ResMed Inc. Announces Results for the Third Quarter of Fiscal Year 2017

RESMED INC AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2017

2016

2017

2016

Net revenue

$514,204

$453,879

$1,510,051

$1,320,066

Cost of sales

214,490

193,999

627,012

557,460

Astral field safety notification expenses ⁽¹⁾

-

-

5,070

-

SERVE-HF accrual release ⁽¹⁾

-

-

-

(2,402)

Gross profit

299,714

259,880

877,969

765,008

Operating expenses:

Selling, general and administrative

137,864

119,351

406,028

348,664

Research and development

35,130

28,109

107,761

84,271

Restructuring expenses ⁽¹⁾

7,945

-

12,358

6,914

Litigation settlement expenses ⁽¹⁾

-

-

8,500

-

Acquisition related expenses ⁽¹⁾

-

3,550

10,076

3,550

Amortization of acquired intangible assets ⁽¹⁾

11,378

4,558

34,809

11,294

Total operating expenses

192,317

155,568

579,532

454,693

Income from operations ⁽¹⁾

107,397

104,312

298,437

310,315

Other income (expenses), net:

Interest income (expense), net

(2,911)

2,131

(7,841)

8,028

Other, net

3,504

2,553

6,525

3,791

Total other income (expenses), net

593

4,684

(1,316)

11,819

Income before income taxes

107,990

108,996

297,121

322,134

Income taxes excluding ASU 2016-09 ⁽²⁾

21,601

20,538

60,336

62,757

Income taxes relating to ASU 2016-09 ⁽²⁾

(1,434)

(2,333)

(3,887)

(9,906)

Total income taxes

20,167

18,205

56,449

52,851

Net income ⁽¹⁾

$87,823

$90,791

$240,672

$269,283

Basic earnings per share ⁽²⁾

$0.62

$0.65

$1.70

$1.92

Diluted earnings per share ⁽²⁾

$0.62

$0.64

$1.69

$1.90

Non-GAAP diluted earnings per share ^{(1) (2)}

$0.71

$0.69

$2.05

$2.01

Basic shares outstanding

141,714

140,187

141,266

140,140

Diluted shares outstanding ⁽²⁾

142,724

141,232

142,363

141,666

(1)

See the reconciliation of non-GAAP financial measures in the table at the end of the press release.

(2)

As a result of the adoption of ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting" during the quarter ended June 30, 2016 we now recognize an income tax impact relating to share-based payment transactions. The income taxes for the three and nine months ended March 31, 2016 have been restated to reflect the adoption of the standard as the benefit was previously recorded as a reduction to Additional Capital.   

RESMED INC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited - In thousands)

March 31,

June 30,

2017

2016

Assets:

Current assets:

Cash and cash equivalents

$827,310

$731,434

Accounts receivable, net

413,612

382,086

Inventories

259,870

224,456

Prepayments and other current assets

104,569

81,743

Total current assets

1,605,361

1,419,719

Property, plant and equipment, net

387,412

384,276

Goodwill

1,050,083

1,059,245

Other intangibles, net

267,404

299,808

Deferred income taxes and other non-current assets

112,303

93,657

Total non-current assets

1,817,202

1,836,986

Total assets

$3,422,563

$3,256,705

Liabilities and Stockholders' Equity:

Current liabilities:

Accounts payable

$82,846

$92,571

Accrued expenses

169,896

156,805

Deferred revenue

48,682

50,009

Income taxes payable

34,854

39,166

Short-term debt

-

299,438

Total current liabilities

336,278

637,989

Non-current liabilities:

Deferred income taxes

12,988

9,061

Deferred revenue

49,135

40,281

Other long-term liabilities

856

1,211

Long-term debt

1,168,350

873,332

Total non-current liabilities

1,231,329

923,885

Total liabilities

1,567,607

1,561,874

Stockholders' Equity:

Common stock

567

563

Additional paid-in capital

1,352,676

1,303,238

Retained earnings

2,261,425

2,160,299

Treasury stock

(1,546,612)

(1,546,611)

Accumulated other comprehensive income

(213,100)

(222,658)

Total stockholders' equity

$1,854,956

$1,694,831

Total liabilities and stockholders' equity

$3,422,563

$3,256,705

RESMED INC AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited - In thousands)

Nine Months Ended

March 31,

2017

2016

Cash flows from operating activities:

Net income

$240,672

$269,283

Adjustment to reconcile net income to cash provided by operating activities:

Depreciation and amortization

83,989

59,827

Impairment of long-lived assets

-

2,815

Stock-based compensation costs

34,263

34,779

Changes in fair value of business combination contingent consideration

10,076

(154)

Payment of business combination contingent consideration

(8,460)

-

Impairment of cost-method investments

588

750

Changes in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable, net

(32,793)

2,798

Inventories, net

(38,146)

26,012

Prepaid expenses, net deferred income taxes and other current assets

(28,554)

99

Accounts payable, accrued expenses and other

12,105

8,764

Net cash provided by operating activities

273,740

404,973

Cash flows from investing activities:

Purchases of property, plant and equipment

(43,857)

(44,133)

Patent registration costs

(6,980)

(6,891)

Business acquisitions, net of cash acquired

(3,394)

(242,645)

Investments in cost-method investments

(6,464)

(8,215)

Proceeds / (Payments) on maturity of foreign currency contracts

10,085

(5,711)

Net cash used in investing activities

(50,610)

(307,595)

Cash flows from financing activities:

Proceeds from issuance of common stock, net

15,255

16,937

Purchases of treasury stock

-

(102,058)

Payment of business combination contingent consideration

(11,682)

(1,228)

Proceeds from borrowings, net of borrowing costs

350,000

310,000

Repayment of borrowings

(355,000)

(193,092)

Dividends paid

(139,546)

(126,026)

Net cash (used in) / provided by financing activities

(140,973)

(95,467)

Effect of exchange rate changes on cash

13,719

(665)

Net increase / (decrease) in cash and cash equivalents

95,876

1,246

Cash and cash equivalents at beginning of period

731,434

717,249

Cash and cash equivalents at end of period

$827,310

$718,495

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In US$ thousands, except share and per share data)

The measure, "non-GAAP income from operations" is reconciled with GAAP income from operations below:

Three Months Ended

March 31

Nine Months Ended

March 31,

2017

2016

2017

2016

GAAP income from operations

$107,397

$104,312

$298,437

$310,315

SERVE-HF accrual release ^(A)

-

-

-

(2,402)

Astral battery field safety notification expenses ^(A)

-

-

5,070

-

Restructuring expenses ^(A)

7,945

-

12,358

6,914

Litigation settlement expenses ^(A)

-

-

8,500

-

Acquisition related expenses ^(A)

-

3,550

10,076

3,550

Amortization of acquired intangible assets ^(A)

11,378

4,558

34,809

11,294

Non-GAAP income from operations

$126,720

$112,420

$369,250

$329,671

The measures "non-GAAP net income" and "non-GAAP diluted earnings per share" are reconciled with GAAP net income and GAAP diluted earnings per share in the table below:

Three Months Ended

March 31,

Nine Months Ended

March 31,

2017

2016

2017

2016

GAAP net income

$87,823

$90,791

$240,672

$269,283

SERVE-HF accrual release, net of tax ^(A)

-

-

-

(1,682)

Astral battery field safety notification expenses ^(A)

-

-

3,549

-

Restructuring expenses, net of tax ^(A)

5,210

-

8,295

5,204

Litigation settlement expenses, net of tax ^(A)

-

-

5,392

-

Acquisition related expenses ^(A)

-

3,550

10,076

3,550

Amortization of acquired intangible assets, net of tax ^(A)

7,704

3,416

23,679

8,572

Non-GAAP net income ^(A)

$100,737

$97,757

$291,663

$284,927

Diluted shares outstanding

142,724

141,232

142,363

141,666

GAAP diluted earnings per share

$0.62

$0.64

$1.69

$1.90

$0.71

$0.69

$2.05

$2.01

^(A) 

ResMed adjusts for the impact of the Astral battery field safety notification expenses, release of SERVE-HF accrual, restructuring expenses, litigation settlement expenses, acquisition related expenses and amortization of acquired intangible assets from their evaluation of ongoing operations and believes investors benefit from adjusting these items to facilitate a more meaningful evaluation of current operating performance.

ResMed believes that non-GAAP diluted earnings per share is an additional measure of performance investors can use to compare operating results between reporting periods. ResMed uses non-GAAP information internally in planning, forecasting, and evaluating the results of operations in the current period and in comparing it to past periods. ResMed believes this information provides investors better insight in evaluating ResMed's performance from core operations and provides consistent financial reporting. Our use of non-GAAP measures is intended to supplement, and not to replace, our presentation of net income and other GAAP measures. Like all non-GAAP measures, non-GAAP earnings are subject to inherent limitations because they do not include all the expenses that must be included under GAAP.

Contacts:

For Investors 

For News Media

Agnes Lee 

Alison Graves

O: 858-836-5971 

O: 858-836-6789

investorrelations@resmed.com 

news@resmed.com