ResMed Inc. Announces Financial Results for Quarter and Year Ended June 30, 2007
SAN DIEGO, Aug. 7 /PRNewswire-FirstCall/ -- ResMed Inc. (NYSE: RMD) today announced revenue and pro forma income results for the quarter ended June 30, 2007. Revenue for the quarter was $191.3 million, a 12% increase over the quarter ended June 30, 2006. For the current quarter, pro forma income from operations and pro forma net income were $42.4 million and $32.2 million (pro forma measures exclude the impact of stock-based compensation costs, restructuring expenses, amortization of acquired intangible assets and voluntary product recall expenses, as described below). Pro forma diluted earnings per share for the quarter ended June 30, 2007 were $0.41, compared to $0.40 for the quarter ended June 30, 2006. GAAP operating income was $36.0 million for the current quarter, while GAAP net income was $27.7 million or $0.35 per diluted share, compared with $0.30 in the year ago quarter, an increase of 17%. Gross margin was 61.3% for the quarter ended June 30, 2007.
Pro forma selling, general and administration (SG&A) costs for the quarter were $61.3 million, an increase of $10.7 million, or 21%, over the same period in fiscal 2006. Pro forma SG&A costs were 32% of revenue in the June quarter, compared to 30% in the same period in fiscal 2006. GAAP SG&A costs were $65.2 million for the quarter, an increase of $11.5 million or 21% over the quarter ended June 30, 2006. The increase in SG&A was primarily due to the addition of selling and administration personnel and related expenses to support sales growth.
Pro forma research & development expenditure during the June quarter was $13.7 million. GAAP R&D expense during the quarter was $14.2 million or approximately 7% of revenue. GAAP R&D expenses increased 28% year over year and are expected to remain between 6% and 7% of net revenue through fiscal year 2008.
For the year ended June 30, 2007, revenue was $716.3 million, an increase of 18% over the $607.0 million for the year ended June 30, 2006. Pro forma income from operations and pro forma net income were $174.3 million and $125.8 million, or $1.59 per diluted share, an increase of 13% and 16%, respectively. On a GAAP basis, income from operations was $90.2 million, while net income for the year ended June 30, 2007 was $66.3 million or $0.85 per diluted share.
Amortization of acquired intangibles of $1.8 million ($1.2 million net of tax), incurred during the quarter ended June 30, 2007 consisted of amortization of acquired intangible assets associated with our acquisitions of Resprecare, Hoefner, Saime, Pulmomed and PolarMed. Stock-based compensation costs incurred during the quarter ended June 30, 2007, of $4.5 million ($3.3 million net of tax), consisted of expenses associated with stock options granted to employees and the employee stock purchase plan.
The Company has provided tabular reconciliation of GAAP operating income and GAAP net income with pro forma operating income and pro forma net income, (excluding the impact of stock-based compensation costs, restructuring expenses, amortization of acquired intangibles, American Jobs Creation Act of 2004 ('AJCA') and voluntary product recall expenses) for the quarters and years ended June 30, 2007 and 2006.
Inventory at $157.2 million as of June 30, 2007, was comparable to March 31, 2007 level of $156.9 million. Accounts receivable days sales outstanding, at 77 days, increased from the March 31, 2007 quarter of 73 days.
Peter C. Farrell Ph.D., Chairman and Chief Executive Officer, commented, "In the fourth quarter of fiscal 2007, overall Americas sales increased by 10%; excluding sales from our motor division, Americas sales increased by 13% over the year ago quarter. Sales growth for the Americas were impacted by challenging year ago comparables when we grew by 44% and a product recall initiated during the current year's quarter. Sales outside of the Americas totaled $92.8 million, a 14% increase over last year. Operating cash flow for the June quarter was an encouraging $27.1 million. While we are not satisfied with our Q407 results, we had a robust fiscal year 2007, and we remain optimistic about our growth moving forward.
Dr. Farrell continued, "I am also pleased to announce that we have set up three distinct strategic business units. They are now operational under the leadership of Senior Vice Presidents Don Darkin (Interfaces), Michael Farrell (Positive Airway Pressure Devices) and Stein Jacobsen (Portable Ventilators). The SBU leaders will be responsible for product management in their respective areas, while our regional chief operating officers will continue to lead our commercial teams. This reorganization streamlines our management structure by removing one layer of management, and aligns our structure better with market expansion opportunities.
Dr. Farrell continued, "We are encouraged by the initial response to our newly-launched full face masks: Quattro and Liberty, with strong early sales achieved by these innovative products. We saw continued growth in Adapt SV sales with complex sleep apnea continuing to gain recognition within the sleep community. In fiscal 2008, we plan to expand our market development initiatives in cardiology, diabetes and occupational health and we will also launch a number of new products in the mask and flow generator segments. I am encouraged that we are beginning to lift the veil of ignorance of sleep-disordered breathing and remain optimistic about our continued organic growth in the years ahead."
About ResMed
ResMed is a leading manufacturer of medical equipment for the treatment and management of sleep-disordered breathing and other respiratory disorders. We are dedicated to developing innovative products to improve the lives of those who suffer from these conditions and to increasing awareness among patients and healthcare professionals for the potentially serious health consequences of untreated sleep-disordered breathing. For more information on ResMed, visit http://www.resmed.com.
ResMed will host a conference call at 2.00 p.m. U.S. Pacific Standard Time today to discuss these quarterly results. Individuals wishing to access the conference call may do so via ResMed's Web site at http://www.resmed.com or by dialing (888) 396-2384 (domestic) or +1 (617) 847-8711 (international) and entering conference I.D. No. 87412663. Please allow extra time prior to the call to visit the Web site and download the streaming media player (Windows Media Player) required to listen to the Internet broadcast. The online archive of the broadcast will be available approximately 90 minutes after the live call and will be available for two weeks. A telephone replay of the conference call is available by dialing (888) 286-8010 (domestic) and +1 (617) 801-6888 (international) and entering conference I.D. No. 55931051.
Further information can be obtained by contacting Matthew Borer at ResMed Inc., San Diego, at (858) 746-2280; Brett Sandercock at ResMed Limited, Sydney, on (+612) 8884-2090; or by visiting the Company's multilingual Web site at http://www.resmed.com.
Statements contained in this release that are not historical facts are "forward-looking" statements as contemplated by the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the Company's future revenue, earnings or expenses, new product development, new markets for the Company's products and the impact of future developments related to the recently announced product recall, and are subject to risks and uncertainties, which could cause actual results to materially differ from those projected or implied in the forward-looking statements. The Company cannot be certain that it has accurately predicted the costs of the product recall, which could change in response to additional feedback from ongoing discussions with the FDA and with various foreign regulatory bodies. In addition, the product recall could affect the Company's reputation. Additional risks and uncertainties are discussed in the Company's Annual Report on Form 10-K for its most recent fiscal year and in other reports the Company files with the U.S. Securities & Exchange Commission. Those reports are available on the Company's Web site.
ResMed Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In US$ thousands, except per share data)
Three Months Ended Year Ended
June 30, June 30,
2007 2006 2007 2006
Net revenue $191,309 $171,172 $716,332 $606,996
Cost of sales (A) 74,103 66,988 272,140 230,101
Voluntary product recall expenses - - 59,700 -
Gross profit 117,206 104,184 384,492 376,895
Operating expenses:
Selling, general and
administrative (A) 65,211 53,690 237,326 200,168
Donation to Foundations - - - 760
Research and development (A) 14,165 11,061 50,106 37,216
Amortization of acquired
intangible assets 1,783 1,666 6,897 6,327
Restructuring expenses - - - 1,124
Total operating expenses 81,159 66,417 294,329 245,595
Income from operations 36,047 37,767 90,163 131,300
Other income (expenses), net:
Interest income (expense), net 1,885 1,792 6,477 1,320
Other, net 2,511 (697) 1,333 774
Total other income (expenses), net 4,396 1,095 7,810 2,094
Income before income taxes 40,443 38,862 97,973 133,394
Income taxes (12,769) (15,769) (31,671) (45,183)
Net income $27,674 $23,093 $66,302 $88,211
Basic earnings per share $0.36 $0.31 $0.86 $1.22
Diluted earnings per share(1) $0.35 $0.30 $0.85 $1.16
Pro forma diluted earnings
per share excluding the
impact of stock-based
compensation costs,
restructuring expenses, AJCA
repatriation tax,
amortization of acquired
intangibles and voluntary
product recall (1) & (2) $0.41 $0.40 $1.59 $1.42
Basic shares outstanding 77,556 75,585 76,709 72,307
Diluted shares outstanding(1) 78,418 77,906 78,253 77,162
Includes stock-based compensation
costs as follows(A):
Cost of sales $191 $330 $1,081 $891
Selling, general and
administrative 3,881 3,088 14,474 12,372
Research and development 464 506 1,950 2,042
Total stock-based
compensation costs $4,536 $3,924 $17,505 $15,305
(1) See reconciliation of basic and diluted earnings per share in table at
end of press release.
(2) See reconciliation of non-GAAP financial measures in table at end of
press release.
ResMed Inc. And Subsidiaries
Consolidated Balance Sheets (Unaudited)
(In US$ thousands, except share and per share data)
June 30, June 30,
2007 2006
Assets
Current assets:
Cash and cash equivalents $277,742 $219,544
Accounts receivable, net 167,821 138,147
Inventories 157,204 116,194
Deferred income taxes 42,109 27,071
Income taxes receivable 6,605 -
Prepaid expenses and other current assets 15,971 9,763
Total current assets 667,452 510,719
Property, plant and equipment, net 310,580 245,376
Goodwill 206,778 195,612
Other intangibles 46,575 48,897
Deferred income taxes 9,206 5,265
Other assets 10,104 7,052
Total non-current assets 583,243 502,202
Total assets 1,250,695 1,012,921
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $53,039 $45,045
Accrued expenses 98,324 40,901
Deferred revenue 18,865 15,344
Income taxes payable 2,063 22,841
Deferred income taxes 415 435
Current portion of long-term debt 28,350 4,869
Total current liabilities 201,056 129,435
Non current liabilities:
Deferred income taxes 18,297 17,642
Deferred revenue 12,472 11,484
Long-term debt 87,648 116,212
Total non-current liabilities 118,417 145,338
Total liabilities 319,473 274,773
Stockholders' Equity:
Common Stock 311 303
Additional paid-in capital 421,701 353,464
Retained earnings 436,954 370,652
Treasury Stock (43,497) (41,405)
Accumulated other comprehensive income 115,753 55,134
Total stockholders' equity 931,222 738,148
Total liabilities and stockholders' equity $1,250,283 $1,012,921
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(In US$ thousands, except share and per share data)
In managing its business, ResMed makes use of certain non-GAAP financial
measures in evaluating the Company's results of operations. The measure, "pro
forma operating income" is reconciled with GAAP operating income in the table
below:
Three Months Ended Year Ended
June 30, June 30,
2007 2006 2007 2006
GAAP operating income 36,047 37,767 90,163 131,300
Stock Based Compensation Expense 4,536 3,924 17,505 15,305
Restructuring expenses - - - 1,124
Amortization of acquired
intangible assets 1,783 1,666 6,897 6,327
Voluntary Product Recall expenses - - 59,700 -
Pro forma operating income
(excluding the impact of stock-
based compensation costs,
restructuring expenses,
amortization of acquired
intangible assets voluntary
product recall expenses) 42,366 43,357 174,265 154,056
The measure, "pro forma net income" is reconciled with GAAP net income in
the table below:
Three Months Ended Year Ended
June 30, June 30,
2007 2006 2007 2006
GAAP net income 27,674 23,093 66,302 88,211
Stock-based compensation costs,
net of tax 3,336 3,279 13,122 11,972
Restructuring expenses, net of tax - - - 718
Amortization of acquired
intangible assets, net of tax 1,179 1,102 4,561 4,174
Voluntary Product Recall expenses - - 41,790 -
AJCA repatriation tax - 3,537 - 3,537
Pro forma net income (excluding
the impact of stock-based
compensation costs,
restructuring expenses, AJCA
repatriation tax, amortization
of acquired intangible assets
and voluntary product recall
expenses) 32,189 31,011 125,775 108,612
ResMed believes that presenting diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses, amortization of acquired intangible assets and voluntary product recall expenses is an additional measure of performance that investors can use to compare operating results between reporting periods. In addition, the events giving rise to the restructuring expenses are not associated with the Company's normal operating business and are expected to result in future market opportunities, cost savings, and other benefits.
Management of the Company uses non-GAAP information internally in planning, forecasting, and evaluating the Company's results of operations in the current period and in comparing it to past periods. The Company also uses these non-GAAP measures in evaluating management performance for compensation purposes. Management believes that this information also provides investors better insight in evaluating the Company's earnings performance from core operations and provides consistency in financial reporting.
Management believes disclosure of non-GAAP earnings has economic substance because the excluded expenses represent non-cash expenditures, or relate to transactions that are variable in nature between reporting periods. Our use of non-GAAP earnings 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. We compensate for the inherent limitations of non-GAAP measures by not relying exclusively on non-GAAP measures, but rather by using such information to supplement GAAP financial measures.
Reconciliation of Basic and Diluted Earnings per Share (Unaudited)
(In US$ thousands, except share and per share data)
Three Months Ended Year Ended
June 30, June 30,
2007 2006 2007 2006
Numerator:
Net Income $27,674 $23,093 $66,302 $88,211
Adjustment for interest and
deferred borrowing costs, net
of income tax effect(1) - - - 1,660
Net income, used in
calculating diluted earnings
per share 27,674 23,093 66,302 89,871
Adjustment for stock-based
compensation costs 3,336 3,279 13,122 11,972
Adjustment for restructuring
expenses - - - 718
Adjustment for amortization
of acquired intangible assets 1,179 1,102 4,561 4,174
Adjustment for voluntary
product recall expense - - 41,790 -
Adjustment for AJCA
repatriation tax - 3,537 - 3,537
Pro forma net income, used in
calculating diluted earnings
per share, excluding the
impact of stock-based
compensation costs,
restructuring expenses,
amortization of acquired
intangible assets, AJCA
repatriation tax and
voluntary product recall
expense 32,189 31,011 125,775 110,272
Denominator:
Basic weighted-average common
shares outstanding 77,556 75,585 76,709 72,307
Effect of dilutive securities:
Stock options 862 2,321 1,544 2,346
Convertible subordinated notes(1) - - - 2,509
Diluted potential common shares 862 2,321 1,544 4,855
Diluted weighted average shares 78,418 77,906 78,253 77,162
Increase in diluted weighted
average shares:
Stock option adjustment due
to the impact of SFAS 123(R) 894 597 977 449
Pro forma diluted weighted
average shares, excluding the
impact of SFAS 123(R) 79,312 78,503 79,230 77,611
Basic earnings per share $0.36 $0.31 $0.86 $1.22
Diluted earnings per share $0.35 $0.30 $0.85 $1.16
Pro forma diluted earnings
per share, excluding the
impact of stock-based
compensation costs,
restructuring expenses,
amortization of acquired
intangible assets, AJCA
repatriation tax and
voluntary product recall
expense $0.41 $0.40 $1.59 $1.42
(1) Diluted earnings per share has been calculated after adjusting the
numerator (net income) for the effect of assumed conversion of our
convertible notes for the three months ended June 30, 2007, by $Nil
(2006:$Nil) and for the year ended June 30, 2007, by $Nil
(2006:$1,660,000).
SOURCE ResMed Inc.
Released August 7, 2007