ResMed Inc. Announces Record Financial Results for Quarter and Six Months Ended December 31, 2006
SAN DIEGO, Feb. 6 /PRNewswire-FirstCall/ -- ResMed Inc. (NYSE: RMD) today announced record revenue and income results for the quarter ended December 31, 2006. Revenue for the quarter was $178.4 million, a 22% increase over the quarter ended December 31, 2005. For the current quarter, pro forma income from operations and pro forma net income were $47.0 million and $33.7 million, an increase of 23% and 25%, respectively (pro forma measures exclude the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets, which are described below). Pro forma diluted earnings per share for the quarter ended December 31, 2006, were $0.43, an increase of 20%, compared to the December 31, 2005, quarter. GAAP operating income was $40.7 million for the current quarter, while net income was $29.0 million or $0.37 per diluted share. Gross margin was 62.6% for the quarter ended December 31, 2006.
Pro forma selling, general and administration (SG&A) costs for the quarter were $53.5 million, an increase of $8.2 million, or 18%, over the same period in fiscal 2006. Pro forma SG&A costs were 30% of revenue in the December quarter, compared to 31% in the same period in fiscal 2006. GAAP SG&A costs were $57.3 million for the quarter, an increase of $8.4 million or 17% over the quarter ended December 31, 2005. The increase in SG&A was primarily due to the addition of selling and administration personnel and related expenses necessary to support our sales growth.
Pro forma research and development expenditure during the quarter was $11.5 million, or approximately 6% of revenues. GAAP R&D expense during the quarter was $12.0 million or approximately 7% of revenue. GAAP R&D expenses increased 40% year over year and are expected to remain between 6% and 7% of net revenue through fiscal year 2007.
For the six months ended December 31, 2006, revenues were $342.0 million, an increase of 25% over the $273.5 million for the six months ended December 31, 2005. For the six months ended December 31, 2006, pro forma income from operations and pro forma net income were $87.6 million and $62.5 million, an increase of 28% and 31%, respectively. GAAP net income for the six months ended December 31, 2006, was $54.0 million or $0.69 per diluted share.
Amortization of acquired intangibles of $1.7 million ($1.1 million net of tax) incurred during the quarter ended December 31, 2006, consisted of amortization of acquired intangible assets associated with our acquisitions of Resprecare, Hoefner, Saime, PolarMed and Pulmomed. Stock-based compensation costs incurred during the quarter ended December 31, 2006, of $4.6 million ($3.6 million net of tax) consisted of expenses associated with stock options granted to employees and the employee stock purchase plan.
The Company is providing 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 and amortization of acquired intangible assets, for the three-month and six-month periods ended December 31, 2006, and December 31, 2005.
Inventory, at $141.9 million, increased by $25.7 million compared to June 2006 levels primarily to accommodate sales growth and the introduction of new products including the Adapt SV and Tango. Accounts receivable days sales outstanding, at 72 days, were marginally higher than the December 2005 levels of 70 days.
Peter C. Farrell, PhD, Chairman and Chief Executive Officer, commented, "In the second quarter of fiscal 2007, overall Americas sales for our sleep products increased by 23%; including sales from our motor division, Americas sales increased by 20% over the year ago quarter. In this regard it is noted that the ResMed motor division has significantly reduced sales of low margin non-core products to concentrate more exclusively on the supply of motors for ResMed products. Sales growth in sleep products for the Americas reflects continuing strong demand for our Swift nasal pillows system, our full-face masks and the Adapt SV, which was only launched in the previous quarter. Sales outside of the Americas totaled $84.4 million, a 24% increase over last year. Operating cash flow for the September quarter was $18 million."
Dr. Farrell continued, "We are pleased with the in-roads we continue to make into the cardiology and complex sleep apnea markets with the Adapt SV and we are making good progress with our Occupational Health strategy. We are also excited by the upcoming launch of the Tango into the value end of the CPAP market."
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 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 www.resmed.com or by dialing (866) 770-7120 (domestic) or +1 (617) 213-8065 (international) and entering conference I.D. No. 77662910. 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. 34006790.
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 (+61 2) 8884-2090; or by visiting the Company's multilingual Web site at 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 and new markets for the Company's products, are subject to risks and uncertainties, which could cause actual results to materially differ from those projected or implied in the forward-looking statements. Those 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 Six Months Ended
December 31, December 31,
2006 2005 2006 2005
Net revenue $178,428 $146,416 $342,033 $273,543
Cost of sales(A) 66,670 54,690 128,979 101,698
Gross profit 111,758 91,726 213,054 171,845
Operating expenses:
Selling, general
and administrative(A) 57,336 48,894 110,780 93,574
Research and
development(A) 12,028 8,588 22,883 17,013
Donation to foundation -- 255 -- 255
Amortization of
acquired intangible
assets 1,702 1,545 3,383 3,090
Restructuring expenses -- 168 -- 1,124
Total operating
expenses 71,066 59,450 137,046 115,056
Income from operations 40,692 32,276 76,008 56,789
Other income
(expenses), net:
Interest income
(expense), net 1,486 (754) 2,983 (1,691)
Other, net 67 1,025 (507) 1,316
Total other income
(expenses), net 1,553 271 2,476 (375)
Income before
income taxes 42,245 32,547 78,484 56,414
Income taxes 13,250 10,233 24,490 17,658
Net income $28,995 $22,314 $53,994 $38,756
Basic earnings
per share $0.38 $0.31 $0.71 $0.55
Diluted earnings
per share(1) $0.37 $0.30 $0.69 $0.53
Pro forma diluted
earnings per share
excluding the impact
of stock-based
compensation costs,
restructuring expenses
and amortization of
acquired
intangibles(1) & (2) $0.43 $0.36 $0.79 $0.64
Basic shares
outstanding 76,358 70,922 76,300 70,623
Diluted shares
outstanding(1) 78,142 77,183 78,271 76,716
(A) Includes
stock-based
compensation costs
as follows:
Cost of sales $285 $213 $591 $213
Selling, general
and administrative 3,787 3,576 6,657 6,451
Research and
development 543 533 991 1,049
Total stock-based
compensation costs $4,615 $4,322 $8,239 $7,713
(1) See reconciliation of Basic and Diluted Earning per Share in table at
end of press release.
(2) See reconciliation of non-GAAP financial measures in table at end of
press release.
RESMED INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(In US$ thousands except share and per share data)
December 31, June 30,
2006 2006
Assets
Current assets:
Cash and cash equivalents $232,668 $219,544
Marketable securities - available for sale 21,950 --
Accounts receivable, net 143,596 138,147
Inventories 141,876 116,194
Deferred income taxes 35,492 26,636
Prepaid expenses and other current assets 15,326 9,763
Total current assets 590,908 510,284
Property, plant and equipment, net 282,283 245,376
Goodwill 202,311 195,612
Other intangibles 48,000 48,897
Other assets 8,840 7,052
Total Non current assets 541,434 496,937
Total assets $1,132,342 $1,007,221
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $45,485 $45,045
Accrued expenses 46,363 40,901
Deferred revenue 17,633 15,344
Income taxes payable 15,766 22,841
Current portion of long-term debt 38,424 4,869
Total current liabilities 163,671 129,000
Non Current Liabilities:
Deferred income taxes 10,629 12,377
Deferred Revenue 12,098 11,484
Long-term debt 95,124 116,212
Total non-current liabilities 117,851 140,073
Total liabilities 281,522 269,073
Stockholders' Equity:
Common Stock 307 303
Additional paid-in capital 386,616 353,464
Retained earnings 424,646 370,652
Treasury stock (41,405) (41,405)
Accumulated other comprehensive income 80,656 55,134
Total stockholders' equity 850,820 738,148
Total liabilities and stockholders' equity $1,132,342 $1,007,221
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands except per share amounts)
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 Six Months Ended
December 31, December 31,
2006 2005 2006 2005
GAAP operating income $40,692 $32,276 $76,008 $56,789
Stock-based
compensation costs 4,615 4,322 8,239 7,713
Restructuring expenses -- 168 -- 1,124
Amortization of
acquired intangible
assets 1,702 1,545 3,383 3,090
Pro forma operating
income (excluding the
impact of stock-based
compensation costs,
restructuring expenses
and amortization of
acquired intangible
assets) $47,009 $38,311 $87,630 $68,716
The measure, "pro forma net income" is reconciled with GAAP net income in
the table below:
Three Months Ended Six Months Ended
December 31, December 31,
2006 2005 2006 2005
GAAP net income $28,995 $22,314 $53,994 $38,756
Stock-based
compensation costs,
net of tax 3,579 3,429 6,294 6,041
Restructuring
expenses, net of tax -- 108 -- 718
Amortization of
acquired intangible
assets, net of tax 1,126 1,018 2,238 2,035
Pro forma net income
(excluding the impact
of stock-based
compensation costs,
restructuring expenses
and amortization of
acquired intangible
assets) $33,700 $26,869 $62,526 $47,550
ResMed believes that presenting diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets 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)
(Dollars in thousands except per share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
2006 2005 2006 2005
Numerator:
Net Income $28,995 $22,314 $53,994 $38,756
Adjustment for
interest and
deferred borrowing
costs, net of income
tax effect(1) -- 839 -- 1,660
Net income, used in
calculating diluted
earnings per share 28,995 23,153 53,994 40,416
Adjustment for
stock-based
compensation costs 3,579 3,429 6,294 6,041
Adjustment for
restructuring expenses -- 108 -- 718
Adjustment for
Amortization of
acquired intangible
assets 1,126 1,018 2,238 2,035
Pro forma net income,
used in calculating
diluted earnings per
share, excluding the
impact of stock-based
compensation costs,
restructuring
expenses and
amortization of
acquired intangible
assets $33,700 $27,708 $62,526 $49,210
Denominator:
Basic weighted-average
common shares
outstanding 76,358 70,922 76,300 70,623
Effect of dilutive
securities:
Stock options 1,784 2,524 1,971 2,356
Convertible
subordinated notes(1) -- 3,737 -- 3,737
Diluted potential
common shares 1,784 6,261 1,971 6,093
Diluted weighted
average shares 78,142 77,183 78,271 76,716
Increase in diluted
weighted average shares:
Stock option adjustment
due to the impact of
SFAS 123(R) 681 381 601 415
Pro forma diluted
weighted average
shares, excluding the
impact of SFAS 123(R) 78,823 77,564 78,872 77,131
Basic earnings
per share $0.38 $0.31 $0.71 $0.55
Diluted earnings
per share $0.37 $0.30 $0.69 $0.53
Pro forma diluted
earnings per share,
excluding the impact
of stock-based
compensation costs,
restructuring expenses
and amortization of
acquired intangible
assets $0.43 $0.36 $0.79 $0.64
(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 December 31, 2006 by
$Nil (2005: $839,000) and for the six months ended December 31, 2006
by $Nil (2005: $1,660,000).
SOURCE ResMed Inc.
Released February 6, 2007