,686 Thereafter 11,900 919 12,819 Total lease payments 50,267 7,718 57,985 Less: interest (4,402) (3,243) (7,645) Present value of lease liabilities $ 45,865 $ 4,475 $ 50,340 Supplemental income statement information related to our leases follows: Three Months Ended October 31, 2020 2019 Operating lease costs: Amortization of right-of-use assets $ 2,786 $ 2,239 Interest on lease obligations 312 412 Finance lease costs: Amortization of right-of-use assets 196 71 Interest on lease obligations 255 90 Variable lease costs 895 846 Short-term lease costs 286 248 Net lease cost $ 4,730 $ 3,906 Supplemental cash flow information related to leases follows: Three Months Ended October 31, 2020 2019 Right-of-use assets obtained in exchange for lease liabilities: Operating leases (1) $ 2,206 $ 14,153 Finance leases (2) $ — $ 4,798 _______________________________________________ (1) The three months ended October 31, 2019 primarily relates to new warehouse facility included in our Dental segment and operating leases acquired in the Hu-Friedy acquisition. (2) The three months ended October 31, 2019 includes finance leases acquired in the Hu-Friedy acquisition. |
Leases | Leases Adoption of “Leases (ASC 842)” We adopted ASC 842, effective August 1, 2019, using the modified retrospective transition approach with optional transition relief, and recognized the cumulative effect of applying the new leasing standard to existing contracts on our condensed consolidated balance sheet on August 1, 2019. Our lease portfolio consists primarily of real estate, equipment and vehicles. We have approximately 90 real estate leases with lease terms ranging from 1 year to 16 years, which include our corporate headquarters, regional headquarters, and other facilities for sales and administration, warehousing, manufacturing and training. Our equipment leases primarily consist of furniture, computers and other office equipment. Supplemental balance sheet information related to our leases follows: Lease Type October 31, 2020 July 31, 2020 Assets: Operating lease assets $ 43,679 $ 44,267 Finance lease assets 4,222 4,417 Right-of-use assets, net $ 47,901 $ 48,684 Liabilities: Operating lease liabilities $ 9,602 $ 9,852 Finance lease liabilities 442 416 Current portion of lease liabilities 10,044 10,268 Operating lease liabilities 36,263 36,515 Finance lease liabilities 4,033 4,164 Long-term lease liabilities 40,296 40,679 Total lease liabilities $ 50,340 $ 50,947 Additional Lease Data Weighted average remaining lease term: Operating leases 6.04 years 6.11 years Finance leases 5.61 years 5.86 years Weighted average discount rate: Operating leases 2.75 % 2.73 % Finance leases 22.84 % 23.39 % At October 31, 2020, maturities of lease liabilities for the periods set forth below were as follows: Fiscal year Operating Finance Total Remaining 2021 $ 8,324 $ 1,086 $ 9,410 2022 9,410 1,432 10,842 2023 8,332 1,425 9,757 2024 7,037 1,434 8,471 2025 5,264 1,422 6,686 Thereafter 11,900 919 12,819 Total lease payments 50,267 7,718 57,985 Less: interest (4,402) (3,243) (7,645) Present value of lease liabilities $ 45,865 $ 4,475 $ 50,340 Supplemental income statement information related to our leases follows: Three Months Ended October 31, 2020 2019 Operating lease costs: Amortization of right-of-use assets $ 2,786 $ 2,239 Interest on lease obligations 312 412 Finance lease costs: Amortization of right-of-use assets 196 71 Interest on lease obligations 255 90 Variable lease costs 895 846 Short-term lease costs 286 248 Net lease cost $ 4,730 $ 3,906 Supplemental cash flow information related to leases follows: Three Months Ended October 31, 2020 2019 Right-of-use assets obtained in exchange for lease liabilities: Operating leases (1) $ 2,206 $ 14,153 Finance leases (2) $ — $ 4,798 _______________________________________________ (1) The three months ended October 31, 2019 primarily relates to new warehouse facility included in our Dental segment and operating leases acquired in the Hu-Friedy acquisition. (2) The three months ended October 31, 2019 includes finance leases acquired in the Hu-Friedy acquisition. |
Inventories, Net
Inventories, Net | 3 Months Ended |
Oct. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Inventories, Net A summary of inventories, net is as follows: October 31, 2020 July 31, 2020 Raw materials and parts $ 65,577 $ 64,888 Work-in-process 7,661 6,745 Finished goods 110,809 114,606 Reserve for excess and obsolete inventory (20,167) (18,279) Total inventories, net $ 163,880 $ 167,960 |
Derivatives
Derivatives | 3 Months Ended |
Oct. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | Derivatives Foreign Currency In order to hedge against the impact of fluctuations in the value of the Euro, British Pound, Canadian dollar, Australian dollar, Singapore dollar and Chinese Renminbi relative to the U.S. dollar on the conversion of such net assets into the functional currencies, we enter into short-term forward contracts to purchase or sell Euros, British Pounds, Canadian dollars, Australian dollars, Singapore dollars and Chinese Renminbi, which contracts are one-month in duration. These short-term contracts are designated as fair value hedge instruments. There were six foreign currency forward contracts with an aggregate notional value of $63,836 and $81,677 at October 31, 2020 and July 31, 2020, respectively, which covered certain assets and liabilities that were denominated in currencies other than each entity’s functional currency. For the three months ended October 31, 2020 and 2019, the settlements of our forward contracts resulted in immaterial amounts of currency conversion gains and losses on the hedged items in the aggregate. Variable Rate Borrowings In order to hedge against the impact of fluctuations in the interest rate associated with our variable rate borrowings, in fiscal 2019, we entered into two interest rate swaps with a combined notional value of $150,000, expiring on June 28, 2023. The swaps fixed interest rates at 2.265%. In March 2020, we terminated our existing interest rate swaps and entered into a new interest rate swap (the “March 2020 Swap”) with a notional value of $500,000, which fixed interest rates at 1.297% and was set to expire on September 6, 2024. As the original forecasted hedged transactions (interest payments on variable rate debt) are still probable to occur, the $8,534 net loss related to the terminated swaps reported in accumulated other comprehensive income on the termination date will be amortized to interest expense through June 28, 2023, the original maturity date of the swaps. On May 13, 2020, in connection with the Second Amendment to our credit agreement, we terminated the March 2020 Swap and entered into a new interest rate swap (the “May 2020 Swap”) with a notional value of $500,000, which included a LIBOR floor of 1.00%, fixed interest rates at 2.08% and will expire on September 6, 2024. As the original forecasted hedged transactions related to the March 2020 Swap (interest payments on variable rate debt) are still probable to occur, the $19,980 net loss related to the terminated swaps reported in accumulated other comprehensive income on the termination date will be amortized to interest expense through September 6, 2024, the original maturity date of the swap. The new interest rate swap reflects the 1.00% LIBOR floor included in the Amended Credit Agreement, which allows for continued hedge accounting treatment. Changes in the fair value of the amended interest rate swap contract will continue to be recognized in other comprehensive income. At October 31, 2020, the fair value of the interest rate swap was $20,119, which included $5,465 recorded in accrued expenses and $14,654 recorded in other long-term liabilities. As of July 31, 2020, the fair value of the interest rate swap was $21,156, which included $5,462 recorded in accrued expenses and $15,694 recorded in other long-term liabilities. The fair value of the interest rate swap is subject to movements in LIBOR and will fluctuate in future periods. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Oct. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair Value Hierarchy We apply the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for our financial assets and liabilities that are re-measured and reported at fair value each reporting period and our nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. We define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis Our financial assets that are re-measured at fair value on a recurring basis include money market funds that are classified as cash and cash equivalents in the condensed consolidated balance sheets. These money market funds are classified within Level 1 of the fair value hierarchy and are valued using quoted market prices for identical assets. The fair value of the interest rate swaps, all of which qualify for cash flow hedge accounting, is recorded on our condensed consolidated balance sheet as an asset or liability with the related gains or losses reported as a component of accumulated other comprehensive income. The changes in fair value are reclassified from accumulated other comprehensive income into earnings in the same period that the hedged items affect earnings. The valuation technique used to determine fair value is the income approach. Under this approach, we use projected future interest rates, which fall into Level 2 of the fair value hierarchy as defined by ASC 820, as provided by counterparties to the interest rate swap agreements and the fixed rates that we are obligated to pay under the agreements. See Note 8, “Derivatives” for additional information. For the Hu-Friedy acquisition, additional purchase price payments were (i) contingent upon the achievement of certain commercial milestones through March 31, 2021, and (ii) contingent upon changes in our common stock price from the date of closing through a future date subject to a registration rights agreement. We estimated the aggregate fair value of these contingent consideration arrangements to be $38,371 at the date of acquisition, which was reported separately in our consolidated balance sheet. For the contingent consideration arrangements based upon the achievement of certain commercial milestones, the initial value assigned at the date of acquisition was determined on the basis of forecasted sales and gross profit percentage of Hu-Friedy products over the next twelve to eighteen months. During the second quarter of fiscal 2020, we paid $25,000 to settle a portion of this contingent consideration arrangement related to net sales achieved for the twelve month period ended December 31, 2019. For the remaining contingent consideration arrangement related to net sales and gross profit percentage, we reduced the fair value from a liability of approximately $17,210 to $0 due to the impact of the COVID-19 pandemic on Hu-Friedy’s current and expected performance. For the contingent consideration arrangement based upon changes in our common stock price through a future date, we were required to pay to the sellers of Hu-Friedy an amount in cash equal to $35,000 minus the aggregate net proceeds received by the seller in connection with a future equity issuance if the amount of such aggregate net proceeds was less than $35,000. The initial fair value assigned to this contingent consideration arrangement was determined based on the closing price of our common stock at the date that the acquisition closed (October 1, 2019) relative to the contracted stock price stipulated in the purchase agreement. On February 13, 2020, we entered into a stock repurchase agreement with Dental Holding LLC, the former owners of Hu-Friedy (the “Repurchase Agreement”). The Repurchase Agreement amended the Hu-Friedy purchase and sale agreement and the related registration rights agreement to provide that we repurchase a portion of the shares from the seller included in the equity consideration transferred at a price per share of $64.51 (the “Repurchase”), which equals the closing price of shares of our common stock traded on the New York Stock Exchange on February 12, 2020. The Repurchase of 438,359 common shares was completed on February 13, 2020, and the shares were thereafter canceled and retired. The Hu-Friedy purchase and sale agreement further required us to pay to the seller an amount in cash equal to $35,000 minus the aggregate net proceeds received by the seller from an equity issuance if the amount of such aggregate net proceeds was less than $35,000 (the “True-Up Obligation”). The Repurchase Agreement further amended the purchase and sale agreement to provide that in satisfaction of the True-Up Obligation, we make a payment to the sellers in an amount equal to $6,721 to settle the contingent obligation, which amount equals $35,000 minus the aggregate amount of $28,279 paid to Dental Holding as consideration for the Repurchase. These payments were made to Dental Holding on February 13, 2020. For the fiscal 2018 Aexis Medical BVBA acquisition, additional purchase price payments ranging from zero to $1,850 were contingent upon the achievement of certain purchase order targets through March 21, 2020. We estimated the original fair value of the contingent consideration using the weighted probabilities of the possible contingent payments. At the date of acquisition, we estimated the original fair value of the contingent consideration to be $1,292. In June 2020, we paid $1,691 to settle the contingent consideration. We are required to reassess the fair value of contingent consideration payments on a periodic basis. Although we believe our assumptions are reasonable, different assumptions or changes in the future may result in different estimated amounts. The fair values of our financial instruments measured on a recurring basis were categorized as follows: October 31, 2020 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Money markets $ 106 $ — $ — $ 106 Total assets $ 106 $ — $ — $ 106 Accrued expenses: Interest rate swap $ — $ 5,465 $ — $ 5,465 Contingent consideration — — — — Other long-term liabilities: Interest rate swap — 14,654 — 14,654 Total liabilities $ — $ 20,119 $ — $ 20,119 July 31, 2020 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Money markets $ 106 $ — $ — $ 106 Total assets $ 106 $ — $ — $ 106 Accrued expenses: Interest rate swap $ — $ 5,462 $ — $ 5,462 Other long-term liabilities: Interest rate swap — 15,694 — 15,694 Total liabilities $ — $ 21,156 $ — $ 21,156 Disclosure of Fair Value of Financial Instruments At October 31, 2020 and July 31, 2020, the carrying amounts for cash and cash equivalents (excluding money markets), accounts receivable and accounts payable approximated fair value due to the short maturity of these instruments. |
Intangibles and Goodwill
Intangibles and Goodwill | 3 Months Ended |
Oct. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangibles and Goodwill | Intangibles and Goodwill Our intangible assets consist of the following: October 31, 2020 July 31, 2020 Gross Accumulated Amortization Net Gross Accumulated Amortization Net Intangible assets with finite lives: Customer relationships $ 373,183 $ (86,328) $ 286,855 $ 373,018 $ (79,386) $ 293,632 Technology 91,706 (32,288) 59,418 91,613 (30,552) 61,061 Brand names 8,738 (4,187) 4,551 8,721 (4,002) 4,719 Non-compete agreements 2,850 (1,866) 984 2,850 (1,818) 1,032 Patents and other registrations 2,696 (1,278) 1,418 2,637 (1,160) 1,477 479,173 (125,947) 353,226 478,839 (116,918) 361,921 Trademarks, trade names and brand names 118,111 — 118,111 118,111 — 118,111 Total intangible assets $ 597,284 $ (125,947) $ 471,337 $ 596,950 $ (116,918) $ 480,032 Amortization expense related to intangible assets was $8,918 and $6,029 for the three months ended October 31, 2020 and 2019, respectively. We expect to recognize an additional $26,434 of amortization expense related to intangible assets for the remainder of fiscal 2021, and thereafter $34,912, $33,641, $32,742, $29,985 and $28,260 of amortization expense for fiscal years 2022, 2023, 2024, 2025 and 2026, respectively. Goodwill changed during the three months ended October 31, 2020 as follows: Medical Life Sciences Dental Dialysis Total Balance, July 31, 2020 $ 185,922 $ 64,394 $ 401,723 $ 8,133 $ 660,172 Dispositions — (56) — — (56) Foreign currency translation 267 19 19 — 305 Balance, October 31, 2020 $ 186,189 $ 64,357 $ 401,742 $ 8,133 $ 660,421 |
Financing Arrangements
Financing Arrangements | 3 Months Ended |
Oct. 31, 2020 | |
Debt Disclosure [Abstract] | |
Financing Arrangements | Financing Arrangements Long-term debt October 31, 2020 July 31, 2020 Revolving credit loans outstanding $ 324,000 $ 399,000 Tranche A term loans outstanding 546,375 546,375 Unamortized debt issuance costs (10,483) (11,166) Total long-term debt, net of unamortized debt issuance costs 859,892 934,209 Current portion of long-term debt (14,750) (7,375) Long-term debt, net of unamortized debt issuance costs and excluding current portion $ 845,142 $ 926,834 First Amendment to Credit Agreement On September 6, 2019, we entered into a First Amendment (the “First Amendment”), amending our Fourth Amended and Restated Credit Agreement. The First Amendment added a $400,000 delayed draw term loan facility (the “Delayed Draw Facility”), in addition to the existing tranche A term loan and existing revolving credit facility. The Delayed Draw Facility and a portion of the revolving credit facility were used to finance a portion of the cash consideration for our acquisition of Hu-Friedy. The remaining proceeds were used to refinance certain existing indebtedness of Cantel and Hu-Friedy, and to pay the fees and expenses incurred in connection therewith, as well as for working capital, capital expenditures and other corporate purposes. Second Amendment to Credit Agreement On May 11, 2020, we entered into a Second Amendment (the “Second Amendment”) further amending the Fourth Amended and Restated Credit Agreement (as amended, the “Amended Credit Agreement”). The Second Amendment’s principal changes include (i) increasing the maximum consolidated leverage ratio covenant for the fiscal quarter ended April 30, 2020 from 4.25x to 5.25x, (ii) suspending such financial maintenance covenant until October 31, 2021, (iii) maintaining a minimum liquidity (as defined in the Amended Credit Agreement) of at least $50,000 during the fiscal quarter ended July 31, 2020 and $75,000 during each of the following fiscal quarters ending with the fiscal quarter ending July 31, 2021, (iv) requiring us to maintain minimum consolidated EBITDA (as defined in the Amended Credit Agreement) for each period of four fiscal quarters ending on the last day of the fiscal quarters ended July 31, 2020 through July 31, 2021 and (v) limiting our ability to pay dividends and repurchase shares of our common stock during the period the consolidated leverage ratio and consolidated interest coverage ratio are suspended. The interest rates have been amended so that loans under the Amended Credit Agreement, until the third business day following the date on which a compliance certificate is delivered for the fiscal quarter ending October 31, 2021, bear interest at 2.00% above the base rate for base rate borrowings, or at 3.00% above LIBOR for LIBOR-based borrowings, and also provides for fees on the unused portion of the revolving credit facility at a rate of 0.50%. Thereafter, borrowings bear interest at rates ranging from 0.00% to 1.75% above base rate for base rate borrowings, or at rates ranging from 1.00% to 2.75% above LIBOR for LIBOR-based borrowings, depending on our consolidated leverage ratio, which is the consolidated ratio of total funded debt (minus certain unrestricted cash) to consolidated EBITDA. The Amended Credit Agreement also provides for fees on the unused portion of the revolving credit facility at rates ranging from 0.20% to 0.50%, depending on our consolidated leverage ratio. Interest rates have also been amended to include a 1.00% floor on all borrowings. As of October 31, 2020, the average interest rate on our outstanding borrowings was approximately 4.00%. The Amended Credit Agreement contains affirmative and negative covenants reasonably customary for similar credit facilities and is secured by (i) substantially all assets of Cantel and its U.S.-based subsidiaries, (ii) a pledge by Cantel and its U.S.-based subsidiaries that guarantees the obligations under the Amended Credit Agreement of all of the outstanding shares of its U.S.-based subsidiaries and 65% of the outstanding shares of certain of Cantel’s foreign-based subsidiaries and (iii) a guaranty by Cantel’s domestic subsidiaries. As of October 31, 2020, we were in compliance with all financial covenants under the Amended Credit Agreement. During the three months ended October 31, 2020, we were not required to make loan A principal payments. The tranche A term loan is subject to principal amortization, with $7,375 due and payable in the fourth quarter of fiscal 2021, $29,500 due and payable in each of fiscal 2022, 2023 and 2024, with the remaining $450,500 due and payable at maturity on September 6, 2024. During the three months ended October 31, 2019, we made principal payments of $2,375. During the three months ended October 31, 2020, we repaid $75,000 of the revolving credit facility under the Amended Credit Agreement. In November 2020, we repaid an additional $50,000 of borrowings under our revolving credit facility. Convertible Debt October 31, 2020 July 31, 2020 Convertible debt principal amount $ 168,000 $ 168,000 Unamortized original issue discount (37,282) (38,919) Unamortized debt issuance costs (4,101) (4,246) Total convertible debt, net of unamortized discount and debt issuance costs $ 126,617 $ 124,835 On May 15, 2020, we issued $168,000 aggregate principal amount of 3.25% convertible senior notes due 2025 (the “Notes”) in a private placement, including pursuant to the grant to the initial purchasers of $140,000 aggregate principal amount of the Notes, an option to purchase up to an additional $28,000 aggregate principal amount of Notes. The private placement offering closed on May 15, 2020. The initial conversion price is $41.51 per share of common stock (based on an initial conversion rate of 24.0912 shares of common stock per $1,000 principal amount of Notes) and will be subject to adjustment if certain events occur. The net proceeds from this offering were approximately $162,977 (including net proceeds relating to the issuance of the additional Notes), after deducting the initial purchasers’ discount and before the cost of offering expenses. As required by the Amended Credit Agreement, we were required to apply at least 50% of the amount by which the net proceeds exceed $100,000, or $31,500, to the repayment of debt under our credit facilities in fiscal 2020. Due to the cash conversion feature included in the Notes, the carrying value of the Notes was allocated between a liability and an equity component. Upon issuance, the liability component of the convertible debt was $123,346, net of a $40,289 discount and net of debt issuance costs of $4,365. The initial carrying value of the equity component recorded in additional paid-in-capital was $29,184, net of a $10,072 deferred tax liability, $1,377 of debt issuance costs and a $344 deferred tax asset. The $40,289 debt discount and $4,365 of debt issuance costs are amortized as non-cash interest expense over the contractual term of the convertible debt using the effective interest method, at a rate of 9.36%. Cash interest for the three months ended October 31, 2020 was $1,365. COVID-19 As further described in Note 1 “Basis of Presentation,” the magnitude and depth of disruption to our business resulting from the COVID-19 pandemic continue to remain highly uncertain. However, based on our current estimates, we do not anticipate these disruptions will impact our ability to maintain compliance with our debt covenants through the end of fiscal 2021. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Oct. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings In the normal course of business, we are subject to pending and threatened legal actions. It is our policy to accrue for amounts related to these legal matters if it is probable that a liability has been incurred and an amount of anticipated exposure can be reasonably estimated. We do not believe that any of these pending claims or legal actions will have a material effect on our business, financial condition, results of operations or cash flows. Restructuring Matters In connection with our response to COVID-19, our ongoing efforts to streamline and consolidate our global operations and integrate the Hu-Friedy acquisition with our legacy Dental business, we have incurred approximately $5,592 and $5,428 of restructuring-related charges in each of the three months periods ended October 31, 2020, and 2019, respectively. The majority of these charges consisted of onetime benefit-related costs (severance, accelerated stock-based compensation costs and other benefit costs) associated with actions taken to reduce headcount. At October 31, 2020 and July 31, 2020, $8,468 and $7,887 was included in compensation payable on our condensed consolidated balance sheet. For the three months ended October 31, 2020, we made $5,011 of severance-related cash payments. The remaining unpaid severance at October 31, 2020, will be paid out ratably during the remainder of fiscal 2021 and into fiscal 2022 in accordance with our employee separation policy. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 3 Months Ended |
Oct. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss) | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The components and changes in accumulated other comprehensive loss follow: Three Months Ended October 31, 2020 2019 Beginning balance $ (27,599) $ (22,197) Foreign currency translation 502 3,932 Interest rate swap, net of taxes (1)(2) 1,848 1,245 Ending balance $ (25,249) $ (17,020) _______________________________________________ (1) Includes tax effect of $602 and $375 for the three months ended October 31, 2020 and 2019, respectively. (2) For the three months ended October 31, 2020, we recognized $1,413 in interest expense, net relating to the non-cash amortization of the net loss on terminated swaps reported in accumulated other comprehensive loss. |
Earnings Per Common Share
Earnings Per Common Share | 3 Months Ended |
Oct. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share (“EPS”) is computed based upon the weighted average number of common shares outstanding for the year. Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the year. As we expect to settle the principal amount of our outstanding convertible debt in cash and any excess in shares of our common stock, we use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted earnings per share, if applicable. The conversion spread will have a dilutive impact on diluted earnings per share of common stock when the average market price of our common stock for a given period exceeds the conversion price of $41.51 per share. Our convertible debt is further described in Note 11, “Financing Arrangements.” We include participating securities (nonvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents) in the computation of EPS pursuant to the two-class method. Our participating securities consist solely of nonvested restricted stock awards, which have contractual participation rights equivalent to those of stockholders of unrestricted common stock. The two-class method of computing earnings per share is an allocation method that calculates earnings per share for common stock and participating securities. The following table sets forth the computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities): Three Months Ended October 31, 2020 2019 Numerator for basic and diluted earnings per share: Net income $ 24,464 $ 5,767 Less income allocated to participating securities — (2) Net income available to common shareholders $ 24,464 $ 5,765 Denominator for basic and diluted earnings per share, adjusted for participating securities: Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock 42,184,486 42,022,383 Dilutive effect of stock awards using the treasury stock method and the average market price for the year 154,352 146,422 Dilutive effect of convertible debt outstanding 619,640 — Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock 42,958,478 42,168,805 Earnings per share attributable to common stock: Basic earnings per share $ 0.58 $ 0.14 Diluted earnings per share $ 0.57 $ 0.14 Stock awards excluded because their inclusion would have been anti-dilutive — — A reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, as determined above, to our total weighted average number of shares and common stock equivalents, including participating securities, is set forth in the following table: Three Months Ended October 31, 2020 2019 Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock 42,958,478 42,168,805 Participating securities — 16,857 Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities 42,958,478 42,185,662 |
Reportable Segments
Reportable Segments | 3 Months Ended |
Oct. 31, 2020 | |
Segment Reporting [Abstract] | |
Reportable Segments | Reportable Segments In accordance with ASC Topic 280, “ Segment Reporting,” (“ASC 280”), we have determined our reportable business segments based upon an assessment of product types, organizational structure, customers and internally prepared financial statements. The primary factors used by us in analyzing segment performance are net sales and income from operations. Our reportable segments are as follows: Medical: designs, develops, manufactures, sells and installs a comprehensive offering of products and services comprising a complete circle of infection prevention solutions. Our products include endoscope reprocessing and endoscopy procedure products. Life Sciences: designs, develops, manufactures, sells, and installs water purification systems for medical, pharmaceutical and other bacteria controlled applications. We also provide filtration/separation and disinfectant technologies to the medical and life science markets through a worldwide distributor network. Two customers collectively accounted for approximately 48.3% and 45.7% of our Life Sciences segment net sales for the three months ended October 31, 2020 and 2019, respectively. Dental: designs, manufactures, sells, supplies and distributes a broad selection of products used by the global dental profession comprising a complete circle of protection. Our products include hand and powered dental instruments, infection control products, personal protective equipment (PPE) and water quality products for the dental suite. Three customers collectively accounted for approximately 41.2% and 43.5% of our Dental segment net sales for the three months ended October 31, 2020 and 2019, respectively. Dialysis: designs, develops, manufactures, sells and services reprocessing systems and sterilants for dialyzers (a device serving as an artificial kidney), as well as dialysate concentrates and supplies utilized for renal dialysis. Three customers accounted for approximately 50.8% and 46.1% of our Dialysis segment net sales for the three months ended October 31, 2020 and 2019, respectively. These customers include one of the top two customers noted above under our Life Sciences segment. No customer accounted for 10% or more of our consolidated net sales for the three months ended October 31, 2020 and 2019. Information as to reportable segments is summarized below Three Months Ended October 31, Net sales 2020 2019 Medical $ 132,319 $ 133,353 Life Sciences 45,568 49,141 Dental 111,006 67,243 Dialysis 8,136 7,509 Total net sales $ 297,029 $ 257,246 Three Months Ended October 31, Income from operations 2020 2019 Medical $ 26,716 $ 21,119 Life Sciences 8,075 7,135 Dental 25,307 5,004 Dialysis 2,566 1,622 62,664 34,880 General corporate expenses (1) 12,312 20,456 Total income from operations $ 50,352 $ 14,424 _______________________________________________ (1) The three months ended October 31, 2019 includes acquisition-related charges incurred in connection with the Hu-Friedy acquisition. |
Accounting Pronouncements (Poli
Accounting Pronouncements (Policies) | 3 Months Ended |
Oct. 31, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
Newly Adopted And Recently Issued Accounting Standards | Newly Adopted Accounting Standards In March 2020, the FASB issued ASU 2020-04, “(Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” (“ASU 2020-04”) to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 was subject to election as of March 20, 2020 and can be elected for both interim and annual periods through December 31, 2022. We adopted ASU 2020-04 on August 1, 2020. The adoption of ASU 2020-04 did not have a material impact on our financial position, results of operations or cash flows. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. We adopted ASU 2018-15 on August 1, 2020. The adoption of ASU 2018-15 did not have a material impact on our financial position, results of operations or cash flows. In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”) to modify the disclosure requirements on fair value measurements in ASC 820, “Fair Value Measurement.” ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021), including interim periods within that reporting period. We adopted ASU 2018-13 on August 1, 2020. The adoption of ASU 2018-13 did not have a material impact on our financial position, results of operations or cash flows. In January 2017, the FASB issued ASU 2017-04, “(Topic 350) Simplifying the Test for Goodwill Impairment,” (“ASU 2017-04”) to simplify the test for goodwill impairment. The revised guidance eliminates the existing Step 2 of the goodwill impairment test which required an entity to compute the implied fair value of its goodwill at the testing date in order to measure the amount of the impairment charge when the fair value of the reporting unit failed Step 1 of the goodwill impairment test. The guidance will be applied on a prospective basis on or after the effective date. ASU 2017-04 is effective for fiscal years beginning after December 31, 2019 (our fiscal year 2021) and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted ASU 2017-04 on August 1, 2020. The adoption of ASU 2017-04 did not have a material impact on our financial position, results of operations or cash flows. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (“ASU 2016-13”) to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 (our fiscal year 2021). We adopted ASU 2016-13 on August 1, 2020. The adoption of ASU 2016-13 did not have a material impact on our financial position, results of operations or cash flows. Recently Issued Accounting Standards In August 2020, the FASB issued ASU 2020-06, “(Subtopic 470-20): Debt—Debt with Conversion and Other Options” (“ASU 2020-06”) to address the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity. The ASU includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, the ASU will require entities to use the “if-converted” method when calculating diluted earnings per share for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 (our fiscal year 2022), including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2020-06 on our financial position, results of operations or cash flows. The impact on our diluted earnings per share could be material upon the adoption of ASU 2020-06. In December 2019, the FASB issued ASU 2019-12, “(Topic 740) Simplifying the Accounting for Income Taxes,” (“ASU 2019-12”) to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of purchase price allocated to the assets acquired and assumed liabilities based on estimated fair values | The following table presents our purchase price allocation of our material acquisition (which was accounted for as a business combination in accordance with ASC Topic 805 “ Business Combinations ”): 2020 Purchase Price Allocation Hu-Friedy (1)(2) (Final) Purchase Price: Cash paid $ 662,151 Fair value of contingent consideration 38,371 Common stock issued 54,391 Total $ 754,913 Allocation: Property and equipment 38,613 Intangible assets: Customer relationships 225,000 Technology 32,000 Brand names 112,000 Goodwill 276,744 Deferred income taxes (222) Inventories 63,680 Other working capital 7,098 Total $ 754,913 _______________________________________________ (1) During the second quarter of fiscal 2020, we paid $25,000 to settle a portion of the contingent consideration, and during the third quarter of fiscal 2020, we paid $35,000 to repurchase a portion of the common stock issued, both of which were included in Acquisitions, net of cash acquired in the Condensed Consolidated Statement of Cash Flows. See Note 9, “Fair Value Measurements” for additional information. (2) The excess purchase price over net assets acquired was assigned to goodwill, all of which is deductible for income tax purposes. |
Schedule of pro forma summary of operations | The following pro forma summary of operations presents our operations as if the Hu-Friedy acquisition had occurred as of the beginning of fiscal 2019. In addition to including the results of operations of this acquisition, the pro forma information gives effect to amortization of the step-up in inventory, depreciation of the step-up in property and equipment, the interest on additional borrowings, the amortization of intangible assets and the issuance of shares of common stock. On an actual basis, the Hu-Friedy acquisition contributed $60,806 and $18,725 to our consolidated net sales for the three months ended October 31, 2020 and 2019 respectively. Pro Forma Summary of Operations Three Months Ended Net sales $ 296,454 Net income $ 952 Earnings per common share: Basic $ 0.02 Diluted $ 0.02 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of the income statement components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Income | The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income: Three Months Ended October 31, 2020 2019 Cost of sales $ 299 $ 260 Operating expenses: Selling 826 536 General and administrative 2,208 1,527 Research and development 89 81 Total operating expenses 3,123 2,144 Stock-based compensation expense $ 3,422 $ 2,404 |
Schedule of weighted-average assumptions used to estimate fair value of stock options | We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions: Three Months Ended October 31, 2020 2019 Volatility of common stock 57.27 % 30.73 % Average volatility of peer companies 45.37 % 36.28 % Average correlation coefficient of peer companies 34.81 % 24.63 % Risk-free interest rate 0.20 % 1.49 % |
Summary of nonvested stock award activity | A summary of nonvested stock award activity for the three months ended October 31, 2020 is as follows: Number of Number of Performance-based Awards Number of Market-based Awards Number of Weighted Average At July 31, 2020 318,702 29,174 63,839 411,715 $ 76.29 Granted 388,605 (4,455) 86,915 471,065 $ 46.80 Vested (1) (103,819) (3,037) (6,383) (113,239) $ 82.34 Forfeited (5,255) — (971) (6,226) $ 74.10 At October 31, 2020 598,233 21,682 143,400 763,315 $ 57.53 _______________________________________________ (1) The aggregate fair value of all nonvested stock awards which vested was approximately $9,328. |
Summary of stock option activity | A summary of stock option activity for the three months ended October 31, 2020 is as follows: Number of shares Weighted Average Exercise Price Outstanding at July 31, 2020 15,000 $ 55.36 Expired (15,000) $ 55.36 Outstanding at October 31, 2020 — $ — |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of net sales disaggregated by geography and product line | The following table gives information as to the net sales disaggregated by geography and product line: Three Months Ended October 31, Net sales by geography 2020 2019 United States $ 215,087 $ 190,084 Europe/Africa/Middle East 47,785 41,018 Asia/Pacific 19,931 17,065 Canada 11,499 7,833 Latin America/South America 2,727 1,246 Total $ 297,029 $ 257,246 Net sales by product line Capital equipment $ 48,640 $ 58,748 Consumables 167,350 153,279 Product service 33,459 31,568 Instrument 45,430 13,520 All other (1) 2,150 131 Total $ 297,029 $ 257,246 _______________________________________________ (1) Primarily includes software licensing revenues. |
Schedule of contract liabilities activity | A summary of contract liabilities activity follows: Three Months Ended October 31, 2020 2019 Beginning balance $ 26,520 $ 28,235 Revenue deferred in current year 18,300 2,007 Deferred revenue recognized (15,590) (2,982) Foreign currency translation 33 104 Ending balance 29,263 27,364 Contract liabilities included in Other long-term liabilities (809) (384) Deferred revenue $ 28,454 $ 26,980 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Leases [Abstract] | |
Schedule of supplemental balance sheet information | Supplemental balance sheet information related to our leases follows: Lease Type October 31, 2020 July 31, 2020 Assets: Operating lease assets $ 43,679 $ 44,267 Finance lease assets 4,222 4,417 Right-of-use assets, net $ 47,901 $ 48,684 Liabilities: Operating lease liabilities $ 9,602 $ 9,852 Finance lease liabilities 442 416 Current portion of lease liabilities 10,044 10,268 Operating lease liabilities 36,263 36,515 Finance lease liabilities 4,033 4,164 Long-term lease liabilities 40,296 40,679 Total lease liabilities $ 50,340 $ 50,947 Additional Lease Data Weighted average remaining lease term: Operating leases 6.04 years 6.11 years Finance leases 5.61 years 5.86 years Weighted average discount rate: Operating leases 2.75 % 2.73 % Finance leases 22.84 % 23.39 % |
Schedule of operating lease maturity | At October 31, 2020, maturities of lease liabilities for the periods set forth below were as follows: Fiscal year Operating Finance Total Remaining 2021 $ 8,324 $ 1,086 $ 9,410 2022 9,410 1,432 10,842 2023 8,332 1,425 9,757 2024 7,037 1,434 8,471 2025 5,264 1,422 6,686 Thereafter 11,900 919 12,819 Total lease payments 50,267 7,718 57,985 Less: interest (4,402) (3,243) (7,645) Present value of lease liabilities $ 45,865 $ 4,475 $ 50,340 |
Schedule of finance lease maturity | At October 31, 2020, maturities of lease liabilities for the periods set forth below were as follows: Fiscal year Operating Finance Total Remaining 2021 $ 8,324 $ 1,086 $ 9,410 2022 9,410 1,432 10,842 2023 8,332 1,425 9,757 2024 7,037 1,434 8,471 2025 5,264 1,422 6,686 Thereafter 11,900 919 12,819 Total lease payments 50,267 7,718 57,985 Less: interest (4,402) (3,243) (7,645) Present value of lease liabilities $ 45,865 $ 4,475 $ 50,340 |
Schedule of supplemental income statement and cash flow information | Supplemental income statement information related to our leases follows: Three Months Ended October 31, 2020 2019 Operating lease costs: Amortization of right-of-use assets $ 2,786 $ 2,239 Interest on lease obligations 312 412 Finance lease costs: Amortization of right-of-use assets 196 71 Interest on lease obligations 255 90 Variable lease costs 895 846 Short-term lease costs 286 248 Net lease cost $ 4,730 $ 3,906 Supplemental cash flow information related to leases follows: Three Months Ended October 31, 2020 2019 Right-of-use assets obtained in exchange for lease liabilities: Operating leases (1) $ 2,206 $ 14,153 Finance leases (2) $ — $ 4,798 _______________________________________________ (1) The three months ended October 31, 2019 primarily relates to new warehouse facility included in our Dental segment and operating leases acquired in the Hu-Friedy acquisition. (2) The three months ended October 31, 2019 includes finance leases acquired in the Hu-Friedy acquisition. |
Inventories, Net (Tables)
Inventories, Net (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Summary of inventories | A summary of inventories, net is as follows: October 31, 2020 July 31, 2020 Raw materials and parts $ 65,577 $ 64,888 Work-in-process 7,661 6,745 Finished goods 110,809 114,606 Reserve for excess and obsolete inventory (20,167) (18,279) Total inventories, net $ 163,880 $ 167,960 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair values of financial instruments measured on a recurring basis | The fair values of our financial instruments measured on a recurring basis were categorized as follows: October 31, 2020 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Money markets $ 106 $ — $ — $ 106 Total assets $ 106 $ — $ — $ 106 Accrued expenses: Interest rate swap $ — $ 5,465 $ — $ 5,465 Contingent consideration — — — — Other long-term liabilities: Interest rate swap — 14,654 — 14,654 Total liabilities $ — $ 20,119 $ — $ 20,119 July 31, 2020 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Money markets $ 106 $ — $ — $ 106 Total assets $ 106 $ — $ — $ 106 Accrued expenses: Interest rate swap $ — $ 5,462 $ — $ 5,462 Other long-term liabilities: Interest rate swap — 15,694 — 15,694 Total liabilities $ — $ 21,156 $ — $ 21,156 |
Intangibles and Goodwill (Table
Intangibles and Goodwill (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Our intangible assets consist of the following: October 31, 2020 July 31, 2020 Gross Accumulated Amortization Net Gross Accumulated Amortization Net Intangible assets with finite lives: Customer relationships $ 373,183 $ (86,328) $ 286,855 $ 373,018 $ (79,386) $ 293,632 Technology 91,706 (32,288) 59,418 91,613 (30,552) 61,061 Brand names 8,738 (4,187) 4,551 8,721 (4,002) 4,719 Non-compete agreements 2,850 (1,866) 984 2,850 (1,818) 1,032 Patents and other registrations 2,696 (1,278) 1,418 2,637 (1,160) 1,477 479,173 (125,947) 353,226 478,839 (116,918) 361,921 Trademarks, trade names and brand names 118,111 — 118,111 118,111 — 118,111 Total intangible assets $ 597,284 $ (125,947) $ 471,337 $ 596,950 $ (116,918) $ 480,032 |
Schedule of changes in goodwill | Goodwill changed during the three months ended October 31, 2020 as follows: Medical Life Sciences Dental Dialysis Total Balance, July 31, 2020 $ 185,922 $ 64,394 $ 401,723 $ 8,133 $ 660,172 Dispositions — (56) — — (56) Foreign currency translation 267 19 19 — 305 Balance, October 31, 2020 $ 186,189 $ 64,357 $ 401,742 $ 8,133 $ 660,421 |
Financing Arrangements (Tables)
Financing Arrangements (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | Long-term debt October 31, 2020 July 31, 2020 Revolving credit loans outstanding $ 324,000 $ 399,000 Tranche A term loans outstanding 546,375 546,375 Unamortized debt issuance costs (10,483) (11,166) Total long-term debt, net of unamortized debt issuance costs 859,892 934,209 Current portion of long-term debt (14,750) (7,375) Long-term debt, net of unamortized debt issuance costs and excluding current portion $ 845,142 $ 926,834 |
Schedule of convertible debt | Convertible Debt October 31, 2020 July 31, 2020 Convertible debt principal amount $ 168,000 $ 168,000 Unamortized original issue discount (37,282) (38,919) Unamortized debt issuance costs (4,101) (4,246) Total convertible debt, net of unamortized discount and debt issuance costs $ 126,617 $ 124,835 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss) | |
Schedule of the components and changes in accumulated other comprehensive income (loss) | The components and changes in accumulated other comprehensive loss follow: Three Months Ended October 31, 2020 2019 Beginning balance $ (27,599) $ (22,197) Foreign currency translation 502 3,932 Interest rate swap, net of taxes (1)(2) 1,848 1,245 Ending balance $ (25,249) $ (17,020) _______________________________________________ (1) Includes tax effect of $602 and $375 for the three months ended October 31, 2020 and 2019, respectively. (2) For the three months ended October 31, 2020, we recognized $1,413 in interest expense, net relating to the non-cash amortization of the net loss on terminated swaps reported in accumulated other comprehensive loss. |
Earnings Per Common Share (Tabl
Earnings Per Common Share (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities) | The following table sets forth the computation of basic and diluted EPS available to stockholders of common stock (excluding participating securities): Three Months Ended October 31, 2020 2019 Numerator for basic and diluted earnings per share: Net income $ 24,464 $ 5,767 Less income allocated to participating securities — (2) Net income available to common shareholders $ 24,464 $ 5,765 Denominator for basic and diluted earnings per share, adjusted for participating securities: Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock 42,184,486 42,022,383 Dilutive effect of stock awards using the treasury stock method and the average market price for the year 154,352 146,422 Dilutive effect of convertible debt outstanding 619,640 — Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock 42,958,478 42,168,805 Earnings per share attributable to common stock: Basic earnings per share $ 0.58 $ 0.14 Diluted earnings per share $ 0.57 $ 0.14 Stock awards excluded because their inclusion would have been anti-dilutive — — |
Schedule of reconciliation of weighted average number of shares and common stock equivalents attributable to common stock to the Company's total weighted average number of shares and common stock equivalents including participating securities | A reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, as determined above, to our total weighted average number of shares and common stock equivalents, including participating securities, is set forth in the following table: Three Months Ended October 31, 2020 2019 Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock 42,958,478 42,168,805 Participating securities — 16,857 Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities 42,958,478 42,185,662 |
Reportable Segments (Tables)
Reportable Segments (Tables) | 3 Months Ended |
Oct. 31, 2020 | |
Segment Reporting [Abstract] | |
Information as to reportable segments | Information as to reportable segments is summarized below Three Months Ended October 31, Net sales 2020 2019 Medical $ 132,319 $ 133,353 Life Sciences 45,568 49,141 Dental 111,006 67,243 Dialysis 8,136 7,509 Total net sales $ 297,029 $ 257,246 Three Months Ended October 31, Income from operations 2020 2019 Medical $ 26,716 $ 21,119 Life Sciences 8,075 7,135 Dental 25,307 5,004 Dialysis 2,566 1,622 62,664 34,880 General corporate expenses (1) 12,312 20,456 Total income from operations $ 50,352 $ 14,424 _______________________________________________ (1) The three months ended October 31, 2019 includes acquisition-related charges incurred in connection with the Hu-Friedy acquisition. |
Acquisitions - Hu-Friedy (Detai
Acquisitions - Hu-Friedy (Details) - USD ($) | Oct. 01, 2019 | Oct. 31, 2020 | Oct. 31, 2019 |
Business Acquisition [Line Items] | |||
Cash consideration | $ 0 | $ 658,932,000 | |
Hu-Friedy | |||
Business Acquisition [Line Items] | |||
Consideration, excluding contingent consideration | $ 716,542,000 | ||
Cash consideration | 662,151,000 | ||
Stock consideration | 54,391,000 | ||
Contingent consideration | 38,371,000 | $ 0 | |
Minimum | Hu-Friedy | |||
Business Acquisition [Line Items] | |||
Contingent consideration | 0 | ||
Maximum | Hu-Friedy | |||
Business Acquisition [Line Items] | |||
Contingent consideration | $ 50,000,000 |
Acquisitions - Summary of Acqui
Acquisitions - Summary of Acquisitions (Details) - USD ($) $ in Thousands | Oct. 01, 2019 | Apr. 30, 2020 | Jan. 31, 2020 | Oct. 31, 2020 | Jul. 31, 2020 |
Business Acquisition [Line Items] | |||||
Goodwill | $ 660,421 | $ 660,172 | |||
Hu-Friedy | |||||
Business Acquisition [Line Items] | |||||
Cash paid | $ 662,151 | ||||
Fair value of contingent consideration | 38,371 | ||||
Common stock issued | 54,391 | ||||
Total consideration | 754,913 | ||||
Property and equipment | 38,613 | ||||
Goodwill | 276,744 | ||||
Deferred income taxes | (222) | ||||
Inventories | 63,680 | ||||
Other working capital | 7,098 | ||||
Total | 754,913 | ||||
Payment to settle portion of contingent consideration | $ 35 | $ 25 | |||
Hu-Friedy | Customer relationships | |||||
Business Acquisition [Line Items] | |||||
Intangible assets: | 225,000 | ||||
Hu-Friedy | Technology | |||||
Business Acquisition [Line Items] | |||||
Intangible assets: | 32,000 | ||||
Hu-Friedy | Brand names | |||||
Business Acquisition [Line Items] | |||||
Intangible assets: | $ 112,000 |
Acquisitions - Pro Forma Summar
Acquisitions - Pro Forma Summary of Operations (Details) - Hu-Friedy - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||
Actual revenue from acquiree | $ 60,806 | $ 18,725 |
Pro forma net sales | 296,454 | |
Pro forma net income | $ 952 | |
Pro forma earnings per common share, basic (in dollars per share) | $ 0.02 | |
Pro forma earnings per common share, diluted (in dollars per share) | $ 0.02 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Oct. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Outstanding unvested restricted stock shares (in shares) | 763,315 | 411,715 | |
Outstanding options (in shares) | 0 | 15,000 | |
Total unrecognized stock-based compensation cost | $ 36,996 | ||
Remaining weighted average period for unrecognized compensation cost | 21 months | ||
Deduction in income tax due to exercise of options and vesting of restricted stock | $ 1,698 | $ 2,022 | |
Reduction in income tax expense over the equity awards' vesting period | 2,778 | 2,581 | |
Excess tax expense (benefit) | $ 1,080 | $ 559 | |
2016 Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Outstanding unvested restricted stock shares (in shares) | 763,315 | ||
Outstanding options (in shares) | 0 | ||
Shares available under Plan (in shares) | 51,760 |
Stock-Based Compensation - Expe
Stock-Based Compensation - Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income | ||
Stock-based compensation expense | $ 3,422 | $ 2,404 |
Cost of sales | ||
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income | ||
Stock-based compensation expense | 299 | 260 |
Total operating expenses | ||
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income | ||
Stock-based compensation expense | 3,123 | 2,144 |
Selling | ||
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income | ||
Stock-based compensation expense | 826 | 536 |
General and administrative | ||
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income | ||
Stock-based compensation expense | 2,208 | 1,527 |
Research and development | ||
Income statement components of stock-based compensation expense recognized in Consolidated Statements of Income | ||
Stock-based compensation expense | $ 89 | $ 81 |
Stock-Based Compensation - Fair
Stock-Based Compensation - Fair Value Monte Carlo Simulation (Details) - Restricted Stock | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility of common stock | 57.27% | 30.73% |
Average volatility of peer companies | 45.37% | 36.28% |
Average correlation coefficient of peer companies | 34.81% | 24.63% |
Risk-free interest rate | 0.20% | 1.49% |
Stock-Based Compensation - Nonv
Stock-Based Compensation - Nonvested Stock Award Activity (Details) $ / shares in Units, $ in Thousands | 3 Months Ended |
Oct. 31, 2020USD ($)$ / sharesshares | |
Number of Shares | |
Nonvested stock awards at the beginning of the period (in shares) | 411,715 |
Granted (in shares) | 471,065 |
Vested (in shares) | (113,239) |
Forfeited (in shares) | (6,226) |
Nonvested stock awards at the end of the period (in shares) | 763,315 |
Weighted Average Fair Value | |
Nonvested stock awards at the beginning of the period (in dollars per share) | $ / shares | $ 76.29 |
Granted (in dollars per share) | $ / shares | 46.80 |
Vested (in dollars per share) | $ / shares | 82.34 |
Forfeited (in dollars per share) | $ / shares | 74.10 |
Nonvested stock awards at the end of the period (in dollars per share) | $ / shares | $ 57.53 |
Aggregate fair value of nonvested stock awards that vested | $ | $ 9,328 |
Time-based awards | |
Number of Shares | |
Nonvested stock awards at the beginning of the period (in shares) | 318,702 |
Granted (in shares) | 388,605 |
Vested (in shares) | (103,819) |
Forfeited (in shares) | (5,255) |
Nonvested stock awards at the end of the period (in shares) | 598,233 |
Performance-based awards | |
Number of Shares | |
Nonvested stock awards at the beginning of the period (in shares) | 29,174 |
Granted (in shares) | (4,455) |
Vested (in shares) | (3,037) |
Forfeited (in shares) | 0 |
Nonvested stock awards at the end of the period (in shares) | 21,682 |
Market-based awards | |
Number of Shares | |
Nonvested stock awards at the beginning of the period (in shares) | 63,839 |
Granted (in shares) | 86,915 |
Vested (in shares) | (6,383) |
Forfeited (in shares) | (971) |
Nonvested stock awards at the end of the period (in shares) | 143,400 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Option Activity (Details) | 3 Months Ended |
Oct. 31, 2020$ / sharesshares | |
Number of shares | |
Outstanding, beginning balance (in shares) | shares | 15,000 |
Expired (in shares) | shares | (15,000) |
Outstanding, ending balance (in shares) | shares | 0 |
Weighted Average Exercise Price | |
Outstanding, beginning balance (in dollars per share) | $ / shares | $ 55.36 |
Expired (in dollars per share) | $ / shares | 55.36 |
Outstanding, ending balance (in dollars per share) | $ / shares | $ 0 |
Revenue Recognition - Summary o
Revenue Recognition - Summary of Net Sales by Geography and Product Line (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 297,029 | $ 257,246 |
Capital equipment | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 48,640 | 58,748 |
Consumables | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 167,350 | 153,279 |
Product service | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 33,459 | 31,568 |
Instrument | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 45,430 | 13,520 |
All other | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 2,150 | 131 |
United States | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 215,087 | 190,084 |
Europe/Africa/Middle East | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 47,785 | 41,018 |
Asia/Pacific | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 19,931 | 17,065 |
Canada | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 11,499 | 7,833 |
Latin America/South America | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 2,727 | $ 1,246 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining performance obligations (Details) $ in Thousands | Oct. 31, 2020USD ($) |
Revenue from Contract with Customer [Abstract] | |
Revenue, remaining performance obligation, amount | $ 81,556 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-11-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, percentage | 70.00% |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year 9 months |
Revenue Recognition - Summary_2
Revenue Recognition - Summary of Contract Liabilities Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Oct. 31, 2020 | Oct. 31, 2019 | Oct. 31, 2020 | Jul. 31, 2020 | Oct. 31, 2019 | |
Contract Liability Activity | |||||
Beginning Balance | $ 26,520 | $ 28,235 | |||
Revenue deferred in current year | 18,300 | 2,007 | |||
Deferred revenue recognized | (15,590) | (2,982) | |||
Foreign currency translation | 33 | 104 | |||
Ending balance | $ 26,520 | $ 28,235 | $ 29,263 | $ 26,520 | $ 27,364 |
Contract liabilities included in Other long-term liabilities | (809) | (384) | |||
Deferred revenue | $ 28,454 | $ 26,223 | $ 26,980 |
Leases - Narrative (Details)
Leases - Narrative (Details) - Real Estate | 3 Months Ended |
Oct. 31, 2020contract | |
Lessee, Lease, Description [Line Items] | |
Number of lease contracts (in contracts) | 90 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease term | 16 years |
Leases - Supplemental balance s
Leases - Supplemental balance sheet (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Assets: | ||
Operating lease assets | $ 43,679 | $ 44,267 |
Finance lease assets | 4,222 | 4,417 |
Right-of-use assets, net | 47,901 | 48,684 |
Liabilities: | ||
Operating lease liabilities | 9,602 | 9,852 |
Finance lease liabilities | 442 | 416 |
Current portion of lease liabilities | 10,044 | 10,268 |
Operating lease liabilities | 36,263 | 36,515 |
Finance lease liabilities | 4,033 | 4,164 |
Long-term lease liabilities | 40,296 | 40,679 |
Total lease liabilities | $ 50,340 | $ 50,947 |
Weighted average remaining lease term: | ||
Operating leases | 6 years 14 days | 6 years 1 month 9 days |
Finance leases | 5 years 7 months 9 days | 5 years 10 months 9 days |
Weighted average discount rate: | ||
Operating leases | 2.75% | 2.73% |
Finance leases | 22.84% | 23.39% |
Leases - Maturities of lease li
Leases - Maturities of lease liabilities (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Operating | ||
Remaining 2021 | $ 8,324 | |
2022 | 9,410 | |
2023 | 8,332 | |
2024 | 7,037 | |
2025 | 5,264 | |
Thereafter | 11,900 | |
Total lease payments | 50,267 | |
Less: interest | (4,402) | |
Present value of lease liabilities | 45,865 | |
Finance | ||
Remaining 2021 | 1,086 | |
2022 | 1,432 | |
2023 | 1,425 | |
2024 | 1,434 | |
2025 | 1,422 | |
Thereafter | 919 | |
Total lease payments | 7,718 | |
Less: interest | (3,243) | |
Present value of lease liabilities | 4,475 | |
Total | ||
Remaining 2021 | 9,410 | |
2022 | 10,842 | |
2023 | 9,757 | |
2024 | 8,471 | |
2025 | 6,686 | |
Thereafter | 12,819 | |
Total lease payments | 57,985 | |
Less: interest | (7,645) | |
Total lease liabilities | $ 50,340 | $ 50,947 |
Leases - Supplemental income st
Leases - Supplemental income statement (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Operating lease costs: | ||
Amortization of right-of-use assets | $ 2,786 | $ 2,239 |
Interest on lease obligations | 312 | 412 |
Finance lease costs: | ||
Amortization of right-of-use assets | 196 | 71 |
Interest on lease obligations | 255 | 90 |
Variable lease costs | 895 | 846 |
Short-term lease costs | 286 | 248 |
Net lease cost | $ 4,730 | $ 3,906 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Leases [Abstract] | ||
Operating leases | $ 2,206 | $ 14,153 |
Finance leases | $ 0 | $ 4,798 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Raw materials and parts | $ 65,577 | $ 64,888 |
Work-in-process | 7,661 | 6,745 |
Finished goods | 110,809 | 114,606 |
Reserve for excess and obsolete inventory | (20,167) | (18,279) |
Total inventories, net | $ 163,880 | $ 167,960 |
Derivatives (Details)
Derivatives (Details) | May 13, 2020USD ($) | Mar. 31, 2020USD ($) | Oct. 31, 2020USD ($)instrument | Jul. 31, 2020USD ($)instrument | Jul. 31, 2019USD ($)instrument |
Foreign currency forward contracts | Designated as hedging instrument | Fair value hedge instruments | |||||
Derivatives | |||||
Average remaining maturity | 1 month | ||||
Number of contracts | instrument | 6 | 6 | |||
Aggregate value of contracts | $ 63,836,000 | $ 81,677,000 | |||
Interest rate swap | |||||
Derivatives | |||||
Net loss related to terminated swaps | $ (19,980,000) | $ (8,534,000) | |||
Floor interest rate | 1.00% | ||||
Fair value derivative liability | 20,119,000 | 21,156,000 | |||
Interest rate swap | 5,465,000 | 5,462,000 | |||
Derivative long-term liability | $ 14,654,000 | $ 15,694,000 | |||
Interest rate swap | Designated as hedging instrument | |||||
Derivatives | |||||
Number of contracts | instrument | 2 | ||||
Notional value | $ 500,000,000 | $ 500,000,000 | $ 150,000,000 | ||
Fixed interest rate | 2.08% | 1.297% | 2.265% | ||
Derivative, floor interest rate | 1.00% |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) | Feb. 13, 2020 | Jun. 30, 2020 | Apr. 30, 2020 | Jan. 31, 2020 | Jul. 31, 2020 | Oct. 31, 2020 | Feb. 12, 2020 | Oct. 01, 2019 | Jul. 31, 2018 | Mar. 21, 2018 |
Convertible notes | ||||||||||
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis | ||||||||||
Fair value, convertible debt | $ 224,330,000 | $ 226,066,000 | ||||||||
Hu-Friedy | ||||||||||
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis | ||||||||||
Contingent consideration | 0 | $ 38,371,000 | ||||||||
Payment to settle portion of contingent consideration | $ 35,000 | $ 25,000 | ||||||||
Decrease in contingent consideration liability | $ 17,210,000 | |||||||||
Contingent consideration, high end of range | $ 35,000 | |||||||||
Hu-Friedy | Dental Holdings | ||||||||||
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis | ||||||||||
Contingent consideration, high end of range | $ 35,000 | |||||||||
Repurchase of shares (in dollars per share) | $ 64.51 | |||||||||
Shares repurchased (in shares) | 438,359 | |||||||||
Payment to settle portion of contingent consideration | $ 6,721,000 | |||||||||
Consideration for the repurchase | $ 28,279,000 | |||||||||
Aexis | ||||||||||
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis | ||||||||||
Contingent consideration | $ 1,292,000 | |||||||||
Payment to settle portion of contingent consideration | $ 1,691,000 | |||||||||
Contingent consideration, high end of range | $ 1,850,000 | |||||||||
Contingent consideration, low end of range | $ 0 |
Fair Value Measurements - Hiera
Fair Value Measurements - Hierarchy Levels (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Recurring basis | ||
Cash and cash equivalents: | ||
Total assets | $ 106 | $ 106 |
Accrued expenses: | ||
Contingent consideration | 0 | |
Other long-term liabilities: | ||
Total liabilities | 20,119 | 21,156 |
Recurring basis | Money markets | ||
Cash and cash equivalents: | ||
Cash and cash equivalents | 106 | 106 |
Recurring basis | Level 1 | ||
Cash and cash equivalents: | ||
Total assets | 106 | 106 |
Accrued expenses: | ||
Contingent consideration | 0 | |
Other long-term liabilities: | ||
Total liabilities | 0 | 0 |
Recurring basis | Level 1 | Money markets | ||
Cash and cash equivalents: | ||
Cash and cash equivalents | 106 | 106 |
Recurring basis | Level 2 | ||
Cash and cash equivalents: | ||
Total assets | 0 | 0 |
Accrued expenses: | ||
Contingent consideration | 0 | |
Other long-term liabilities: | ||
Total liabilities | 20,119 | 21,156 |
Recurring basis | Level 2 | Money markets | ||
Cash and cash equivalents: | ||
Cash and cash equivalents | 0 | 0 |
Recurring basis | Level 3 | ||
Cash and cash equivalents: | ||
Total assets | 0 | 0 |
Accrued expenses: | ||
Contingent consideration | 0 | |
Other long-term liabilities: | ||
Total liabilities | 0 | 0 |
Recurring basis | Level 3 | Money markets | ||
Cash and cash equivalents: | ||
Cash and cash equivalents | 0 | 0 |
Interest Rate Swap | ||
Accrued expenses: | ||
Interest rate swap | 5,465 | 5,462 |
Interest Rate Swap | Recurring basis | ||
Accrued expenses: | ||
Interest rate swap | 5,465 | 5,462 |
Other long-term liabilities: | ||
Interest rate swap | 14,654 | 15,694 |
Interest Rate Swap | Recurring basis | Level 1 | ||
Accrued expenses: | ||
Interest rate swap | 0 | 0 |
Other long-term liabilities: | ||
Interest rate swap | 0 | 0 |
Interest Rate Swap | Recurring basis | Level 2 | ||
Accrued expenses: | ||
Interest rate swap | 5,465 | 5,462 |
Other long-term liabilities: | ||
Interest rate swap | 14,654 | 15,694 |
Interest Rate Swap | Recurring basis | Level 3 | ||
Accrued expenses: | ||
Interest rate swap | 0 | 0 |
Other long-term liabilities: | ||
Interest rate swap | $ 0 | $ 0 |
Intangibles and Goodwill - Inta
Intangibles and Goodwill - Intangible Assets Summary (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Intangible assets with finite lives: | ||
Gross | $ 479,173 | $ 478,839 |
Accumulated Amortization | (125,947) | (116,918) |
Net | 353,226 | 361,921 |
Intangible assets with indefinite lives: | ||
Trademarks, trade names and brand names | 118,111 | 118,111 |
Total intangible assets | ||
Gross | 597,284 | 596,950 |
Accumulated Amortization | (125,947) | (116,918) |
Net | 471,337 | 480,032 |
Customer relationships | ||
Intangible assets with finite lives: | ||
Gross | 373,183 | 373,018 |
Accumulated Amortization | (86,328) | (79,386) |
Net | 286,855 | 293,632 |
Total intangible assets | ||
Accumulated Amortization | (86,328) | (79,386) |
Technology | ||
Intangible assets with finite lives: | ||
Gross | 91,706 | 91,613 |
Accumulated Amortization | (32,288) | (30,552) |
Net | 59,418 | 61,061 |
Total intangible assets | ||
Accumulated Amortization | (32,288) | (30,552) |
Brand names | ||
Intangible assets with finite lives: | ||
Gross | 8,738 | 8,721 |
Accumulated Amortization | (4,187) | (4,002) |
Net | 4,551 | 4,719 |
Total intangible assets | ||
Accumulated Amortization | (4,187) | (4,002) |
Non-compete agreements | ||
Intangible assets with finite lives: | ||
Gross | 2,850 | 2,850 |
Accumulated Amortization | (1,866) | (1,818) |
Net | 984 | 1,032 |
Total intangible assets | ||
Accumulated Amortization | (1,866) | (1,818) |
Patents and other registrations | ||
Intangible assets with finite lives: | ||
Gross | 2,696 | 2,637 |
Accumulated Amortization | (1,278) | (1,160) |
Net | 1,418 | 1,477 |
Total intangible assets | ||
Accumulated Amortization | $ (1,278) | $ (1,160) |
Intangibles and Goodwill - Narr
Intangibles and Goodwill - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 8,918 | $ 6,029 |
Future amortization - remainder of 2021 | 26,434 | |
Future amortization - 2022 | 34,912 | |
Future amortization - 2023 | 33,641 | |
Future amortization - 2024 | 32,742 | |
Future amortization - 2025 | 29,985 | |
Future amortization - 2026 | $ 28,260 |
Intangibles and Goodwill - Good
Intangibles and Goodwill - Goodwill Rollforward (Details) $ in Thousands | 3 Months Ended |
Oct. 31, 2020USD ($) | |
Changes in Goodwill | |
Balance at the beginning of the period | $ 660,172 |
Dispositions | (56) |
Foreign currency translation | 305 |
Balance at the end of the period | 660,421 |
Medical | |
Changes in Goodwill | |
Balance at the beginning of the period | 185,922 |
Dispositions | 0 |
Foreign currency translation | 267 |
Balance at the end of the period | 186,189 |
Life Sciences | |
Changes in Goodwill | |
Balance at the beginning of the period | 64,394 |
Dispositions | (56) |
Foreign currency translation | 19 |
Balance at the end of the period | 64,357 |
Dental | |
Changes in Goodwill | |
Balance at the beginning of the period | 401,723 |
Dispositions | 0 |
Foreign currency translation | 19 |
Balance at the end of the period | 401,742 |
Dialysis | |
Changes in Goodwill | |
Balance at the beginning of the period | 8,133 |
Dispositions | 0 |
Foreign currency translation | 0 |
Balance at the end of the period | $ 8,133 |
Financing Arrangements - Schedu
Financing Arrangements - Schedule of long-term debt (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 |
Debt Instrument [Line Items] | ||
Total long-term debt, net of unamortized debt issuance costs | $ 859,892 | $ 934,209 |
Current portion of long-term debt | (14,750) | (7,375) |
Long-term debt, net of unamortized debt issuance costs and excluding current portion | 845,142 | 926,834 |
Line of Credit | ||
Debt Instrument [Line Items] | ||
Unamortized debt issuance costs | (10,483) | (11,166) |
Revolving credit loan | Line of Credit | ||
Debt Instrument [Line Items] | ||
Loans outstanding | 324,000 | 399,000 |
Tranche A term loan | Line of Credit | ||
Debt Instrument [Line Items] | ||
Loans outstanding | $ 546,375 | $ 546,375 |
Financing Arrangements - Narrat
Financing Arrangements - Narrative (Details) | May 15, 2020USD ($)$ / shares | May 11, 2020USD ($) | Nov. 30, 2020USD ($) | Oct. 31, 2020USD ($) | Oct. 31, 2019USD ($) | Jul. 31, 2020USD ($) | May 10, 2020 | Sep. 06, 2019USD ($) |
Debt Instrument [Line Items] | ||||||||
Principal payment made | $ 0 | $ 2,375,000 | ||||||
Long-term debt | 859,892,000 | $ 934,209,000 | ||||||
Deferred income taxes | 49,533,000 | 49,533,000 | ||||||
Deferred income taxes | $ 3,738,000 | 4,787,000 | ||||||
Line of Credit | ||||||||
Debt Instrument [Line Items] | ||||||||
Weighted average interest rate | 4.00% | |||||||
Debt issuance costs, net | $ 10,483,000 | 11,166,000 | ||||||
Line of Credit | Second Amendment | ||||||||
Debt Instrument [Line Items] | ||||||||
Maximum consolidated leverage ratio | 5.25 | 4.25 | ||||||
Minimum liquidity during next fiscal quarter | $ 50,000,000 | |||||||
Minimum liquidity year one | $ 75,000,000 | |||||||
Floor interest rate | 1.00% | |||||||
Shares of foreign subsidiaries pledged as security (as a percent) | 65.00% | |||||||
Line of Credit | Lender's base rate | Second Amendment | Debt Instrument, Covenant, Period One | ||||||||
Debt Instrument [Line Items] | ||||||||
Margin on reference rate (as a percent) | 2.00% | |||||||
Line of Credit | Lender's base rate | Minimum | Second Amendment | Debt Instrument, Covenant, Period Two | ||||||||
Debt Instrument [Line Items] | ||||||||
Margin on reference rate (as a percent) | 0.00% | |||||||
Line of Credit | Lender's base rate | Maximum | Second Amendment | Debt Instrument, Covenant, Period Two | ||||||||
Debt Instrument [Line Items] | ||||||||
Margin on reference rate (as a percent) | 1.75% | |||||||
Line of Credit | LIBOR | Second Amendment | Debt Instrument, Covenant, Period One | ||||||||
Debt Instrument [Line Items] | ||||||||
Margin on reference rate (as a percent) | 3.00% | |||||||
Line of Credit | LIBOR | Minimum | Second Amendment | Debt Instrument, Covenant, Period Two | ||||||||
Debt Instrument [Line Items] | ||||||||
Margin on reference rate (as a percent) | 1.00% | |||||||
Line of Credit | LIBOR | Maximum | Second Amendment | Debt Instrument, Covenant, Period Two | ||||||||
Debt Instrument [Line Items] | ||||||||
Margin on reference rate (as a percent) | 2.75% | |||||||
Line of Credit | Delayed Draw Term Loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Loans outstanding | $ 400,000 | |||||||
Line of Credit | Revolving credit loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Loans outstanding | 324,000,000 | 399,000,000 | ||||||
Repayments of debt | 75,000,000 | |||||||
Line of Credit | Revolving credit loan | Subsequent Event | ||||||||
Debt Instrument [Line Items] | ||||||||
Repayments of debt | $ 50,000,000 | |||||||
Line of Credit | Revolving credit loan | Second Amendment | Debt Instrument, Covenant, Period One | ||||||||
Debt Instrument [Line Items] | ||||||||
Fees on unused portion of credit facilities (as a percent) | 0.50% | |||||||
Line of Credit | Revolving credit loan | Minimum | Second Amendment | Debt Instrument, Covenant, Period Two | ||||||||
Debt Instrument [Line Items] | ||||||||
Fees on unused portion of credit facilities (as a percent) | 0.20% | |||||||
Line of Credit | Revolving credit loan | Maximum | Second Amendment | Debt Instrument, Covenant, Period Two | ||||||||
Debt Instrument [Line Items] | ||||||||
Fees on unused portion of credit facilities (as a percent) | 0.50% | |||||||
Line of Credit | Tranche A term loan | ||||||||
Debt Instrument [Line Items] | ||||||||
Loans outstanding | 546,375,000 | 546,375,000 | ||||||
Remainder of fiscal year | 7,375,000 | |||||||
Principal payment due 2021 | 29,500,000 | |||||||
Principal payment due 2022 | 29,500,000 | |||||||
Principal payment due 2023 | 29,500,000 | |||||||
Principal payment due at maturity | 450,500,000 | |||||||
Principal payment made | $ 2,375,000 | 31,500,000 | ||||||
Convertible notes | 3.25% Convertible Senior Notes | ||||||||
Debt Instrument [Line Items] | ||||||||
Loans outstanding | 168,000,000 | 168,000,000 | ||||||
Aggregate principal | $ 168,000,000 | |||||||
Interest rate (as a percent) | 3.25% | |||||||
Conversion price (in dollars per share) | $ / shares | $ 41.51 | |||||||
Conversion rate | 0.0240912 | |||||||
Proceeds from issuance of convertible debt | $ 162,977,000 | |||||||
Percent of proceeds used to repay debt | 50.00% | |||||||
Net proceeds not used to repay debt | $ 100,000,000 | |||||||
Long-term debt | 123,346,000 | 126,617,000 | 124,835,000 | |||||
Unamortized original issue discount | 40,289,000 | 37,282,000 | 38,919,000 | |||||
Debt issuance costs, net | 4,365,000 | 4,101,000 | $ 4,246,000 | |||||
Equity component of convertible debt | 29,184,000 | |||||||
Deferred income taxes | 10,072,000 | |||||||
Equity component of debt issuance costs | 1,377,000 | |||||||
Deferred income taxes | $ 344,000 | |||||||
Effective interest rate | 9.36% | |||||||
Cash interest | $ 1,365,000 | |||||||
Convertible notes | Initial Purchase | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal | $ 140,000,000 | |||||||
Convertible notes | Over Allotment Option | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal | $ 28,000,000 |
Financing Arrangements - Sche_2
Financing Arrangements - Schedule of convertible debt (Details) - USD ($) $ in Thousands | Oct. 31, 2020 | Jul. 31, 2020 | May 15, 2020 |
Debt Instrument [Line Items] | |||
Total long-term debt, net of unamortized debt issuance costs | $ 859,892 | $ 934,209 | |
3.25% Convertible Senior Notes | Convertible notes | |||
Debt Instrument [Line Items] | |||
Loans outstanding | 168,000 | 168,000 | |
Unamortized original issue discount | (37,282) | (38,919) | $ (40,289) |
Unamortized debt issuance costs | (4,101) | (4,246) | (4,365) |
Total long-term debt, net of unamortized debt issuance costs | $ 126,617 | $ 124,835 | $ 123,346 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Oct. 31, 2020 | Oct. 31, 2019 | Jul. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Restructuring charges | $ 5,592 | $ 5,428 | |
Restructuring reserve | 8,468 | $ 7,887 | |
Severance-related cash payments | $ 5,011 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Components and changes in accumulated other comprehensive (loss) income | ||
Beginning Balance | $ 729,599 | $ 661,537 |
Other comprehensive income (loss) | 2,350 | 5,177 |
Ending Balance | 758,381 | 732,191 |
Tax effect on interest rate swap | 602 | 375 |
Interest rate swap | Interest Expense | ||
Components and changes in accumulated other comprehensive (loss) income | ||
Interest expense, net relating to non-cash amortization of net loss | 1,413 | |
Accumulated Other Comprehensive Loss | ||
Components and changes in accumulated other comprehensive (loss) income | ||
Beginning Balance | (27,599) | (22,197) |
Other comprehensive income (loss) | 2,350 | 5,177 |
Ending Balance | (25,249) | (17,020) |
Foreign Currency Translation | ||
Components and changes in accumulated other comprehensive (loss) income | ||
Other comprehensive income (loss) | 502 | 3,932 |
Interest Rate Swap, net of taxes | ||
Components and changes in accumulated other comprehensive (loss) income | ||
Other comprehensive income (loss) | $ 1,848 | $ 1,245 |
Earnings Per Common Share - Nar
Earnings Per Common Share - Narrative (Details) | May 15, 2020$ / shares |
3.25% Convertible Senior Notes | Convertible notes | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Conversion price (in dollars per share) | $ 41.51 |
Earnings Per Common Share - Com
Earnings Per Common Share - Computation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Numerator for basic and diluted earnings per share: | ||
Net income | $ 24,464 | $ 5,767 |
Less income allocated to participating securities | 0 | (2) |
Net income available to common shareholders | $ 24,464 | $ 5,765 |
Denominator for basic and diluted earnings per share, adjusted for participating securities: | ||
Denominator for basic earnings per share - weighted average number of shares outstanding attributable to common stock (in shares) | 42,184,486 | 42,022,383 |
Dilutive effect of stock awards using the treasury stock method and the average market price for the year (in shares) | 154,352 | 146,422 |
Dilutive effect of convertible debt outstanding (in shares) | 619,640 | 0 |
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock (in shares) | 42,958,478 | 42,168,805 |
Earnings per share attributable to common stock: | ||
Basic earnings per share (in dollars per share) | $ 0.58 | $ 0.14 |
Diluted earnings per share (in dollars per share) | $ 0.57 | $ 0.14 |
Stock awards excluded because their inclusion would have been anti-dilutive (in shares) | 0 | 0 |
Earnings Per Common Share - Wei
Earnings Per Common Share - Weighted Average Shares (Details) - shares | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Reconciliation of weighted average number of shares and common stock equivalents attributable to common stock, to the entity's total weighted average number of shares and common stock equivalents, including participating securities | ||
Denominator for diluted earnings per share - weighted average number of shares and common stock equivalents attributable to common stock (in shares) | 42,958,478 | 42,168,805 |
Participating securities (in shares) | 0 | 16,857 |
Total weighted average number of shares and common stock equivalents attributable to both common stock and participating securities (in shares) | 42,958,478 | 42,185,662 |
Reportable Segments - Narrative
Reportable Segments - Narrative (Details) - Segment sales - Customer concentration | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Two customers | Life Sciences | ||
Information as to operating segments | ||
Concentration risk within segment (as a percent) | 48.30% | 45.70% |
Three customers | Dental | ||
Information as to operating segments | ||
Concentration risk within segment (as a percent) | 41.20% | 43.50% |
Three customers | Dialysis | ||
Information as to operating segments | ||
Concentration risk within segment (as a percent) | 50.80% | 46.10% |
Reportable Segments - Results (
Reportable Segments - Results (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2020 | Oct. 31, 2019 | |
Information as to operating segments | ||
Net sales | $ 297,029 | $ 257,246 |
Income from operations | 50,352 | 14,424 |
General corporate expenses | 49,378 | 55,287 |
Operating Segment | ||
Information as to operating segments | ||
Income from operations | 62,664 | 34,880 |
General corporate expenses | ||
Information as to operating segments | ||
General corporate expenses | 12,312 | 20,456 |
Medical | ||
Information as to operating segments | ||
Net sales | 132,319 | 133,353 |
Medical | Operating Segment | ||
Information as to operating segments | ||
Income from operations | 26,716 | 21,119 |
Life Sciences | ||
Information as to operating segments | ||
Net sales | 45,568 | 49,141 |
Life Sciences | Operating Segment | ||
Information as to operating segments | ||
Income from operations | 8,075 | 7,135 |
Dental | ||
Information as to operating segments | ||
Net sales | 111,006 | 67,243 |
Dental | Operating Segment | ||
Information as to operating segments | ||
Income from operations | 25,307 | 5,004 |
Dialysis | ||
Information as to operating segments | ||
Net sales | 8,136 | 7,509 |
Dialysis | Operating Segment | ||
Information as to operating segments | ||
Income from operations | $ 2,566 | $ 1,622 |