Exhibit 99.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On July 31, 2006, Carsen Group Inc. (“Carsen”), a wholly-owned subsidiary of Cantel Medical Corp. (“Cantel”), closed the sale of substantially all of its assets to Olympus America Inc. and certain of its affiliates (collectively, “Olympus”) under an Asset Purchase Agreement dated as of May 16, 2006 among Carsen, Cantel and Olympus. Olympus purchased substantially all of Carsen’s assets other than those related to Carsen’s Medivators business and certain other smaller product lines. Following the closing, Olympus hired substantially all of Carsen’s employees and took over Carsen’s Olympus-related operations (as well as the operations related to the other acquired product lines).
The purchase price for the net assets sold to Olympus was approximately $31,500,000, comprised of a fixed sum of $10,000,000 plus an additional formula-based sum of $21,500,000. The balance of $900,000 is subject to adjustment based on final asset valuations and certain offsets to be determined during the first quarter of fiscal 2007. In addition, Olympus will pay Carsen a percentage (20%) of Olympus’ revenues attributable to Carsen’s unfilled customer orders as of July 31, 2006 that were assumed by Olympus at the closing.
In addition, on July 31, 2006, Carsen sold most of its remaining inventories, records and other assets to Carsen Medical Inc. (“CMI”), a newly formed corporation owned by two individuals who previously served as executives of Carsen. The transaction was consummated under the terms of an Asset Purchase Agreement dated as of May 18, 2006. The purchase price for the assets, net of liabilities assumed by CMI, has not been finalized but is anticipated to be less than $50,000. In addition, CMI will pay to Carsen one percent (1%) of CMI’s annual sales during each fiscal year commencing August 1, 2007 up to a maximum aggregate payment of $375,000.
The following Unaudited Pro Forma Condensed Financial Statements were derived from the unaudited condensed consolidated financial statements included in Cantel’s Form 10-Q as of and for the nine months ended April 30, 2006, and the audited consolidated financial statements included in Cantel’s Annual Report on Form 10-K for the fiscal year ended July 31, 2005.
The following Unaudited Pro Forma Condensed Balance Sheet as of April 30, 2006 was prepared as if the transactions under both asset purchase agreements with Olympus and CMI were completed on April 30, 2006. The following Unaudited Pro Forma Condensed Consolidated Statements of Income were prepared as if all of Carsen’s operating results were excluded from continuing operations as of the first day of the respective period. The following Unaudited Pro Forma Condensed Financial Statements do not reflect the likely use of the proceeds from the transactions (a significant portion of such proceeds would be used to repay debt and to invest in cash equivalents, therefore reducing net interest expense if the transactions were completed as of the first day of the respective periods presented in the following Unaudited Pro Forma Condensed Consolidated Statements of Income.)
Cantel is providing this information for illustrative purposes only. It does not necessarily indicate what the continuing operations and financial position of Cantel might have been had the termination of Carsen’s operations occurred prior to the periods presented, nor does it necessarily indicate what the results of continuing operations and financial position of Cantel will be following the termination of Carsen’s operations on July 31, 2006.
The accompanying unaudited pro forma financial information should be read in conjunction with:
· the audited consolidated financial statements and other financial information included in Cantel’s Annual Report on Form 10-K for the fiscal year ended July 31, 2005, including the notes to those financial statements;
· the unaudited condensed consolidated financial statements included in Cantel’s Form 10-Q as of and for the nine months ended April 30, 2006, including the notes to those financial statements; and
· the Current Report on Form 8-K filed on May 22, 2006.
CANTEL MEDICAL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 30, 2006
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| Historical |
| Pro Forma |
| Pro Forma |
| |||
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| (amounts in thousands) |
| |||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 21,813 |
| $ | 26,587 | (A) | $ | 48,400 |
|
Accounts receivable, net |
| 38,307 |
| (14,549 | )(D) | 23,758 |
| |||
Inventories |
| 33,875 |
| (9,573 | )(D) | 24,302 |
| |||
Deferred income taxes |
| 2,480 |
| (296 | )(D) | 2,184 |
| |||
Prepaid expenses and other current assets |
| 2,130 |
| 67 | (D) | 2,197 |
| |||
Total current assets |
| 98,605 |
| 2,236 |
| 100,841 |
| |||
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Property and equipment, net |
| 35,990 |
| (527 | )(D) | 35,463 |
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Intangible assets, net |
| 43,986 |
| (98 | )(D) | 43,888 |
| |||
Goodwill |
| 68,218 |
| (246 | )(D) | 67,972 |
| |||
Other assets |
| 1,927 |
| — |
| 1,927 |
| |||
|
| $ | 248,726 |
| $ | 1,365 |
| $ | 250,091 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
| $ | 3,500 |
| $ | — |
| $ | 3,500 |
|
Accounts payable |
| 12,089 |
| (3,476 | )(D) | 8,613 |
| |||
Compensation payable |
| 4,955 |
| (1,618 | )(D) | 3,337 |
| |||
Accrued expenses |
| 6,435 |
| (1,029 | )(D) | 5,406 |
| |||
Deferred revenue |
| 6,647 |
| (4,582 | )(D) | 2,065 |
| |||
Liabilities of discontinued operations |
| — |
| 5,210 | (B) | 5,210 |
| |||
Total current liabilities |
| 33,626 |
| (5,495 | ) | 28,131 |
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Long-term debt |
| 54,000 |
| — |
| 54,000 |
| |||
Deferred income taxes |
| 23,937 |
| 104 | (D) | 24,041 |
| |||
Other long-term liabilities |
| 2,762 |
| — |
| 2,762 |
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Stockholders’ equity: |
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Preferred Stock |
| — |
| — |
| — |
| |||
Common Stock |
| 1,607 |
| — |
| 1,607 |
| |||
Additional capital |
| 68,091 |
| — |
| 68,091 |
| |||
Retained earnings |
| 57,956 |
| 6,325 | (C) | 64,281 |
| |||
Accumulated other comprehensive income |
| 10,318 |
| 431 | (D) | 10,749 |
| |||
Treasury Stock, at cost |
| (3,571 | ) | — |
| (3,571 | ) | |||
Total stockholders’ equity |
| 134,401 |
| 6,756 |
| 141,157 |
| |||
|
| $ | 248,726 |
| $ | 1,365 |
| $ | 250,091 |
|
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
2
CANTEL MEDICAL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED APRIL 30, 2006
|
| Historical |
| Pro Forma |
| Pro Forma |
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| (amounts in thousands, except per share data) |
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Net sales |
| $ | 187,215 |
| $ | (45,176 | ) | $ | 142,039 |
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Cost of sales |
| 116,504 |
| (26,868 | ) | 89,636 |
| |||
Gross profit |
| 70,711 |
| (18,308 | ) | 52,403 |
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Operating expenses: |
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Selling |
| 19,072 |
| (5,985 | ) | 13,087 |
| |||
General and administrative |
| 25,146 |
| (2,160 | ) | 22,986 |
| |||
Research and development |
| 3,811 |
| — |
| 3,811 |
| |||
Total operating expenses |
| 48,029 |
| (8,145 | ) | 39,884 |
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Income from continuing operations before interest and income taxes |
| 22,682 |
| (10,163 | ) | 12,519 |
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Interest expense, net |
| 2,731 |
| (43 | ) | 2,688 |
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Income from continuing operations before income taxes |
| 19,951 |
| (10,120 | ) | 9,831 |
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Income taxes |
| 7,693 |
| (3,590 | ) | 4,103 |
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Income from continuing operations |
| $ | 12,258 |
| $ | (6,530 | ) | $ | 5,728 |
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Earnings per common share from continuing operations: |
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Basic |
| $ | 0.79 |
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| $ | 0.37 |
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Diluted |
| $ | 0.75 |
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| $ | 0.35 |
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Weighted average common shares: |
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Basic |
| 15,486 |
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| 15,486 |
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Diluted |
| 16,357 |
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|
| 16,357 |
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See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
3
CANTEL MEDICAL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JULY 31, 2005
|
| Historical |
| Pro Forma |
| Pro Forma |
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| (amounts in thousands, except per share data) |
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Net sales |
| $ | 197,402 |
| $ | (60,245 | ) | $ | 137,157 |
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Cost of sales |
| 121,162 |
| (37,886 | ) | 83,276 |
| |||
Gross profit |
| 76,240 |
| (22,359 | ) | 53,881 |
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Operating expenses: |
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Selling |
| 23,016 |
| (7,750 | ) | 15,266 |
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General and administrative |
| 22,935 |
| (2,741 | ) | 20,194 |
| |||
Research and development |
| 4,099 |
| — |
| 4,099 |
| |||
Total operating expenses |
| 50,050 |
| (10,491 | ) | 39,559 |
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Income from continuing operations before interest and income taxes |
| 26,190 |
| (11,868 | ) | 14,322 |
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Interest expense, net |
| 1,058 |
| (118 | ) | 940 |
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Income from continuing operations before income taxes |
| 25,132 |
| (11,750 | ) | 13,382 |
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Income taxes |
| 9,627 |
| (4,139 | ) | 5,488 |
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Income from continuing operations |
| $ | 15,505 |
| $ | (7,611 | ) | $ | 7,894 |
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Earnings per common share from continuing operations: |
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Basic |
| $ | 1.05 |
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| $ | 0.53 |
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Diluted |
| $ | 0.96 |
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| $ | 0.49 |
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Weighted average common shares: |
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Basic |
| 14,830 |
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| 14,830 |
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Diluted |
| 16,208 |
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| 16,208 |
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See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
4
CANTEL MEDICAL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JULY 31, 2004
|
| Historical |
| Pro Forma |
| Pro Forma |
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| (amounts in thousands, except per share data) |
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Net sales |
| $ | 169,993 |
| $ | (46,952 | ) | $ | 123,041 |
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Cost of sales |
| 107,537 |
| (29,434 | ) | 78,103 |
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Gross profit |
| 62,456 |
| (17,518 | ) | 44,938 |
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Operating expenses: |
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Selling |
| 20,749 |
| (6,203 | ) | 14,546 |
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General and administrative |
| 18,599 |
| (2,264 | ) | 16,335 |
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Research and development |
| 4,212 |
| — |
| 4,212 |
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Total operating expenses |
| 43,560 |
| (8,467 | ) | 35,093 |
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Income from continuing operations before interest and income taxes |
| 18,896 |
| (9,051 | ) | 9,845 |
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Interest expense, net |
| 1,582 |
| (85 | ) | 1,497 |
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Income from continuing operations before income taxes |
| 17,314 |
| (8,966 | ) | 8,348 |
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Income taxes |
| 6,660 |
| (3,189 | ) | 3,471 |
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Income from continuing operations |
| $ | 10,654 |
| $ | (5,777 | ) | $ | 4,877 |
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Earnings per common share from continuing operations: |
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Basic |
| $ | 0.75 |
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| $ | 0.34 |
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Diluted |
| $ | 0.70 |
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| $ | 0.32 |
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Weighted average common shares: |
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Basic |
| 14,188 |
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| 14,188 |
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Diluted |
| 15,244 |
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| 15,244 |
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See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
5
CANTEL MEDICAL CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JULY 31, 2003
|
| Historical |
| Pro Forma |
| Pro Forma |
| |||
|
| (amounts in thousands, except per share data) |
| |||||||
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Net sales |
| $ | 129,257 |
| $ | (35,305 | ) | $ | 93,952 |
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Cost of sales |
| 81,063 |
| (23,413 | ) | 57,650 |
| |||
Gross profit |
| 48,194 |
| (11,892 | ) | 36,302 |
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Operating expenses: |
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Selling |
| 17,309 |
| (4,711 | ) | 12,598 |
| |||
General and administrative |
| 12,816 |
| (1,555 | ) | 11,261 |
| |||
Research and development |
| 4,528 |
| — |
| 4,528 |
| |||
Total operating expenses |
| 34,653 |
| (6,266 | ) | 28,387 |
| |||
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Income from continuing operations before interest and income taxes |
| 13,541 |
| (5,626 | ) | 7,915 |
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Interest expense, net |
| 1,326 |
| (45 | ) | 1,281 |
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Income from continuing operations before income taxes |
| 12,215 |
| (5,581 | ) | 6,634 |
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Income taxes |
| 4,305 |
| (2,091 | ) | 2,214 |
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Income from continuing operations |
| $ | 7,910 |
| $ | (3,490 | ) | $ | 4,420 |
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Earnings per common share from continuing operations: |
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Basic |
| $ | 0.57 |
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| $ | 0.32 |
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Diluted |
| $ | 0.54 |
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| $ | 0.30 |
| |
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Weighted average common shares: |
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| |||
Basic |
| 13,901 |
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| 13,901 |
| |||
Diluted |
| 14,773 |
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|
| 14,773 |
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See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
6
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(A) To record the cash received from Olympus and CMI as if the transactions under both Asset Purchase Agreements with Olympus and CMI were completed on April 30, 2006.
(B) To reflect the remaining liabilities of the discontinued operations, which primarily represent income taxes payable, certain compensation payables, certain accounts payable and certain accrued expenses.
(C) To record the gain from the sale of net assets to Olympus, net of taxes. Such gain excludes the cost of severance which was previously expensed and reflected in retained earnings as of April 30, 2006.
(D) To reflect the sale of Carsen’s net assets and to reclassify the remaining liabilities as discontinued as if the transactions under both Asset Purchase Agreements with Olympus and CMI were completed on April 30, 2006.
(E) To remove Carsen’s results of operations from continuing operations for the period presented and to adjust such amounts for intercompany transactions.
7