---

---

SECURITIES AND EXCHANGE COMMISSIONWashington, 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 December 30, 2000 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(State or other jurisdiction of
incorporation or organization)

41-1229121(I.R.S. Employer
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 December 30, 2000Common Stock, $0.05 par value

6,679,287 shares


---

---

---



Minntech Corporation  Quarterly Report on Form 10-Q  September 30, 2000

Index

|                                                                                               |                                                      | Page
|---------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----
|Part I.  Financial Information                                                                 |                                                      |     
|Item 1.  Financial Statements                                                                  |                                                      |     
|                                                                                               | Condensed Consolidated Statements of Operations      |     
|                                                                                               | Condensed Consolidated Balance Sheets                |     
|                                                                                               | Condensed Consolidated Statements of Cash Flows      |     
|                                                                                               | Notes to Condensed Consolidated Financial Statements |     
|Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                      | 10  
|Part II. Other Information                                                                     |                                                      |     
|Item 4.  Submission of Matters to a Vote of Security Holders                                   |                                                      | 13  
|Item 6.  Exhibits and Reports on Form 8-K                                                      |                                                      | 13  
|Signatures                                                                                     |                                                      | 15  

2

---



Part IFinancial Information

Item 1.  Financial Statements

Minntech Corporation        Condensed Consolidated Statements of Operations        (Unaudited)        (In thousands, except per share amounts)

|                                           |                                     | Thirteen
weeks ended
Dec 30, 2000  |        | Three
months ended
Dec 31, 1999 |        | Thirty-Nine
weeks ended
Dec 30, 2000 |        | Nine
months ended
Dec 31,1999
|------------------------------------------ | ----------------------------------- | ---------------------------------- | ------ | ------------------------------- | ------ | ------------------------------------ | ------ | -----------------------------
|Net salesproduct                          |                                     | $                                  | 19,399 |                                 | $      | 18,726                               |        | $                            
|Contract revenue                           |                                     |                                    |       |                                 |        |                                     |        |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Net sales                                  |                                     |                                    | 19,399 |                                 |        | 18,726                               |        |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Operating costs and expenses               |                                     |                                    |        |                                 |        |                                      |        |                              
|                                           | Cost of product sales               |                                    |        | 11,887                          |        |                                      | 10,772 |                              
|                                           | Research and development            |                                    |        | 904                             |        |                                      | 909    |                              
|                                           | Selling, general and administrative |                                    |        | 4,665                           |        |                                      | 4,594  |                              
|                                           | Amortization of intangible assets   |                                    |        | 77                              |        |                                      | 123    |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|                                           |                                     | Total operating costs and expenses |        |                                 | 17,533 |                                      |        | 16,398                       
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Earnings from operations                   |                                     |                                    | 1,866  |                                 |        | 2,328                                |        |                              
|Other income, net                          |                                     |                                    | 264    |                                 |        | 235                                  |        |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Earnings before income taxes               |                                     |                                    | 2,130  |                                 |        | 2,563                                |        |                              
|Provision for income taxes                 |                                     |                                    | 681    |                                 |        | 872                                  |        |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Net earnings                               |                                     | $                                  | 1,449  |                                 | $      | 1,691                                |        | $                            
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Net earnings per share                     |                                     |                                    |        |                                 |        |                                      |        |                              
|                                           | Basic                               |                                    | $      | .22                             |        | $                                    | .25    |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|                                           | Diluted                             |                                    | $      | .22                             |        | $                                    | .25    |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|Weighted-average common shares Outstanding |                                     |                                    |        |                                 |        |                                      |        |                              
|                                           | Basic                               |                                    |        | 6,679                           |        |                                      | 6,840  |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              
|                                           | Diluted                             |                                    |        | 6,683                           |        |                                      | 6,844  |                              
|                                           |                                     |                                    |        |                                 |        |                                      |        |                              

The
accompanying notes are an integral part of these financial statements.

3

---

Minntech Corporation        Condensed Consolidated Balance Sheets        (Amounts in thousands, except share and per share amounts)

|                                           |                                                                                                                                 | December 30,
2000          |                      | March 31, 2000 |       
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | -------------------- | -------------- | ------
|
|ASSETS                                     |                                                                                                                                 |                            |                      |                |       
|Current assets                             |                                                                                                                                 |                            |                      |                |       
|                                           | Cash and cash equivalents                                                                                                       |                            | $                    | 15,896         |       
|                                           | Accounts receivable, less allowance for doubtful accounts of $486 and $438, respectfully                                        |                            |                      | 15,592         |       
|                                           | Inventories                                                                                                                     |                            |                      |                |       
|                                           |                                                                                                                                 | Finished goods             |                      |                | 4,218 
|                                           |                                                                                                                                 | Raw materials              |                      |                | 4,084 
|                                           |                                                                                                                                 | Work-in-process            |                      |                | 2,478 
|                                           |                                                                                                                                 |                            |                      |                |       
|                                           |                                                                                                                                 |                            | Total inventories    |                |       
|                                           | Prepaid expenses and other current assets                                                                                       |                            |                      | 1,551          |       
|                                           |                                                                                                                                 |                            |                      |                |       
|                                           |                                                                                                                                 |                            | Total current assets |                |       
|Property and equipment                     |                                                                                                                                 |                            |                      |                |       
|                                           | Land, buildings and improvements                                                                                                |                            |                      | 11,266         |       
|                                           | Machinery and equipment                                                                                                         |                            |                      | 28,657         |       
|                                           |                                                                                                                                 |                            |                      |                |       
|                                           |                                                                                                                                 |                            | 39,923               |                |       
|                                           | Less accumulated depreciation                                                                                                   |                            |                      | (23,770        | )     
|                                           |                                                                                                                                 |                            |                      |                |       
|                                           |                                                                                                                                 | Net property and equipment |                      |                | 16,153
|Other assets                               |                                                                                                                                 |                            |                      |                |       
|                                           | Patent costs, net                                                                                                               |                            |                      | 451            |       
|                                           | Goodwill, net                                                                                                                   |                            |                      | 437            |       
|                                           | Other                                                                                                                           |                            |                      | 2,402          |       
|                                           |                                                                                                                                 |                            |                      |                |       
|Total assets                               |                                                                                                                                 | $                          | 63,262               |                | $     
|                                           |                                                                                                                                 |                            |                      |                |       
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                 |                            |                      |                |       
|Current liabilities                        |                                                                                                                                 |                            |                      |                |       
|                                           | Accounts payable                                                                                                                |                            | $                    | 4,707          |       
|                                           | Income taxes payable                                                                                                            |                            |                      | 893            |       
|                                           | Accrued compensation                                                                                                            |                            |                      | 1,250          |       
|                                           | Other accrued expenses                                                                                                          |                            |                      | 1,196          |       
|                                           |                                                                                                                                 |                            |                      |                |       
|                                           |                                                                                                                                 | Total current liabilities  |                      |                | 8,046 
|Deferred compensation                      |                                                                                                                                 |                            | 918                  |                |       
|                                           |                                                                                                                                 |                            |                      |                |       
|Total liabilities                          |                                                                                                                                 |                            | 8,964                |                |       
|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, 6,679,287 and 6,678,016 shares issued and outstanding, respectively |                            |                      | 334            |       
|                                           | Additional paid-in capital                                                                                                      |                            |                      | 12,084         |       
|                                           | Accumulated other comprehensive income                                                                                          |                            |                      | (1,056         | )     
|                                           | Retained earnings                                                                                                               |                            |                      | 42,936         |       
|                                           |                                                                                                                                 |                            |                      |                |       
|Total stockholders' equity                 |                                                                                                                                 |                            | 54,298               |                |       
|                                           |                                                                                                                                 |                            |                      |                |       
|Total liabilities and stockholders' equity |                                                                                                                                 | $                          | 63,262               |                | $     
|                                           |                                                                                                                                 |                            |                      |                |       

The accompanying notes are an integral part of these financial statements.

4

---



Minntech Corporation        Condensed Consolidated Statements of Cash Flows        (Unaudited)        (Dollars in thousands)

|                                                 |                                                                                     | Thirty-Nine
weeks ended
Dec 30, 2000         |                                           | Nine months
Ended
Dec 31, 1999 |      
|------------------------------------------------ | ----------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ------------------------------ | -----
|Cash flows from operating activities             |                                                                                     |                                              |                                           |                                |      
|                                                 | Net earnings                                                                        |                                              | $                                         | 2,717                          |      
|                                                 | Adjustments to reconcile net earnings to net cash provided by operating activities: |                                              |                                           |                                |      
|                                                 |                                                                                     | Depreciation and amortization                |                                           |                                | 2,514
|                                                 |                                                                                     | Tax benefit from stock option exercises      |                                           |                                |     
|                                                 |                                                                                     | Foreign currency exchange loss/(gain)        |                                           |                                | 245  
|                                                 |                                                                                     | Gain on sale of land                         |                                           |                                |     
|                                                 |                                                                                     | Other, net                                   |                                           |                                | 320  
|                                                 |                                                                                     | Changes in operating assets and liabilities: |                                           |                                |      
|                                                 |                                                                                     |                                              | Accounts receivable                       |                                |      
|                                                 |                                                                                     |                                              | Inventories                               |                                |      
|                                                 |                                                                                     |                                              | Prepaid expenses and other current assets |                                |      
|                                                 |                                                                                     |                                              | Accounts payable                          |                                |      
|                                                 |                                                                                     |                                              | Accrued expenses                          |                                |      
|                                                 |                                                                                     |                                              | Income taxes payable                      |                                |      
|                                                 |                                                                                     |                                              |                                           |                                |      
|                                                 |                                                                                     |                                              | Total adjustments                         |                                |      
|                                                 |                                                                                     |                                              |                                           |                                |      
|Net cash provided by operating activities        |                                                                                     |                                              | 7,800                                     |                                |      
|                                                 |                                                                                     |                                              |                                           |                                |      
|Cash flows from investing activities             |                                                                                     |                                              |                                           |                                |      
|                                                 | Purchases of property and equipment                                                 |                                              |                                           | (3,361                         | )    
|                                                 | Patent application costs                                                            |                                              |                                           | (96                            | )    
|                                                 | Proceeds from sale of undeveloped land                                              |                                              |                                           |                               |      
|                                                 | Proceeds from product line disposition                                              |                                              |                                           | 1,646                          |      
|                                                 | Other                                                                               |                                              |                                           | 5                              |      
|                                                 |                                                                                     |                                              |                                           |                                |      
|Net cash used in investing activities            |                                                                                     |                                              | (1,806                                    | )                              |      
|Cash flows from financing activities             |                                                                                     |                                              |                                           |                                |      
|                                                 | Payments on note payable                                                            |                                              |                                           |                               |      
|                                                 | Payment of cash dividend                                                            |                                              |                                           | (668                           | )    
|                                                 | Proceeds from exercise of stock options                                             |                                              |                                           |                               |      
|                                                 | Payments on employee stock purchase plan                                            |                                              |                                           | 96                             |      
|                                                 | Repurchase of common stock                                                          |                                              |                                           | (193                           | )    
|                                                 |                                                                                     |                                              |                                           |                                |      
|Net cash used in financing activities            |                                                                                     |                                              | (765                                      | )                              |      
|Effects of exchange rate changes on cash         |                                                                                     |                                              | (20                                       | )                              |      
|                                                 |                                                                                     |                                              |                                           |                                |      
|Net increase in cash and cash equivalents        |                                                                                     |                                              | 5,209                                     |                                |      
|Cash and cash equivalents at beginning of period |                                                                                     |                                              | 10,687                                    |                                |      
|                                                 |                                                                                     |                                              |                                           |                                |      
|Cash and cash equivalents at end of period       |                                                                                     | $                                            | 15,896                                    |                                | $    
|                                                 |                                                                                     |                                              |                                           |                                |      

The
accompanying notes are an integral part of these financial statements.

5

---



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 generally accepted accounting principles 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, 2000 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. Third quarter results include the thirteen and thirty-nine
week periods ended December 30, 2000. A fiscal year will include either 52 or 53 weeks in total. This change in reporting will not be materially different from prior years.

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 December 30, 2000, 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 (9.5% at December 30, 2000) or the indexed London Interbank Offered Rate (LIBOR). As of December 30, 2000, the Company had no outstanding
borrowings under the line of credit. This credit line expires on September 30, 2002.

6

---

Note 3Earnings Per Share

The following table reconciles the numerators and denominators of the basic and diluted earnings per share computations for the thirteen and thirty-nine week
periods ended December 30, 2000 and the three and nine-month periods ended December 31, 1999.

|(in thousands, except per share amounts)   |                  | Basic Earnings Per Share |       | Effect of Dilutive
Stock Options |     | Diluted Earnings Per Share
|------------------------------------------ | ---------------- | ------------------------ | ----- | -------------------------------- | --- | --------------------------
|Thirteen weeks ended Dec 30, 2000          |                  |                          |       |                                  |     |                           
|Net earnings                               |                  | $                        | 1,449 |                                  |     |                           
|Weighted average common shares outstanding |                  |                          | 6,679 |                                  | 4   |                           
|                                           | Per share amount |                          | $     | .22                              |     |                           
|Three months ended Dec 31, 1999            |                  |                          |       |                                  |     |                           
|Net earnings                               |                  | $                        | 1,691 |                                  |     |                           
|Weighted average common shares outstanding |                  |                          | 6,840 |                                  | 4   |                           
|                                           | Per share amount |                          | $     | .25                              |     |                           
|Thirty-nine weeks ended Dec 30, 2000       |                  |                          |       |                                  |     |                           
|Net earnings                               |                  | $                        | 2,717 |                                  |     |                           
|Weighted average common shares outstanding |                  |                          | 6,680 |                                  | 10  |                           
|                                           | Per share amount |                          | $     | .41                              |     |                           
|Nine months ended Dec 31, 1999             |                  |                          |       |                                  |     |                           
|Net earnings                               |                  | $                        | 4,097 |                                  |     |                           
|Weighted average common shares outstanding |                  |                          | 6,854 |                                  | 116 |                           
|                                           | Per share amount |                          | $     | .60                              |     |                           

Outstanding
stock options to purchase 906,667 and 270,767 shares of common stock as of December 30, 2000 and December 31, 1999, respectfully, 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:

|(dollars in thousands)      |                                   | Thirteen weeks ended
Dec 30, 2000 |       | Three months
ended
Dec 31, 1999 |       | Thirty-nine weeks
ended
Dec 30, 2000 |      | Nine months
Ended
Dec 31, 1999 |      
|--------------------------- | --------------------------------- | --------------------------------- | ----- | ------------------------------- | ----- | ------------------------------------ | ---- | ------------------------------ | -----
|Net earnings                |                                   | $                                 | 1,449 |                                 | $     | 1,691                                |      | $                              | 2,717
|Other comprehensive income: |                                   |                                   |       |                                 |       |                                      |      |                                |      
|                            | Foreign currency translation, net |                                   |       | 396                             |       |                                      | (345 | )                              |      
|                            |                                   |                                   |       |                                 |       |                                      |      |                                |      
|                            | Total other comprehensive income  |                                   |       | 396                             |       |                                      | (345 | )                              |      
|                            |                                   |                                   |       |                                 |       |                                      |      |                                |      
|                            |                                   | Total comprehensive income        |       | $                               | 1,845 |                                      | $    | 1,346                          |      
|                            |                                   |                                   |       |                                 |       |                                      |      |                                |      

The
accumulated other comprehensive income balance as of December 30, 2000 is solely comprised of foreign currency translation.

7

---

Note 5Stockholders' Equity

Consolidated Statement of Stockholders' Equity
(dollars in thousands)

|                                        |  | Common Stock |   |   |     |  |   |        |  
|--------------------------------------- |  | ------------ | - | - | --- |  | - | ------ | -
|
|Balances at March 31, 2000              |  | 6,686,714    |   | $ | 334 |  | $ | 12,181 |  
|Net income                              |  |              |   |   |     |  |   |        |  
|Foreign currency translation adjustment |  |              |   |   |     |  |   |        |  
|Repurchase of common stock              |  | (24,100      | ) |   |     |  |   | (193   | )
|Employee stock purchase plan            |  | 15,402       |   |   |     |  |   | 96     |  
|Exercised stock options                 |  | 1,271        |   |   |     |  |   |        |  
|Payment of cash dividends               |  |              |   |   |     |  |   |        |  
|                                        |  |              |   |   |     |  |   |        |  
|Balances at December 30, 2000           |  | 6,679,287    |   | $ | 334 |  | $ | 12,084 |  
|                                        |  |              |   |   |     |  |   |        |  

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.

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.

8

---

The table below presents information about reportable segments for the thirteen- and thirty-nine week periods ended December 30, 2000 and the three- and nine-month
periods ended December 31, 1999.

Business Segment Information

|                                   |  | Dialysis
Products |        | Cardiosurgery
Products |   | Other
Developing
Businesses |  | Corporate &
Unallocated(1) |       | Total
Company
|---------------------------------- |  | ----------------- | ------ | ---------------------- | - | --------------------------- |  | -------------------------- | ----- | -------------
|Revenues                           |  |                   |        |                        |   |                             |  |                            |       |              
|Third quarter ended 12/30/2000     |  | $                 | 14,510 |                        | $ | 2,478                       |  | $                          | 2,411 |              
|Third quarter ended 12/31/1999     |  | $                 | 13,804 |                        | $ | 2,779                       |  | $                          | 2,143 |              
|Thirty-nine weeks ended 12/30/2000 |  | $                 | 40,744 |                        | $ | 7,783                       |  | $                          | 5,953 |              
|Nine months ended 12/31/1999       |  | $                 | 40,741 |                        | $ | 10,188                      |  | $                          | 5,445 |              
|Earnings (loss) from Operations    |  |                   |        |                        |   |                             |  |                            |       |              
|Third quarter ended 12/30/2000     |  | $                 | 3,482  |                        | $ | 439                         |  | $                          | 703   |              
|Third quarter ended 12/31/1999     |  | $                 | 3,950  |                        | $ | 717                         |  | $                          | 255   |              
|Thirty-nine weeks ended 12/30/2000 |  | $                 | 9,256  |                        | $ | 1,055                       |  | $                          | 438   |              
|Nine months ended 12/31/1999       |  | $                 | 11,471 |                        | $ | 2,004                       |  | $                          | 115   |              
|Identifiable assets(2)             |  |                   |        |                        |   |                             |  |                            |       |              
|December 30, 2000                  |  | $                 | 19,961 |                        | $ | 11,235                      |  | $                          | 2,900 |              
|March 31, 2000                     |  | $                 | 21,649 |                        | $ | 14,093                      |  | $                          | 2,515 |              

---

9

---

Geographic Areas

Information in the table below is presented on the basis which the company uses it to manage the identifiable segments. International sales amounted to
20.0 percent and 21.0 percent of revenues for the third quarter of fiscal 2001, and the third quarter of fiscal 2000, respectively. Substantially all of the Company's export sales are
invoiced and paid in U.S. dollars.

Geographic Area Information

|                                   |  | United States |        | International |   | Other(1) |  | Eliminations |    | Total
|---------------------------------- |  | ------------- | ------ | ------------- | - | -------- |  | ------------ | -- | -----
|Revenues                           |  |               |        |               |   |          |  |              |    |      
|Third quarter ended 12/30/2000     |  | $             | 17,743 |               | $ | 4,437    |  | $            |   |      
|Third quarter ended 12/31/1999     |  | $             | 16,187 |               | $ | 4,413    |  | $            |   |      
|Thirty-nine weeks ended 12/30/2000 |  | $             | 50,505 |               | $ | 11,125   |  | $            |   |      
|Nine months ended 12/31/1999       |  | $             | 49,949 |               | $ | 14,505   |  | $            | 60 |      
|Property, Plant & Equipment, net   |  |               |        |               |   |          |  |              |    |      
|December 30, 2000                  |  | $             | 14,073 |               | $ | 2,079    |  |              |   |      
|March 31, 2000                     |  | $             | 12,837 |               | $ | 2,522    |  |              |   |      

---

Significant Customers

During the third quarter ended December 30, 2000 no individual customer sales totals represented 10% or more or total revenues.

Note 7New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101") which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. The Company is in the process of reviewing requirements of
SAB 101, as amended, and is required to comply no later than the fourth quarter of fiscal year 2001. The Company is evaluating the potential effects of SAB 101 on its consolidated financial
statements.

During
October 2000, the "Emerging Issues Task Force" ("EITF") issued EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs". EITF
No. 00-10 addresses the income statement classification of the amounts billed to customer's, and costs incurred for shipping and handling. The Company currently classifies shipping
and handling costs as costs of goods sold. Amounts billed to customers for shipping and handling are currently reflected as a reduction to cost of goods sold. The amounts billed to customers will be
reclassified to revenue in order to conform with EITF No. 00-10. The Company is in the process of determining the reclassifications necessary for reporting purposes. Compliance is
required no later than the fourth quarter of fiscal 2001.

10

---



Minntech Corporation        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 third quarter of fiscal 2001 increased 3.6 percent to $19.4 million, compared to $18.7 million in the same period on year ago. Dialysis product
sales increased 5.1 percent to $14.5 million in the third quarter of fiscal 2001 due primarily to increases in sales of concentrate, dialysis reprocessing equipment and services. Cardiosurgery sales
declined by 10.9 percent to $2.5 million in the third quarter of fiscal 2001. The lower cardiosurgery sales in the quarter are primarily attributable to a decrease in hemoconcentrator sales.
Developing businesses sales increased 12.5 percent to $2.4 million in the third quarter of fiscal 2001 due to growth in filtration and separation products.

Revenues
for the thirty-nine week period ending December 30, 2000 decreased by 3.4 percent to $54.5 million. Dialysis product sales fiscal 2001 year-to-date are essentially
unchanged from the same period one year ago. Sales of cardiosurgery products decreased 23.6 percent to $7.8 million in the thirty-nine week period ending December 30, 2000. In the first half of
the prior year the Company was a direct marketer of its oxygenator and hemoconcentrator product lines. In the third quarter of fiscal 2000 the Company sold its oxygenator and cardioplegia product
lines to LifeStream International, Inc. and entered into an exclusive distribution agreement with LifeStream for its hemoconcentrator product line. The Company realizes lower average selling prices
under the OEM distribution structure, but also operates with lower sales and marketing expenses. The decrease in cardiosurgery sales in the first three quarters of fiscal 2001 is attributable to lower
hemoconcentrator average selling prices under the OEM distribution structure combined with a decline in unit volume. Developing businesses sales year-to-date are up 9.4 percent to $6.0 million as
compared to the same period last year, due to growth in the Company's filtration and separation and endoscope reprocessing product lines.

Foreign
exchange rate movements unfavorably impacted revenues by $.5 million, or 2.7 percent, in the third quarter of fiscal 2001 and $1.1 million, or
2.0 percent, in the first three quarters of this year.

Product
sales by group are summarized in the following table:

|                                   |               | Quarter ended |        | Three quarters
ended
|---------------------------------- | ------------- | ------------- | ------ | --------------------
|
|
|Dialysis products                  |               | $             | 14,510 |                     
|Cardiosurgery products             |               |               | 2,478  |                     
|Other Developing Business products |               |               | 2,411  |                     
|                                   |               |               |        |                     
|                                   | Total Company |               | $      | 19,399              
|                                   |               |               |        |                     

11

---

Following
is a summary of earnings/(losses) from operations before income taxes by business segment:

|                            |               | Quarter ended |        | Three quarters
ended |  
|--------------------------- | ------------- | ------------- | ------ | -------------------- | -
|
|
|Dialysis products           |               | $             | 3,482  |                      | $
|Cardiosurgery products      |               |               | 439    |                      |  
|Other Developing Businesses |               |               | 703    |                      |  
|Corporate & Unallocated     |               |               | (2,758 | )                    |  
|                            |               |               |        |                      |  
|                            | Total Company |               | $      | 1,866                |  
|                            |               |               |        |                      |  

Gross
margin as a percentage of product sales declined to 38.7 percent from 42.5 percent in the same quarter in the prior year. Year-to-date fiscal 2001 gross margins on product sales
were 36.7 percent compared to 42.9 percent in the same period last year. The lower gross margins for the quarter and year-to-date periods are primarily the result of increased distribution costs,
combined with higher overhead costs resulting from lower sales volumes, and lower average selling prices in the hemoconcentrator product line. The hemoconcentrator average selling price decline is
attributable to selling the product through a strategic OEM partnership as compared to the first half of the prior year when the Company sold the product direct.

Research
and development expenses in the third quarter of fiscal 2001 were $.9 million or 4.7 percent of revenues compared to $.9 million or 4.9 percent of revenues in the prior year.
For the three quarters ended December 30, 2000, research and development expenses totaled $2.7 million or 4.9 percent of revenues compared to $3.3 million or 5.8 percent of revenues in the same period
one year ago. The decrease in research and development spending is attributable to transitioning major development projects to later stages of completion in 2001 as compared to 2000. The Company
expects that research and development spending in fiscal 2001 will range between 4.7 and 5.2 percent of revenues.

Selling,
general and administrative expenses for the third quarter of fiscal 2001 were $4.7 million or 24.0 percent of revenues compared to $4.6 million or 24.5 percent of revenues in
the same period one year ago. For the three quarters ended December 30, 2000, selling, general, and administrative expenses totaled $14.0 million or 25.7 percent of revenues compared to $15.1 million
or 26.8 percent of revenues for the same period last year. Selling, general, and administrative expenses in terms of absolute dollars are flat for the quarter as a result of a decrease in general and
administrative expenses offset by increased dialysis sales and marketing spending. Selling, general, and administrative expenses year-to-date decreased both in terms of absolute dollars and as a
percent of revenues due to lower general and administrative spending and cardiosurgery sales and marketing costs, partially offset by an increase in dialysis sales and marketing combined with
severance costs incurred in the first quarter of this year.

Other
income of $.26 million in the third quarter reflects $.25 million for interest income combined with non-recurring other income items of $.29 million, partially offset by $.28
million in foreign exchange related losses. Other income for the three quarters ended December 30, 2000 of $.85 million
reflects $.5 million of interest income, $.4 million of non-recurring other income items, and $.25 million for foreign exchange related losses.

The
Company's effective tax rate for both the third quarter and year-to-date period ended December 30, 2000 was 32.0 percent compared to an effective rate of 34.0 percent for
the corresponding

12

---

periods one year ago. The Company expects the effective tax rate to range between 32.0 and 33.0 percent for fiscal 2001.

The
Company reported net earnings of $1.4 million for the third quarter ended December 30, 2000 or 7.5 percent of revenue compared to net earnings of $1.7 million, or 9.0 percent of
revenue in the third quarter one year ago. For the three quarters ended December 30, 2000 net earnings were $2.7 million, or 5.0 percent of revenue, compared to $4.1 million, or 7.3 percent of revenue
for the corresponding period last year. For the quarter and year-to-date periods ended December 30, 2000, net earnings were unfavorably impacted by lower product sales, higher distribution expenses,
and higher overhead costs on lower sales volumes.

Liquidity and Capital Resources

Operating activities provided $3.0 million of cash and cash equivalents in the third quarter and $7.8 million in the year-to-date period ended
December 30, 2000. Fiscal 2001 year-to-date cash flows from operations were favorably impacted by reductions in inventory and prepaid expenses. The Company invested $3.5 million in capital
equipment and patents in thirty-nine week period ended December 30, 2000. At December 30, 2000 the Company had $15.9 million of cash and cash equivalents.

Working
capital at December 30, 2000 was $35.8 million as compared to $32.7 million as of March 31, 2000. The current ratio as of December 30, 2000 was 5.4, compared to 4.9 at
March 31, 2000.

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. During the first quarter
of fiscal 2001 the Company expended $.2 million to repurchase 24,100 shares. There were no share repurchases in the second or third quarters of fiscal 2001.

In
April 1998, the Company signed a finite risk insurance policy to cover potential future product liability and legal defense exposures. In fiscal 1999 and 2000 the Company made $1.7
million in premium payments. The company cancelled the coverage in the second quarter of fiscal 2001 and subsequently recovered $1.3 million of premiums and interest in the second quarter of fiscal
2001.

In
October 1999, the company finalized the sale of two cardiosurgery product lines to LifeStream International for $7.2 million in cash. Minntech received $2.24 million in cash at
closing and $1.65 million in subsequent payments in the current fiscal year. The remaining amount to be collected is 3.31 million, including current inventory related to these product lines.

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 2001.

Year 2000 issues

The Company's computer systems and equipment successfully transitioned to the year 2000 with no significant issues. The Company continues to keep the year 2000
project management in place to monitor latent problems that could surface at key dates or events in the future. The Company does not
anticipate any significant problems related to these events. However, there can be no assurances that failure to address the year 2000 issues by significant business partners will not have a material
adverse effect on the Company.

13

---

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 will switch 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 should require 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 will be expensed as incurred, and are not anticipated to be material to the Company's results of operations, financial condition, or liquidity.

14

---

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

|Exhibit No. |  | Exhibit                                                                                                             |  | Page      
|----------- |  | ------------------------------------------------------------------------------------------------------------------- |  | ----------
|3(a)        |  | Restated Articles of Incorporation, as amended(1)                                                                   |  |           
|3(b)        |  | Restated By-Laws(2)                                                                                                 |  |           
|3(c)        |  | Amendment to By-Laws(3)                                                                                             |  |           
|4(a)        |  | Form of Specimen Common Stock Certificate(4)                                                                        |  |           
|4(b)        |  | Rights Agreement, dated as of July 1, 1999, between the Company and Norwest Bank Minnesota, National Association(5) |  |           
|10(a)       |  | 1989 Stock Plan, as amended(6)                                                                                      |  |           
|10(b)       |  | Amendment to 1989 Stock Plan effective February 25, 1998(7)                                                         |  |           
|10(c)       |  | Amendment to 1989 Stock Plan effective September 30, 1998(8)                                                        |  |           
|10(d)       |  | Employment Agreement with Barbara A. Wrigley dated September 1, 1996(9)                                             |  |           
|10(e)       |  | 1990 Employee Stock Purchase Plan, as amended and restated                                                          |  | Electronic
|10(f)       |  | Employment Agreement with R. James Danehy dated November 29, 2000                                                   |  | Electronic
|10(g)       |  | Management Agreement with R. James Danehy dated November 29, 2000                                                   |  | Electronic
|10(h)       |  | Non-Qualified Stock Option Agreement with R. James Danehy dated November 29, 2000                                   |  | Electronic
|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 April 1, 2000*                                  |  |           
|10(m)       |  | Separation and Consulting Agreement with Thomas J. McGoldrick dated July 17, 2000*                                  |  |           
|10(n)       |  | Amendment to Separation and Consulting Agreement with Thomas J. McGoldrick dated August 1, 2000*                    |  |           
|10(o)       |  | Separation and Consulting Agreement with Daniel H. Schyma dated July 31, 2000*                                      |  |           
|10(p)       |  | Restated Supplemental Executive Retirement Plan effective April 1, 2000(18)*                                        |  |           
|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(12)*                      |  |           
|10(s)       |  | Employment Agreement with Jules L. Fisher dated December 11, 1996, as amended April 1, 1997(19)*                    |  |           
|10(t)       |  | First Amendment to Supplemental Executive Retirement Plan effective September 27, 2000(20)                          |  |           
|10(u)       |  | Employment Agreement with Michael P. Petersen dated May 26, 2000(21)                                                |  |           
|21          |  | Subsidiaries of the Registrant(16)                                                                                  |  |           

| |  | (b) |  | Reports on Form 8-K                                                                      
| |  | --- |  | -----------------------------------------------------------------------------------------
| |  |     |  | No reports on Form 8-K were filed by the Company during the third quarter of fiscal 2001.

---

---

---

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: February 13, 2001 |                                                                                                                  
|                        | /s/JULES L. FISHERJules L. Fisher Chief Financial Officer
(Duly authorized officer)
(Principal financial officer)

---

QuickLinks