<Page>
EXHIBIT 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended JUNE 30, 2001 or
--------------
/_/ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from __________ to _____
COMMISSION FILE NUMBER 0-11278
MINNTECH CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1229121
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14605 - 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
(Address of principal executive offices)
Registrant's telephone number, including area code: (763) 553-3300
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 30, 2001
----- ----------------------------
Common Stock, $0.05 par value 6,684,562 shares
<Page>
MINNTECH CORPORATION
QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 2001
Index
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Operations 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 16
Page 2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINNTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<Table>
<Caption>
Thirteen weeks Thirteen weeks
ended ended
June 30, 2001 July 1, 2000
------------- ------------
TOTAL REVENUES $ 19,951 $ 17,605
OPERATING COSTS AND EXPENSES
Cost of product sales 12,151 11,622
Research and development 884 1,014
Selling, general and administrative 5,262 5,051
Amortization of intangible assets 52 59
-------- --------
Total operating costs and expenses 18,349 17,746
-------- --------
EARNINGS / (LOSS) FROM OPERATIONS 1,602 (141)
Other income, net 250 52
-------- --------
EARNINGS / (LOSS) BEFORE INCOME TAXES 1,852 (89)
Provision / (benefit) for income taxes 648 (28)
-------- --------
NET EARNINGS / (LOSS) BEFORE CUMULATIVE EFFECT OF A CHANGE IN 1,204 (61)
ACCOUNTING PRINCIPLE
Cumulative effect of a change in accounting principle -- (136)
-------- --------
NET EARNINGS / (LOSS) $ 1,204 $ (197)
======== ========
Weighted avg. common shares outstanding -- basic 6,681 6,682
EARNINGS / (LOSS) PER SHARE -- BASIC:
Earnings / (loss) before cumulative effect $ .18 ($0.01)
Cumulative effect -- ($0.02)
-------- --------
Net earnings / (loss) $ .18 ($0.03)
======== ========
Weighted avg. common shares outstanding -- diluted: 6,708 6,682
EARNINGS / (LOSS) PER SHARE -- DILUTED:
Earnings / (loss) before cumulative effect $ .18 ($0.01)
Cumulative effect -- ($0.02)
-------- --------
Net earnings / (loss) $ .18 ($0.03)
======== ========
</Table>
The accompanying notes are an integral part of these financial statements.
Page 3
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MINNTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except share and per share amounts)
<Table>
<Caption>
ASSETS (Unaudited)
June 30, 2001 March 31, 2001
------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 15,825 $ 15,344
Accounts receivable, less allowance for doubtful accounts
of $409 and $364, respectfully 14,444 13,333
Inventories
Finished goods 4,803 4,627
Raw materials 3,699 3,881
Work-in-process 2,432 2,738
-------- --------
Total inventories 10,934 11,246
Prepaid expenses and other current assets 3,633 3,131
-------- --------
TOTAL CURRENT ASSETS 44,836 43,054
PROPERTY AND EQUIPMENT
Land, buildings and improvements 12,690 12,685
Machinery and equipment 29,524 29,146
-------- --------
42,214 41,831
Less accumulated depreciation (25,176) (24,421)
-------- --------
Net property and equipment 17,038 17,410
OTHER ASSETS
Patent costs, net 494 430
Goodwill, net 376 390
Other 1,717 1,728
-------- --------
TOTAL ASSETS $ 64,461 $ 63,012
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,019 $ 3,717
Income taxes payable 663 271
Accrued compensation 1,017 889
Other accrued expenses 3,442 3,919
-------- --------
TOTAL CURRENT LIABILITIES 9,141 8,796
Deferred compensation 754 738
Deferred income taxes 56 57
-------- --------
TOTAL LIABILITIES 9,591 9,951
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000 shares authorized, -- --
none outstanding
Common stock, $.05 par value; 20,000,000 shares authorized, 335 334
6,702,956 and 6,679,287 shares issued and outstanding, respectively
Additional paid-in capital 12,243 12,084
Accumulated other comprehensive income (1,633) (1,358)
Retained earnings 43,565 42,361
-------- --------
TOTAL STOCKHOLDERS' EQUITY 54,510 53,421
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 64,461 $ 63,012
======== ========
</Table>
The accompanying notes are an integral part of these financial statements.
Page 4
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MINNTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<Table>
<Caption>
Thirteen weeks Thirteen weeks
ended ended
June 30, 2001 July 1, 2000
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings / (loss) $ 1,204 $ (61)
Adjustments to reconcile net earnings / (loss) to net cash provided by
operating activities:
Depreciation and amortization 846 802
Foreign currency exchange gain (113) (132)
Other, net 9 116
Changes in operating assets and liabilities:
Accounts receivable (1,264) 173
Inventories 286 (495)
Prepaid expenses and other current assets (505) (748)
Accounts payable 323 957
Accrued expenses (341) (260)
Income taxes payable 429 (372)
-------- --------
Total adjustments (330) 41
-------- --------
NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES 874 (20)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (497) (945)
Patent application costs (101) (42)
Other 12 8
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (586) (979)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 43 --
Proceeds from / payments on employee stock purchase plan 117 97
Repurchase of common stock -- (194)
-------- --------
NET CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES 160 (97)
Effects of exchange rate changes on cash 33 44
-------- --------
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 481 (1,052)
Cash and cash equivalents at beginning of period 15,344 10,687
-------- --------
Cash and cash equivalents at end of period $ 15,825 $ 9,635
-------- --------
</Table>
The accompanying notes are an integral part of these financial statements.
Page 5
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MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - FINANCIAL INFORMATION
The unaudited interim condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission; accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted.
These unaudited interim condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes in the
Company's Annual Report on Form 10-K for the year ended March 31, 2001 as filed
with the Securities and Exchange Commission.
The Company adopted a universal calendar for financial reporting beginning in
the first quarter of fiscal 2001. A fiscal year will include either 52 or 53
weeks in total. This change in reporting is not materially different from prior
years.
Effective April 1, 2000, Minntech modified their revenue recognition policy for
certain equipment sales and certain product shipments, resulting in a cumulative
effect of a change in accounting. The cumulative effect of this accounting
change was $.219 million ($.136 million, net of tax). The accounting change did
not have a material effect on revenue or quarterly earnings during fiscal 2001.
Minntech has restated its results for the thirteen week period ended July 1,
2000. See further discussion of this matter in the Company's Annual Report on
Form 10-K for the year ended March 31, 2001.
In the opinion of management, the unaudited interim condensed consolidated
financial statements reflect all adjustments necessary for a fair presentation
of the interim periods.
NOTE 2 - LINE OF CREDIT
At June 30, 2001, the Company had a line of credit with a commercial bank which
allowed the Company to borrow up to $10 million on an unsecured basis at the
prime rate of interest (6.75% at June 30, 2001) or the indexed London Interbank
Offered Rate (LIBOR). As of June 30, 2001, the Company had no outstanding
borrowings under the line of credit. This credit line expires on September 30,
2002.
NOTE 3 - EARNINGS/(LOSS) PER SHARE
The following table reconciles the numerators and denominators of the basic and
diluted earnings/(loss) per share computations for the quarter ended June 30,
2001 and July 1, 2000.
<Table>
<Caption>
(in thousands, except per share amounts) Basic Effect of Dilutive Diluted
Quarter ended June 30, 2001 Earnings Per Share Stock Options Earnings Per Share
- ----------------------------------------------------------------------------------------------------------------
Net earnings $ 1,204 $ 1,204
Weighted average common shares outstanding 6,681 27 6,708
Per share amount $ .18 $ .18
Quarter ended July 1, 2000
- ----------------------------------------------------------------------------------------------------------------
Net loss $ (197) $ (197)
Weighted average common shares outstanding 6,682 6,682
Per share amount $ (.03) $ (.03)
</Table>
Page 6
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MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - EARNINGS PER SHARE (CONTINUED)
Outstanding stock options to purchase 280,195 and 588,049 shares of common stock
as of June 30, 2001 and July 1, 2000, respectively, were not included in the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market price of the common stock during the
period.
NOTE 4 - COMPREHENSIVE INCOME
The components of comprehensive income are as follows:
<Table>
<Caption>
(dollars in thousands) Quarter ended Quarter ended
June 30, 2001 July 1, 2000
- --------------------------------------------------------------------------------------
Net earnings/(loss) $ 1,204 $ (61)
Other comprehensive income:
Foreign currency translation, net (275) 26
------------------------------------------
Total other comprehensive income (275) 26
-----------------------------------------
Total comprehensive income/(loss) $ 929 $ (35)
==========================================
</Table>
The accumulated other comprehension income balance as of June 30, 2001 is solely
comprised of foreign currency translation.
NOTE 5 - STOCKHOLDERS' EQUITY
<Table>
<Caption>
Consolidated Statement of Stockholders' Equity
(dollars in thousands)
Common Stock
----------------------------------
Shares Additional Accumulated other
issued and paid-in comprehensive Retained
outstanding Amount capital income earnings Total
-----------------------------------------------------------------------------
Balances at March 31, 2001 6,679,287 $ 334 $ 12,084 $ (1,358) $ 42,361 $ 53,421
Net earnings 1,204 1,204
Foreign currency translation adjustment (275) (275)
Employee stock purchase plan 18,394 1 117 118
Exercised stock options 5,275 42 42
Payment of cash dividends
-----------------------------------------------------------------------------
Balances at June 30, 2001 6,702,956 $ 335 $ 12,243 $ (1,633) $ 43,565 $ 54,510
=============================================================================
</Table>
NOTE 6 - SEGMENT DATA AND SIGNIFICANT CUSTOMERS
The Company's businesses are organized, managed, and internally reported as
three segments. These segments, which are based upon products, services and
industry, are Dialysis Products, Cardiosurgery Products and Other Developing
Businesses. Management of these segments includes responsibility for different
product lines and services on a geographic basis, including accountability for
revenues as well as sales and marketing costs.
Page 7
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MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - SEGMENT DATA AND SIGNIFICANT CUSTOMERS (CONTINUED)
The Dialysis Product segment includes supplies, concentrates, reprocessing
services and electronic equipment for hemodialysis treatment of patients with
chronic kidney failure or end-stage renal disease. Included in the Cardiosurgery
Products segment are oxygenators and hemoconcentrators which are used during
open-heart surgery, and hemofilters, which are used in acute renal failure.
Developing Businesses include filtration and separation and endoscope
reprocessing product lines.
Research and development is managed at the corporate level. Resource decisions
and performance assessment is managed by corporate officers. Research and
development expenses are monitored by project and allocated to their respective
segments. Corporate and unallocated represent costs that are not assigned to
reportable segments. Therefore, management does not represent that these
segments, if operated independently, would report the operating income and other
financial information shown below. The table below presents information about
reportable segments for the quarter ended June 30, 2001 and July 1, 2000,
respectively.
BUSINESS SEGMENT INFORMATION
<Table>
<Caption>
Other
Dialysis Cardiosurgery Developing Corporate & Total
Products Products Businesses Unallocated(1) Company
---------- --------------- ------------ ---------------- ----------
REVENUES
First quarter ended June 30, 2001 $ 14,869 $ 2,770 $ 2,312 $ -- $ 19,951
First quarter ended July 1, 2000 $ 13,771 $ 2,055 $ 1,779 $ -- $ 17,605
EARNINGS (LOSS) FROM OPERATIONS
First quarter ended June 30, 2001 $ 2,788 $ 935 $ 744 $ (2,865) $ 1,602
First quarter ended July 1, 2000 $ 2,536 $ 206 $ (230) $ (2,653) $ (141)
IDENTIFIABLE ASSETS (2)
June 30, 2001 $ 29,641 $ 7,908 $ 4,924 $ 21,988 $ 64,461
March 31, 2001 $ 29,273 $ 9,101 $ 5,079 $ 19,559 $ 63,012
</Table>
(1) Loss from operations consists of unallocated corporate administrative
expenses and amortization of intangibles.
(2) Identifiable segment assets include accounts receivable; property plant
and equipment; inventories; and long term notes receivable. Additional
assets included in Corporate and Unallocated primarily include cash and
short-term investments, capitalized patent costs, deferred income
taxes, goodwill, land and certain prepaid expenses.
SIGNIFICANT CUSTOMERS
During the first quarter ended June 30, 2001 no individual customer
sales totals represented 10% or more or total revenues.
Page 8
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MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board "FASB,"
issued Statement of Financial Accounting Standard No. 133 "Accounting for
Derivative Instruments and Hedging Activities." This statement, which had to be
adopted by the Company for transactions entered into beginning April 1, 2001,
established new standards for recognition and measurement of derivatives and
hedging activities. The adoption of this statement did not have a material
effect on the Company's financial statements.
In the fourth quarter of 2001, the Company adopted the Financial
Accounting Standards Board's Emerging Issues Task Force (EITF) No. 00-10,
"Accounting for Shipping and Handling Fees and Costs." EITF No. 00-10 requires
companies to classify as revenue all amounts billed to customers in a sales
transaction, including those amounts related to shipping and handling. The
adoption of EITF No. 00-10 has resulted in the reclassification of certain
freight amounts invoiced from cost of goods sold to revenue. The effect on the
Company's Consolidated Statement of Operations was to increase cost of sales and
increase revenue by $822 and $745 in the first quarter of fiscal 2002 and 2001,
respectively. These reclassifications did not effect consolidated net
earnings/(loss).
In July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations
("FAS 141") and No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under FAS 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are reviewed annually
(or more frequently if impairment indicators arise) for impairment. Separable
intangible assets that are not deemed to have indefinite lives will continue to
be amortized over their useful lives (but with no maximum life). Upon adoption
of FAS 142, amortization of goodwill recorded for business combinations
consummated prior to July 1, 2001 will cease, and intangible assets acquired
prior to July 1, 2001 that do not meet the criteria for recognition under FAS
141 will be reclassified to goodwill. The amortization provisions of FAS 142
apply to goodwill and intangible assets acquired after June 30, 2001. Companies
are required to adopt FAS 142 for fiscal years beginning after December 15,
2001, but early adoption is permitted. The Company will adopt FAS 142 on April
1, 2002, the beginning of fiscal 2003. In connection with the adoption of FAS
142, the Company will be required to perform a transitional goodwill impairment
assessment. The Company has not yet determined the impact these standards will
have on its results of operations and financial position. Goodwill amortization
of $14,000 was recorded during the first quarter of fiscal 2002. An estimated
$56,000 will be recorded during fiscal 2002 for the full year.
NOTE 8 - PRODUCT LINE DISPOSITION
On October 6, 1999, the Company sold all assets and rights related to
its Biocor(TM) oxygenator and EnGUARD(TM) PHX cardioplegia systems components to
LifeStream International LLC, a newly formed cardiopulmonary products company,
in exchange for $7.2 million in cash and warrants. Under the terms of the
agreement Minntech received $2.24 million in cash at closing. One payment of
$.25 million was received when a product modification met specifications and
another $.25 million was received when 510K approval by the Federal Drug
Administration was received on a new product. An additional $1.25 million was
received on the one year anniversary of the sale and $.28 million of inventory
was purchased. The remaining amount to be collected is $1.45 million in deferred
payments. In addition, LifeStream will purchase the remaining inventory balances
for these product lines when the Company ceases the contract manufacturing
arrangement. As of June 30, 2001 the Company had $.35 million in related
inventory for these products.
Page 9
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NOTE 9 - MERGER AGREEMENT WITH CANTEL MEDICAL CORP.
On May 30, 2001, the Company entered into a definitive merger agreement
with Cantel Medical Corporation, under which Cantel will acquire the Company.
Under the terms of the agreement, each share of Minntech stock will be converted
into the right to receive $10.50, consisting of $6.25 in cash, and a fraction of
a share of common stock of Cantel having a value of $4.25, subject to possible
adjustment.
For more information on the merger and the merger agreement, please
refer to the joint proxy statement/prospectus of Cantel and the Company, which
is included in Cantel's registration statement on Form S-4 (Reg. No. 333-64580)
filed on July 30, 2001. Cantel and the Company have each called special meetings
of their shareholders to approve the merger. These meetings will be held on
September 6, 2001. The merger is expected to close shortly after the
shareholders' meetings, if shareholder approval is received.
The transaction is subject to customary closing conditions, including
the approval of the shareholders of the Company and Cantel. Under the merger
agreement, the Company has the right to terminate the agreement if Cantel's
average closing stock price during a defined period ending shortly before the
merger is below $13.24, unless Cantel elects to provide the Company's
shareholders additional consideration, in cash or Cantel shares, at Cantel's
option, such that the total consideration is no less than $10.00 for each
Minntech share. Additional information about the proposed merger can be found in
the proxy statement / prospectus, and other documents filed with the Securities
and Exchange Commission, which can be accessed at www.sec.gov.
On May 30, 2001, the Company's Board of Directors amended the share
rights plan (described in "Note 9 - Preferred Stock" above) to exempt this
transaction from its application. The Company recorded charges of approximately
$.30 million in legal and consulting expenses in connection with this
transaction in the first quarter of fiscal 2002.
Page 10
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QUARTERLY REPORT ON FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenue in the first quarter of fiscal 2002 increased 13.3 percent to $20.0
million, compared to $17.6 million in the same period one year ago. Dialysis
product sales increased 8.0 percent to $14.9 million in the first quarter of
fiscal 2002 due primarily to increases in dialyzer reprocessing product sales,
with dialyzer reprocessing equipment unit growth accounting for most of the
increase. Cardiosurgery sales increased by 34.8 percent to $2.8 million in the
first quarter of fiscal 2002. The cardiosurgery sales increase in the quarter is
due to increases in hemofilter, hemoconcentrator, and oxygenator sales.
Developing businesses sales increased 30.0 percent to $2.3 million in the first
quarter of fiscal 2002 due primarily to a 38.5% increase in filtration and
separation products which was driven by growth in sterilant products.
Product sales by group are summarized in the following table:
<Table>
<Caption>
Quarter ended
(in thousands of dollars) June 30, 2001 % of July 1, 2000 % of
Total Sales Total Sales
-------------------------------------------------------
Dialysis products $ 14,869 74.5% $13,771 78.2%
Cardiosurgery products 2,770 13.9 2,055 11.7
Other Developing Business products 2,312 11.6 1,779 10.1
- ----------------------------------------------------------------------------------------------------
Total Company $ 19,951 100.0% $17,605 100.0%
====================================================================================================
</Table>
Following is a summary of earnings/(loss) from operations before income taxes by
business segment:
<Table>
<Caption>
Quarter ended
(in thousands of dollars) June 30, 2001 % of July 1, 2000 % of
Segment Revenues Segment Revenues
---------------------------------------------------------------------
Dialysis products $ 2,788 18.8 % $ 2,536 18.4 %
Cardiosurgery products 935 33.8 206 10.0
Other Developing Businesses 744 32.2 (230) --
Corporate & Unallocated (2,865) -- (2,653) --
- ------------------------------------------------------------------------------------------------------------------
Total Company $ 1,602 8.0 % $ (141) --
==================================================================================================================
</Table>
Page 11
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MINNTECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Gross margin as a percentage of product sales increased to 39.1 percent in the
first quarter of fiscal 2002 from 34.0 percent in the same quarter in the prior
year. The improvement in gross margins is attributable to increased unit volume
in all business segments, an improved product mix, and cost efficiencies in
manufacturing and distribution.
Research and development expenses in the first quarter of fiscal 2002 were $.9
million or 4.4 percent of revenues compared to $1.0 million or 5.8 percent of
revenues in the prior year. The decrease in research and development spending is
attributable to transitioning major development projects to later stages of
completion in the current fiscal year. The Company expects that research and
development spending in fiscal 2002 will range between 4.5 and 5.0 percent of
revenues.
Selling, general and administrative expenses for the first quarter of fiscal
2002 were $5.3 million or 26.4 percent of revenues compared to $5.1 million or
28.7 percent of revenues in the same period one year ago. Selling, general, and
administrative expenses in the first quarter of fiscal 2002 include $.3 million
of non-recurring expenses related to the Company's pending merger with Cantel
Medical Corp.
Other income of $.250 million in the first quarter of the current year is up
from $52,000 in the prior year quarter due to favorable foreign exchange
combined with an increase in interest income.
The Company's effective tax rate for the first quarter that ended June 30, 2001
was 35.0 percent compared to effective rate of 32.0 percent for the
corresponding period one year ago. The Company's effective tax rate increased in
the current year primarily due to recognizing additional state income tax
expense in the U.S.
The Company reported net earnings of $1.2 million for the first quarter ended
June 30, 2001 or 6.0 percent of revenue compared to a net loss of $.2 million in
the first quarter one year ago. The increase in net earnings in the current year
is primarily attributable to the improvement in gross margins from the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $.9 million of cash and cash equivalents in the
first quarter ended June 30, 2001. The Company invested $.6 million in capital
equipment and patents in the first quarter of fiscal 2002. At June 30, 2001 the
Company had $15.8 million of cash and cash equivalents.
Working capital at June 30, 2001 was $35.7 million as compared to $34.3 million
as of March 31, 2001. The current ratio as of June 30, 2001 was 4.9, unchanged
from March 31, 2001.
The Company initiated a stock repurchase program in August 1998 and has spent
$3.9 million to repurchase a total of 388,100 shares to date under the program.
There have been no share repurchases since the first quarter of fiscal 2001,
when the Company expended $.2 million to repurchase 24,100 shares.
Page 12
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MINNTECH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company expects its cash balances, cash flow from operations, and line of
credit to be adequate to meet its obligations and anticipated operating cash
needs, including planned capital expenditures, in its core business in fiscal
2002.
On May 30, 2001, the Company entered into an Agreement and Plan of Merger with
Cantel Medical Corporation and a newly formed, wholly owned subsidiary of
Cantel. Under the merger agreement, the Company's ability to incur additional
indebtedness without Cantel's consent is substantially limited. In addition, the
merger agreement precludes the Company's issuance of debt or equity securities
(except in connection with option exercises) without Cantel's consent.
For more information on the merger and the merger agreement, please refer to the
joint proxy statement/prospectus of Cantel and the Company, which is included in
Cantel's registration statement on Form S-4 (Reg. No. 333-64580) filed on July
30, 2001. Cantel and the Company have each called special meetings of their
shareholders to approve the merger. These meetings will be held on September 6,
2001. The merger is expected to close shortly after the shareholders' meetings,
if shareholder approval is received.
EURO CONVERSION
Effective January 1, 1999, the European Economic and Monetary Union created a
single Eurocurrency (the euro) for its member countries. A transition period is
in effect that began January 1, 1999, and goes through December 31, 2001, during
which time transactions will be executed in both the euro and the member country
currencies. Effective January 1, 2002, euro bank notes will be introduced and on
July 1, 2002, the euro will be the sole legal tender of the European Economic
and Monetary Union countries.
In general, the adoption of a single currency for the participating countries is
expected to result in greater transparency of pricing, making Europe a more
competitive environment for businesses. However, conversion to the euro is
expected to affect many financial systems and business applications.
The Company switched all European business to the euro as the functional
currency as of April 1, 2001. The Company's current European price list is
maintained in euros. This conversion required minimal information system
modifications. It is not anticipated at this time, that the euro will have a
material impact on our fundamental risk management philosophy. Any costs
incurred associated with the adoption of the euro were expensed as incurred, and
were not material to the Company's results of operations, financial condition,
or cash flows.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 7 to the condensed consolidated financial statements for the first
quarter ended June 30, 2001.
Page 13
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MINNTECH CORPORATION
QUARTERLY REPORT ON FORM 10-Q
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8K
a) Exhibits
2(a) Agreement and Plan of Merger, dated as of May 30, 2001, among
Cantel Medical Corporation, Canopy Merger Corporation, and the
Company(1)
3(a) Restated Articles of Incorporation, as amended(2)
3(b) Restated Bylaws(3)
3(c) Amendment to Bylaws(4)
4(a) Form of Specimen Common Stock Certificate(5)
4(b) Rights Agreement, dated as of July 1, 1999, between the Company
and Wells Fargo Bank Minnesota, N.A. (formerly known as Norwest
Bank Minnesota, N.A.)(6)
4(c) First Amendment to Rights Agreement, dated as of May 30, 2001,
between the Company and Wells Fargo Bank Minnesota, N.A.(7)
10(a) 1989 Stock Plan, as amended(8)*
10(b) Amendment to 1989 Stock Plan effective February 25, 1998(9)*
10(c) Amendment to 1989 Stock Plan effective September 30, 1998(10)*
10(d) Employment Agreement with Barbara A. Wrigley dated September 1,
1996(11)*
10(e) 1990 Employee Stock Purchase Plan, as amended and restated,
effective June 1, 1998(12)*
10(f) Employment Agreement with R. James Danehy dated November 29, 2000
(12)*
10(g) Management Agreement with R. James Danehy dated November 29, 2000
(12)*
10(h) Non-Qualified Stock Option Agreement with R. James Danehy dated
November 29, 2000(12)*
10(i) Emeritus Director Consulting Plan(13)*
10(j) Amendment to Emeritus Director Consulting Plan effective
September 26, 1996(14)*
10(k) 1998 Stock Option Plan, as amended(15)*
10(l) Separation and Consulting Agreement with Richard P. Goldhaber
dated February 18, 2000(16)*
10(m) Separation and Consulting Agreement with Thomas J. McGoldrick
dated July 17, 2000(11)*
10(n) Amendment to Separation and Consulting Agreement with Thomas J.
McGoldrick dated August 1, 2000(11)*
10(o) Separation and Consulting Agreement with Daniel H. Schyma dated
July 31, 2000(11)*
10(p) Amended and Restated Supplemental Executive Retirement Plan
effective April 1, 2000(11)*
10(q) Employment Agreement with Robert W. Johnson dated September 1,
1996, as amended April 1, 1997(11)*
10(r) Employment Agreement with Paul E. Helms dated September 1, 1996,
as amended April 1, 1997(11)* 10(s) Employment Agreement with
Jules L. Fisher dated December 11, 1996, as amended April 1, 1997
(11)*
10(t) First Amendment to Supplemental Executive Retirement Plan
effective September 27, 2000(17)*
10(u) Employment Agreement with Michael P. Petersen dated May 26, 2000
(17)*
10(v) Second Amendment to 1998 Stock Option Plan effective March 28,
2001*
10(w) Amendment to 1990 Employee Stock Purchase Plan effective July 26,
2000(18)*
10(x) Amendment to 1990 Employee Stock Purchase Plan effective May 30,
2001*
21 Subsidiaries of the Registrant(19)
Page 14
<Page>
(b) Reports on Form 8-K
Report on Form 8-K, filed June 4, 2001, relating to the execution of
the Agreement and Plan of Merger among Cantel Medical Corp., Canopy
Merger Corp., and the Company, providing for the acquisition of the
Company by Cantel.
================================================================================
* Management contract, compensatory plan or arrangement.
(1) Incorporated by reference to Exhibit 2 to the Company's Current Report on
Form 8-K dated May 30, 2001, File No. 0-11278.
(2) Incorporated by reference to Exhibit 3(a) to the Company's Annual Report on
Form 10-K for the year ended March 31, 1999, File No. 0-11278.
(3) Incorporated by reference to Exhibit 3(b) to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995, File No. 0-11278.
(4) Incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8, Registration No. 333-70545.
(5) Incorporated by reference to Exhibit 4 to the Company's Annual Report on
Form 10-K for the year ended March 31, 1993, File No. 0-11278.
(6) Incorporated by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A filed on July 12, 1999, File No. 0-11278.
(7) Incorporated by reference to Exhibit 1 to the Company's Registration
Statement on Form 8A/A filed on June 7, 2001, File No. 0-11278.
(8) Incorporated by reference to Exhibit 10(a) to the Company's Annual Report
on Form 10-K for the year-ended March 31, 1997, File No. 0-11278.
(9) Incorporated by reference to Exhibit 10(b) to the Company's Annual Report
on Form 10-K for the year ended March 31, 1998, File No. 0-11278.
(10) Incorporated by reference to Exhibit 10(i) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998, File No.
0-11278.
(11) Incorporated by reference to the same-numbered exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 1, 2000, File No.
0-11278.
(12) Incorporated by reference to the same-numbered exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 30, 2000, File
No. 0-11278.
(13) Incorporated by reference to Exhibit 10 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995, File No. 0-11278.
(14) Incorporated by reference to Exhibit 10(b) filed as part of the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996,
File No. 0-11278.
(15) Incorporated by reference to Exhibit 10 to the Company's Registration
Statement on Form S-8, Registration No. 333-70545.
(16) Incorporated by reference to Exhibit 10(l) to the Company's Annual Report
on Form 10-K for the year ended March 31, 2000, File No. 0-11278.
(17) Incorporated by reference to the same-numbered exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000,
File No. 0-11278.
(18) Incorporated by reference to Exhibit 10(f) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000, File No.
0-11278.
(19) Incorporated by reference to Exhibit 21 to the Company's Annual Report on
Form 10-K for the year ended March 31, 1999, File No. 0-11278.
Page 15
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Minntech Corporation
Date: August 14, 2001
/s/ Jules L. Fisher
-------------------------------
Jules L. Fisher
Chief Financial Officer
(Duly authorized officer)
(Principal financial officer)
Page 16