The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand Cantel Medical Corp. ("Cantel"). The MD&A is provided as a supplement to and should be read in conjunction with our financial statements and the accompanying notes. Our MD&A includes the following sections:

Overview provides a brief description of our business and a summary of significant activity that has affected or may affect our results of operations and financial condition.

Results of Operations provides a discussion of the consolidated results of operations for the three and nine months ended April 30, 2012 compared with the three and nine months ended April 30, 2011.

Liquidity and Capital Resources provides an overview of our working capital, cash flows, contractual obligations, financing and foreign currency activities.

Critical Accounting Policies provides a discussion of our accounting policies that require critical judgments, assumptions and estimates.

Forward-Looking Statements provides a discussion of cautionary factors that may affect future results.

Overview

Cantel is a leading provider of infection prevention and control products and services in the healthcare market, specializing in the following operating segments:

† Endoscopy: Medical device reprocessing systems, disinfectants, detergents and other supplies used to high-level disinfect flexible endoscopes. Beginning in August 2011, this segment also offers disposable infection control products intended to eliminate the challenges associated with proper cleaning and sterilization of numerous reusable components used in gastrointestinal (GI) endoscopy procedures.

† Water Purification and Filtration: Water purification equipment and services, filtration and separation products, and disinfectants for the medical, pharmaceutical, biotech, beverage and commercial industrial markets.

† Healthcare Disposables: Single-use, infection prevention and control products used principally in the dental market including face masks, sterilization pouches, towels and bibs, tray covers, saliva ejectors, germicidal wipes, plastic cups, and disinfectants. Beginning in February 2011 this segment also offers both a mail-in service and in-office spore test kits for healthcare professionals to verify the performance of their sterilizers.

† Dialysis: Medical device reprocessing systems, sterilants/disinfectants, dialysate concentrates and other supplies for renal dialysis.

† Therapeutic Filtration: Hollow fiber membrane filtration and separation technologies for medical applications. (Included in the All Other reporting segment.)

† Specialty Packaging: Specialty packaging and thermal control products, as well as related compliance training, for the transport of infectious and biological specimens and thermally sensitive pharmaceutical, medical and other products. (Included in the All Other reporting segment.)

† Chemistries: Sterilants, disinfectants, detergents and decontamination services used in various applications for infection prevention and control. (Included in the All Other reporting segment.)

Most of our equipment, consumables and supplies are used to help prevent or control the occurrence or spread of infections.

See our Annual Report on Form 10-K for the fiscal year ended July 31, 2011 (the "2011 Form 10-K") and our Condensed Consolidated Financial Statements for additional financial information regarding our reporting segments.

Significant Activity

(i) For the three and nine months ended April 30, 2012 compared with the three and nine months ended April 30, 2011, net sales increased by 17.7% and 22.1%, respectively, and net income increased by 61.9% and 37.8%, respectively, to a record level of net income for a three and nine month period
. We continue to benefit from having a broad portfolio of infection prevention and control products sold into diverse business segments, where approximately 72% of our net sales are attributable to consumable products and service. The primary factors that contributed to this financial performance, as further described elsewhere in this MD&A, were as follows:

† increased sales and net income, inclusive of acquisition related costs, acquisition related fair value adjustments and higher interest expense, as a result of our acquisition of the business and substantially all of the assets of Byrne Medical, Inc. ("BMI"), which is included in our Endoscopy segment, as more fully described in Note 3 to the Condensed Consolidated Financial Statements,

† significant increases in sales volume of endoscope reprocessing consumable products and services as a result of the increased field population of equipment,

† improved sales and profitability in our Water Purification and Filtration segment primarily relating to increased sales of our capital equipment and service in the dialysis industry and the impact of our acquisition of the United States water purification business of Gambro Renal Products, Inc. ("GRP") and a Swedish-based affiliate of GRP (the "Gambro Business" or the "Gambro Acquisition") on October 6, 2010, as more fully described in Note 3 to the Condensed Consolidated Financial Statements, and

† improved sales and profitability in our Healthcare Disposables segment primarily due to increased demand for our face masks and the decreasing price of raw materials.

The above factors were partially offset by:

† decreases in sales volume of our endoscope reprocessing equipment as these capital equipment sales were elevated in prior periods as a result of our

participation in a major initiative by the Veterans Administration to upgrade their hospitals' endoscope reprocessing equipment as well as regulatory issues experienced by a major competitor,

† decreases in net sales and profitability in our Therapeutic Filtration and Dialysis operating segments,

† increased investment in research and development activities and

† the impairment of an investment during our second quarter of fiscal 2012, as more fully described in Note 16 to the Condensed Consolidated Financial Statements and elsewhere in this MD&A.

(ii) We sell our dialysis products to a concentrated number of customers. Sales in our Dialysis segment were adversely impacted by the continued loss of some lower margin dialysate concentrate business as a result of the highly competitive and price sensitive market for such product, as well as the decrease in demand for our Renatronฎ reprocessing equipment, sterilants and reprocessing supplies, as more fully described elsewhere in this MD&A. This reduction in dialysis sales has reduced overall profitability in this segment. Our market for dialysis reprocessing products is limited to dialysis centers that reuse dialyzers, which market has been decreasing in the United States despite the environmental advantages and our belief that the per-procedure cost of reuse dialyzers is more economical than single-use dialyzers. A further decrease in the market for dialysis concentrate and reprocessing products is likely to result in continued loss of net sales and a lower level of profitability in this segment in the future. See "Risk Factors" in our 2011 Form 10-K for a discussion of our Dialysis segment.

(iii) On August 1, 2011 our Minntech subsidiary acquired the business and substantially all of the assets of BMI, as more fully described in Note 3 to the Condensed Consolidated Financial Statements. Certain components of the acquisition's purchase price were recorded at fair value and will be continually re-measured at each balance sheet date, which has the potential for creating earnings volatility in the future as further described elsewhere in this MD&A and in Notes 3 and 7 to the Condensed Consolidated Financial Statements.

(iv) In conjunction with the acquisition of the business and substantially all of the assets of BMI (the "Byrne Medical Business" or the "Byrne Acquisition") and the impending expiration of our existing credit facility, we entered into a $150,000,000 Second Amended and Restated Credit Agreement dated as of August 1, 2011 with our senior lenders to fund the cash consideration paid and the costs associated with the acquisition, as well as to refinance our working capital credit facilities under an existing credit agreement, as more fully described elsewhere in this MD&A and in Notes 3 and 10 to the Condensed Consolidated Financial Statements.

(v) In order to more fully capitalize on the strength of the Medivators brand name currently used in our endoscopy business, we decided to change the name of Minntech Corporation to Medivators Inc. The name change will take legal effect on August 1, 2012. The Minntech name in our foreign subsidiaries will also be changed to Medivators.

(vi) In our prior fiscal year, we acquired the Gambro Business on October 6, 2010 and the sterilization monitoring business of ConFirm Monitoring Systems, Inc. (the "ConFirm Monitoring Business" or the "ConFirm Acquisition") on February 11, 2011, as more fully described in Note 3 to the Condensed Consolidated Financial Statements.

(vii) The Company issued 9,955,000 additional shares of common stock in connection with a three-for-two stock split effected in the form of a 50% stock dividend paid on February 1, 2012 to stockholders of record on January 23, 2012, as more fully described elsewhere in this MD&A.

(viii) On October 21, 2011, we announced an increase in the semiannual cash dividend to $0.0467 per share ($0.07 per share on a pre-split basis) of outstanding common stock, which was paid on January 31, 2012 to shareholders of record at the close of business on January 17, 2012, as more fully described elsewhere in this MD&A.

Results of Operations

The results of operations described below reflect the operating results of Cantel and its wholly-owned subsidiaries.

Since the acquisition of the Byrne Medical Business was completed on August 1, 2011, its results of operations are included in our results of operations for the three and nine months ended April 30, 2012 and are excluded from the three and nine months ended April 30, 2011.

Since the acquisition of the ConFirm Monitoring Business was consummated on February 11, 2011, its results of operations are included in our results of operations for the three and nine months ended April 30, 2012 and the portion of the three and nine months ended April 30, 2011 subsequent to its acquisition date.

Since the Gambro Acquisition was completed on October 6, 2010, its results of operations are included in our results of operations for the three and nine months ended April 30, 2012, the three months ended April 30, 2011 and the portion of the nine months ended April 30, 2011 subsequent to its acquisition date.

The following discussion should also be read in conjunction with our 2011 Form 10-K.

The following table gives information as to the net sales and the percentage to the total net sales for each of our reporting segments:

                           Three Months Ended                        Nine Months Ended
                                April 30,                                April 30,
                        2012                2011                 2012                 2011
                                           (Dollar Amounts in Thousands)
                     $         %         $         %          $         %          $         %

Endoscopy         $ 38,606     39.7   $ 27,311     33.0   $ 115,037     40.0   $  74,119     31.5
Water
Purification
and Filtration      25,955     26.7     23,298     28.2      76,505     26.6      67,973     28.9
Healthcare
Disposables         19,336     19.9     18,237     22.1      56,668     19.7      50,903     21.6
Dialysis             8,902      9.1      9,318     11.3      27,180      9.4      29,326     12.4
All Other            4,439      4.6      4,455      5.4      12,407      4.3      13,312      5.6
                  $ 97,238    100.0   $ 82,619    100.0   $ 287,797    100.0   $ 235,633    100.0

Net Sales

Net sales increased by $14,619,000, or 17.7%, to $97,238,000 for the three months ended April 30, 2012 from $82,619,000 for the three months ended April 30, 2011.

Net sales increased by $52,164,000, or 22.1%, to $287,797,000 for the nine months ended April 30, 2012 from $235,633,000 for the nine months ended April 30, 2011.

The increase in net sales for the three and nine months ended April 30, 2012 was principally attributable to increases in sales of endoscopy products and services, water purification and filtration products and service and healthcare disposables products, partially offset by decreases in sales of dialysis products, and with the respect to the nine months ended April 30, 2012 therapeutic filtration products.

Net sales of endoscopy products and services increased by $11,295,000, or 41.4%, and $40,918,000, or 55.2%, for the three and nine months ended April 30, 2012, respectively, compared with the three and nine months ended April 30, 2011, primarily due to (i) net sales for the three and nine months ended April 30, 2012 of $12,565,000 and $36,204,000, respectively, due to the acquisition of the Byrne Medical Business on August 1, 2011 and (ii) increases in demand in the United States for our disinfectants, service, consumables and equipment accessories due to the significant increase in the installed base of endoscope reprocessing equipment. Partially offsetting this increase was a decrease in demand for our endoscope reprocessing equipment during the six month period ended April 30, 2012. Demand for our endoscope reprocessing equipment had been elevated during the second half of fiscal 2011 and the three months ended October 31, 2011 due to our previous investments in new product offerings and sales and marketing programs as well as regulatory issues experienced by a major competitor, all of which enabled us to increase our sales of endoscope reprocessing equipment including successfully participating in a major initiative beginning in the second half of fiscal 2011 by the Veterans Administration to upgrade their hospitals' endoscope reprocessing equipment. Beginning in our second quarter of fiscal 2012, this elevated level of capital equipment sales gradually decreased to a similar level that existed prior to the second half of fiscal 2011. However, we expect disinfectants, service, consumables and equipment accessories to continue to benefit from the increased installed base of endoscope reprocessing equipment.

Changes in selling prices did not have a significant effect on net sales for the three and nine months ended April 30, 2012 compared with the three and nine months ended April 30, 2011.

Net sales of water purification and filtration products and services increased by $2,657,000, or 11.4%, and $8,532,000, or 12.6%, for the three and nine months ended April 30, 2012, respectively, compared with the three and nine months ended April 30, 2011, primarily due to (i) increases in demand for our water purification capital equipment and service in the dialysis industry,
(ii) incremental net sales attributable to the prior year acquisition of the Gambro Business on October 6, 2010 and (iii) higher selling prices of our water purification products and services, which favorably impacted net sales for the three and nine months ended April 30, 2012 by approximately $356,000 and $1,516,000, respectively. Partially offsetting these increases was a decrease in demand for capital equipment used for commercial and industrial applications.

Net sales of healthcare disposables products increased by $1,099,000, or 6.0%, and $5,765,000, or 11.3%, for the three and nine months ended April 30, 2012, respectively, compared with the three and nine months ended April 30, 2011, principally due to (i) incremental net sales of approximately $697,000 and $2,902,000 for the three and nine months ended April 30, 2012, respectively, attributable to the prior year acquisition of the ConFirm Monitoring Business on February 11, 2011, (ii) higher selling prices, which favorably impacted net sales for the three and nine months ended April 30, 2012 by approximately $391,000 and $1,312,000, respectively, and (iii) an increase in customer demand for our face masks.

Net sales of dialysis products and services decreased by 4.5% and 7.3% for the three and nine months ended April 30, 2012, respectively, compared with the three and nine months ended April 30, 2011 primarily due to (i) the expected adverse impact of losing some dialysate concentrate business (a concentrated acid or bicarbonate used to prepare dialysate, a chemical solution that draws waste products from a patient's blood through a dialyzer membrane during hemodialysis treatment) from domestic customers as a result of the highly competitive and price sensitive market for this lower margin commodity product and (ii) a decrease in demand in the United States (including a decrease from our largest dialysis customer, DaVita, Inc. ("DaVita")) for our Renatron dialyzer reprocessing equipment, sterilants and reprocessing supplies. Due to sales price decreases by some of our competitors, we expect a continued decrease in net sales of our lower margin dialysate concentrate product in the future as we elect not to pursue unprofitable concentrate sales. Furthermore, Fresenius Medical Care ("Fresenius"), the largest dialysis provider chain in the United States, manufactures dialysate concentrate themselves and no longer purchases that product from us. Our market for dialysis reprocessing products is limited to dialysis centers that reuse dialyzers, which market has been decreasing in the United States despite the environmental advantages and our belief that the per-procedure cost of reuse dialyzers is more economical than single-use dialyzers. The shift from reusable to single-use dialyzers is principally due to the lowering cost of single-use dialyzers, the ease of using a dialyzer one time, and the commitment of Fresenius, a manufacturer of single-use dialyzers, to convert dialysis clinics performing reuse to single-use facilities. In addition, DaVita has been evaluating the economics and other factors associated with single-use versus reuse on a market-by-market basis. This evaluation has resulted in the conversion by DaVita of certain clinics from reuse to single-use and in many cases the opening of new clinics as single-use clinics. A further decrease in the market for dialysis concentrate and reprocessing products is likely to result in continued loss of net sales and a lower level of profitability in this segment in the future. Additionally, our Dialysis segment is highly dependent upon DaVita as a customer and any further shift by this customer away from reuse would have a material adverse effect on our Dialysis segment net sales. Changes in selling prices of our dialysis products did not have a significant effect on net sales for the three

and nine months ended April 30, 2012 compared with the three and nine months ended April 30, 2011.

Net sales in the All Other reporting segment was comparable for the three months ended April 30, 2012 compared with the three months ended April 30, 2011, and decreased by $905,000, or 6.8%, for the nine months ended April 30, 2012 compared with the nine months ended April 30, 2011. The decrease was primarily the result of a decrease of $877,000 in net sales in our Therapeutic Filtration operating segment due to (i) a decrease in domestic and international demand for our hemofilter products (a device used to perform hemofiltration in a slow, continuous blood filtration therapy used to control fluid overload and acute renal failure in unstable, critically ill patients who cannot tolerate the rapid filtration rates of conventional hemodialysis) and (ii) a reduction in higher margin sales in the United States of filters manufactured by us on an OEM basis for a single customer's hydration system as a result of our customer phasing out the use of our filters in the prior year. Increases in selling prices of our therapeutic filtration, specialty packaging and chemistries products did not have a significant effect on net sales in the All Other segment for the three and nine months ended April 30, 2012 compared with the three and nine months ended April 30, 2011.

Gross profit

Gross profit increased by $11,317,000, or 36.2%, to $42,619,000 for the three months ended April 30, 2012 from $31,302,000 for the three months ended April 30, 2011. Gross profit as a percentage of net sales for the three months ended April 30, 2012 and 2011 was 43.8% and 37.9%, respectively.

Gross profit increased by $30,504,000, or 33.6%, to $121,390,000 for the nine months ended April 30, 2012 from $90,886,000 for the nine months ended April 30, 2011. Gross profit as a percentage of net sales for the nine months ended April 30, 2012 and 2011 was 42.2% and 38.6%, respectively.

Gross profit as a percentage of net sales for the three and nine months ended April 30, 2012 increased compared with the three and nine months ended April 30, 2011 primarily due to (i) the acquisition of the Byrne Medical Business, which products carry a higher gross profit percentage, (ii) more favorable sales mix due to increases in sales volume of certain higher margin products (such as sterilants in our Endoscopy segment and face masks in our Healthcare Disposables segment) and decreases in sales volume of lower margin products (such as endoscope reprocessing equipment in our Endoscopy segment), (iii) improved gross margins in our Water Purification and Filtration segment as a result of the full integration of the Gambro Business into our Minnesota manufacturing facility,
(iv) increases in selling prices in our Water Purification and Filtration and Healthcare Disposables segments, and (v) a decrease in raw materials costs primarily in our Healthcare Disposables segment during our third quarter of fiscal 2012 due to the decreasing price of oil.

We cannot provide assurances that our gross profit percentage will not be adversely affected in the future (i) by uncertainties associated with our product mix, (ii) by price competition in certain of our segments such as Healthcare Disposables, Endoscopy and Dialysis, (iii) if raw materials and distribution costs increase and we are unable to implement price increases or
(iv) by the impact of legislation relating to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act which provides for a 2.3% annual excise tax on the sales of certain medical devices in the United States commencing in January

2013. Additionally, despite expensive shipping costs, some of our competitors manufacture certain healthcare disposable products in China and Southeast Asia due to lower overall costs. Although we believe the quality of our healthcare disposable products, which are generally produced in the United States, are superior to similar products produced in China and Southeast Asia, we may experience significant pricing pressure that would adversely affect our gross profit in the future in our Healthcare Disposables segment as a result of low cost competition from products produced in China and Southeast Asia.

Operating Expenses

Selling expenses increased by $2,735,000, or 23.8%, to $14,240,000 for the three months ended April 30, 2012 from $11,505,000 for the three months ended April 30, 2011. For the nine months ended April 30, 2012, selling expenses increased by $8,505,000, or 26.6%, to $40,433,000 from $31,928,000 for the nine months ended April 30, 2011. These increases were primarily due to the inclusion of $2,954,000 and $8,102,000 of selling expenses relating to the Byrne Medical Business for the three and nine months ended April 30, 2012, respectively.

Selling expenses as a percentage of net sales were 14.6% and 13.9% for the three months ended April 30, 2012 and 2011, respectively, and 14.0% and 13.5% for the nine months ended April 30, 2012 and 2011, respectively. The increase in our selling expense as a percentage of net sales was primarily attributable to the inclusion of the higher selling cost structure of the Byrne Medical Business operation.

General and administrative expenses increased by $1,949,000, or 18.7%, to $12,388,000 for the three months ended April 30, 2012, from $10,439,000 for the three months ended April 30, 2011, primarily due to (i) the inclusion of $1,427,000 of general and administrative expenses relating to the Byrne Medical Business, which includes approximately $902,000 in amortization of intangible assets and a $395,000 reduction in expenses relating to fair value adjustment of a price floor financial instrument as further described in Notes 3 and 7 to the Condensed Consolidated Financial Statements and (ii) approximately $448,000 in compensation expense (exclusive of the acquired Byrne Medical Business) relating to annual salary raises, higher incentive compensation and employee benefit costs, partially offset by lower stock-based compensation expense.

General and administrative expenses increased by $6,719,000, or 22.5%, to $36,582,000 for the nine months ended April 30, 2012, from $29,863,000 for the nine months ended April 30, 2011, primarily due to (i) the inclusion of $5,000,000 of general and administrative expenses relating to the Byrne Medical Business, which includes approximately $2,711,000 in amortization of intangible assets, $626,000 in acquisition related expenses and a $1,400,000 reduction in expenses relating to fair value adjustments of contingent consideration and a price floor financial instrument as further described in Notes 3 and 7 to the Condensed Consolidated Financial Statements and (ii) approximately $1,785,000 in compensation expense (exclusive of the acquired Byrne Medical Business) relating to annual salary raises, higher incentive compensation, additional administrative personnel, employee benefit costs and stock-based compensation expense, including $309,000 in additional stock-based compensation related to an employment termination which required us to accelerate the vesting of certain stock options and restricted shares.

General and administrative expenses as a percentage of net sales were 12.7% and 12.6% for the three months ended April 30, 2012 and 2011, respectively, and 12.7% for both the nine months ended April 30, 2012 and 2011.

Research and development expenses (which include continuing engineering costs) increased by $502,000, or 29.3%, to $2,217,000 for the three months ended April 30, 2012 from $1,715,000 for the three months ended April 30, 2011. For the nine months ended April 30, 2012, research and development expenses increased by $1,881,000, or 39.4%, to $6,660,000 from $4,779,000 for the nine months ended April 30, 2011. These increases were primarily due to development work on certain new products in our Endoscopy segment.

Interest

Interest expense increased by $702,000 to $897,000 for the three months ended April 30, 2012 from $195,000 for the three months ended April 30, 2011. For the . . .