EX-99.2
Published on January 29, 2019
Exhibit 99.2
Unaudited Pro Forma Condensed Combined Financial Information
On November 13, 2018, ResMed Operations Inc. (“ResMed Operations”) completed its previously announced acquisition of MatrixCare Holdings, Inc., a Delaware corporation (“MatrixCare”), in accordance with an Agreement and Plan of Merger (the “Merger Agreement”), dated November 5, 2018, with Evolved Sub, Inc. a Delaware corporation and a wholly-owned subsidiary of ResMed Operations (“Merger Sub”), ResMed Inc. (“ResMed”), and OPE LGI Holdings Limited, a Canadian private company in its capacity as the agent acting on behalf of the holders of common stock and common stock options of MatrixCare. Pursuant to the Merger Agreement, Merger Sub merged with and into MatrixCare, with MatrixCare continuing as the surviving entity and becoming a wholly-owned subsidiary of ResMed Operations (the “Merger”). The Merger Agreement was filed as Exhibit 2.1 to ResMed’s Current Report on Form 8-K, which was filed with the Securities and Exchange Commission on November 14, 2018 (the “Original 8-K”).
ResMed’s most recent fiscal year ended on June 30, 2018 and MatrixCare’s most recent fiscal year ended on December 31, 2017. Accordingly, the unaudited pro forma condensed combined balance sheet as of September 30, 2018 combines ResMed’s historical unaudited consolidated balance sheet as of September 30, 2018 and MatrixCare’s unaudited consolidated balance sheet as of September 30, 2018. It is presented as if the acquisition of MatrixCare by ResMed had occurred on September 30, 2018 and includes items that are directly attributable to the acquisition and factually supportable, regardless of whether they have a continuing impact or are nonrecurring.
To present results for comparable periods, the unaudited pro forma condensed combined statements of income for the twelve months ended June 30, 2018 combines the historical results of ResMed for the fiscal year ended June 30, 2018 and the historical results of MatrixCare for the twelve months ended June 30, 2018, and the unaudited pro forma condensed combined statements of income for the three months ended September 30, 2018 combines the historical results of ResMed for the three months ended September 30, 2018 and the historical results of MatrixCare for the three months ended September 30, 2018. The unaudited pro forma condensed combined statements of income are presented as if the acquisition of MatrixCare by ResMed had occurred on July 1, 2017, the beginning of ResMed’s 2018 fiscal year, and excludes items related to the acquisition that are nonrecurring but includes items that are directly attributable to the acquisition, expected to have a continuing impact, and factually supportable.
The following unaudited pro forma condensed combined financial information should be read in conjunction with:
|
· |
the notes to the unaudited pro forma condensed combined financial statements; |
|
· |
the Original 8-K; |
|
· |
the historical audited consolidated financial statements and accompanying notes of ResMed included in its Annual Report on Form 10-K as of and for the year ended June 30, 2018; |
|
· |
the historical unaudited interim consolidated financial statements and accompanying notes of ResMed included in its Quarterly Report on Form 10-Q as of and for the three months ended September 30, 2018; and |
|
· |
the historical audited consolidated financial statements and accompanying notes of MatrixCare as of and for the year ended December 31, 2017 (presented in Exhibit 99.1 to this Amendment No. 1 to the Original 8-K); and |
|
· |
the historical unaudited consolidated financial statements and accompanying notes of MatrixCare as of and for the nine months ended September 30, 2018 (presented in Exhibit 99.1 to this Amendment No. 1 to the Original 8-K). |
The preliminary allocation of the purchase price presented below, in Note 2, and used to prepare the unaudited pro forma financial information, is based on a preliminary valuation of assets acquired and liabilities assumed. Accordingly, the pro forma purchase price adjustments are subject to further adjustments as additional information becomes available and as additional analysis is performed. The preliminary pro forma purchase price adjustments have been made solely to provide the unaudited pro forma financial statements included herewith. A final determination of these fair values will be based on the actual net tangible and intangible assets of MatrixCare that exist as of the closing date of the transaction. In addition, the unaudited pro forma condensed combined financial statements do not reflect the costs of integration or benefits that may result from realizing future cost savings from operating efficiencies or revenue synergies expected to result from the acquisition.
The unaudited pro forma condensed combined financial statements are provided for informational purposes only and do not necessarily indicate results that would have occurred had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma financial information does not purport to indicate the future financial position or operating results of the combined operations.
1
RESMED INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT SEPTEMBER 30, 2018
(In USD thousands)
|
|
|||||||||||||
|
|
ResMed |
MatrixCare |
Pro Forma |
Ref |
Pro-Forma |
||||||||
|
Assets |
|||||||||||||
|
Current assets: |
|||||||||||||
|
Cash and cash equivalents |
$ |
230,188 |
$ |
15,293 |
$ |
- |
$ |
245,481 | |||||
|
Accounts receivable, net |
463,743 | 18,230 |
- |
481,973 | |||||||||
|
Inventories |
282,555 |
- |
- |
282,555 | |||||||||
|
Prepaid expenses and other current assets |
111,757 | 10,722 |
- |
122,479 | |||||||||
|
Total current assets |
1,088,243 | 44,245 |
- |
1,132,488 | |||||||||
|
Non-current assets: |
|||||||||||||
|
Property, plant and equipment, net |
381,822 | 20,795 |
- |
402,617 | |||||||||
|
Goodwill |
1,192,030 | 213,838 | 345,281 |
a |
1,751,149 | ||||||||
|
Other intangible assets, net |
242,193 | 82,762 | 162,238 |
a, b |
487,193 | ||||||||
|
Deferred income taxes |
46,226 |
- |
- |
46,226 | |||||||||
|
Prepaid taxes and other non-current assets |
117,024 | 3,548 |
- |
120,572 | |||||||||
|
Total non-current assets |
1,979,295 | 320,943 | 507,519 | 2,807,757 | |||||||||
|
Total assets |
$ |
3,067,538 |
$ |
365,188 |
$ |
507,519 |
$ |
3,940,245 | |||||
|
Liabilities and Stockholders’ Equity |
|||||||||||||
|
Current liabilities: |
|||||||||||||
|
Accounts payable |
$ |
98,709 |
$ |
5,082 |
$ |
- |
$ |
103,791 | |||||
|
Accrued expenses |
169,465 | 9,111 | 20,372 |
c |
198,948 | ||||||||
|
Deferred revenue |
64,822 | 24,341 | (7,496) | 81,667 | |||||||||
|
Income taxes payable |
76,137 |
- |
- |
76,137 | |||||||||
|
Short-term debt, net |
11,975 | 149,421 | (149,421) |
d |
11,975 | ||||||||
|
Total current liabilities |
421,108 | 187,955 | (136,545) | 472,518 | |||||||||
|
Non-current liabilities: |
|||||||||||||
|
Deferred revenue |
73,810 | 3,441 |
- |
77,251 | |||||||||
|
Deferred income taxes |
16,091 | 17,313 | 57,428 |
a |
90,832 | ||||||||
|
Other long-term liabilities |
534 | 994 |
- |
1,528 | |||||||||
|
Long-term debt, net |
517,637 |
- |
762,494 |
d |
1,280,131 | ||||||||
|
Long-term income taxes payable |
138,102 |
- |
- |
138,102 | |||||||||
|
Total non-current liabilities |
746,174 | 21,748 | 819,922 | 1,587,844 | |||||||||
|
Total liabilities |
1,167,282 | 209,703 | 683,377 | 2,060,362 | |||||||||
|
Commitments and contingencies |
|||||||||||||
|
Stockholders’ equity: |
|||||||||||||
|
Preferred stock |
- |
- |
- |
- |
|||||||||
|
Common stock |
570 | 13 | (13) |
g |
570 | ||||||||
|
Additional paid-in capital |
1,463,669 | 175,286 | (175,286) |
g |
1,463,669 | ||||||||
|
Retained earnings |
2,296,473 | (19,670) | (703) |
g |
2,276,100 | ||||||||
|
Treasury stock |
(1,623,256) | (144) | 144 |
g |
(1,623,256) | ||||||||
|
Accumulated other comprehensive loss |
(237,200) |
- |
- |
(237,200) | |||||||||
|
Total stockholders’ equity |
1,900,256 | 155,485 | (175,858) | 1,879,883 | |||||||||
|
Total liabilities and stockholders’ equity |
$ |
3,067,538 |
$ |
365,188 |
$ |
507,519 |
$ |
3,940,245 | |||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
2
RESMED INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018
(In USD thousands, except per share amounts)
|
|
|||||||||||||
|
|
ResMed |
MatrixCare |
Pro Forma |
Ref |
Pro-Forma |
||||||||
|
|
|||||||||||||
|
Net revenue |
$ |
588,279 |
$ |
28,835 |
$ |
- |
$ |
617,114 | |||||
|
Cost of sales |
245,186 | 8,458 |
- |
253,644 | |||||||||
|
Gross profit |
343,093 | 20,377 |
- |
363,470 | |||||||||
|
Operating expenses: |
|||||||||||||
|
Selling, general and administrative |
147,303 | 8,834 |
- |
156,137 | |||||||||
|
Research and development |
38,791 | 4,925 |
- |
43,716 | |||||||||
|
Amortization of acquired intangible assets |
12,867 | 9,066 | (3,078) |
b |
18,855 | ||||||||
|
Total operating expenses |
198,961 | 22,825 | (3,078) | 218,708 | |||||||||
|
Income from operations |
144,132 | (2,448) | 3,078 | 144,762 | |||||||||
|
Other income (loss), net: |
|||||||||||||
|
Interest income |
922 |
- |
- |
922 | |||||||||
|
Interest expense |
(3,708) | (2,966) | (3,168) |
e |
(9,842) | ||||||||
|
Other, net |
(2,465) | 12 |
- |
(2,453) | |||||||||
|
Total other income (loss), net |
(5,251) | (2,954) | (3,168) | (11,373) | |||||||||
|
Income before income taxes |
138,881 | (5,402) | (90) | 133,389 | |||||||||
|
Income tax expense (benefit) |
33,144 | 271 | (1,424) |
f |
31,991 | ||||||||
|
Net income |
$ |
105,737 |
$ |
(5,673) |
$ |
1,334 |
$ |
101,398 | |||||
|
Basic earnings per share |
$ |
0.74 |
$ |
0.71 | |||||||||
|
Diluted earnings per share |
$ |
0.73 |
$ |
0.70 | |||||||||
|
|
|||||||||||||
|
Basic shares outstanding (000's) |
142,668 | 142,668 | |||||||||||
|
Diluted shares outstanding (000's) |
144,030 | 144,030 | |||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 2018
(In USD thousands, except per share amounts)
|
|
|||||||||||||
|
|
ResMed |
MatrixCare |
Pro Forma |
Ref |
Pro-Forma |
||||||||
|
|
|||||||||||||
|
Net revenue |
$ |
2,340,196 |
$ |
117,046 |
$ |
- |
$ |
2,457,242 | |||||
|
Cost of sales |
978,032 | 33,207 |
- |
1,011,239 | |||||||||
|
Gross profit |
1,362,164 | 83,839 |
- |
1,446,003 | |||||||||
|
Operating expenses: |
|||||||||||||
|
Selling, general and administrative |
600,369 | 34,689 |
- |
635,058 | |||||||||
|
Research and development |
155,149 | 23,139 |
- |
178,288 | |||||||||
|
Amortization of acquired intangible assets |
46,383 | 37,479 | (13,527) |
b |
70,335 | ||||||||
|
Restructuring Expenses |
18,432 |
- |
- |
18,432 | |||||||||
|
Total operating expenses |
820,333 | 95,307 | (13,527) | 902,113 | |||||||||
|
Income from operations |
541,831 | (11,468) | 13,527 | 543,890 | |||||||||
|
Other income (loss), net: |
|||||||||||||
|
Interest income |
16,378 |
- |
- |
16,378 | |||||||||
|
Interest expense |
(28,355) | (11,791) | (12,746) |
e |
(52,892) | ||||||||
|
Other, net |
(8,542) | (25) |
- |
(8,567) | |||||||||
|
Total other income (loss), net |
(20,519) | (11,816) | (12,746) | (45,081) | |||||||||
|
Income before income taxes |
521,312 | (23,284) | 781 | 498,809 | |||||||||
|
Income taxes |
205,724 | (10,994) | 4,693 |
f |
199,423 | ||||||||
|
Net income |
$ |
315,588 |
$ |
(12,290) |
$ |
(3,912) |
$ |
299,386 | |||||
|
Basic earnings per share (note 11) |
$ |
2.21 |
$ |
2.10 | |||||||||
|
Diluted earnings per share (note 11) |
$ |
2.19 |
$ |
2.08 | |||||||||
|
|
|||||||||||||
|
Basic shares outstanding (000's) |
142,764 | 142,764 | |||||||||||
|
Diluted shares outstanding (000's) |
143,987 | 143,987 | |||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
4
Exhibit 99.2
RESMED INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Pro Forma Preparation
The unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of ResMed and MatrixCare after giving effect to the acquisition using the purchase method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and applying the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined balance sheet is presented as if the acquisition had occurred on September 30, 2018. The unaudited pro forma condensed combined statements of income for the three months ended September 30, 2018 and the twelve months ended June 30, 2018 are presented as if the acquisition had occurred on July 1, 2017.
Note 2. Pro Forma Adjustments
|
(a) |
Purchase Price Allocation |
For pro forma purposes, we have preliminarily allocated the purchase price to the net tangible and intangible assets based on their estimated fair values. Therefore, the assets acquired and liabilities assumed, including intangible assets, presented in the table below are provisional and will be finalized after ResMed receives and reviews all available data as soon as practicable and not later than one year from the acquisition date.
The following table is a summary of the preliminary purchase price allocation including preliminary estimates of the fair value of net assets acquired and the resulting goodwill of the acquisition of MatrixCare, as reflected in the unaudited pro forma condensed consolidated balance sheet at September 30, 2018:
|
|
|||
|
|
USD ('000) |
||
|
Cash paid at closing |
$ |
613,072 | |
|
Developed technology |
82,000 | ||
|
Customer relationships |
145,000 | ||
|
Trade names |
18,000 | ||
|
Goodwill |
554,335 | ||
|
Deferred tax liability |
(57,428) | ||
|
Total intangible assets |
$ |
741,907 | |
|
MatrixCare historical net assets/(liabilities) |
155,485 | ||
|
Add: Fair value adjustment to MatrixCare deferred revenue |
7,496 | ||
|
Less: MatrixCare historical goodwill |
(209,053) | ||
|
Less: MatrixCare historical intangible assets value |
(82,762) | ||
|
Total purchase price |
$ |
613,072 | |
|
(b) |
Acquired Intangible Assets |
The acquired intangible assets and related amortization expense based on the preliminary estimate of fair value for the twelve months ended June 30, 2018 and three months ended September 30, 2018 are as follows:
|
|
|||||||||||
|
|
Amortization Expense |
||||||||||
|
|
Preliminary |
Useful Lives (years) |
Twelve months ended |
Three months ended September 30, 2018 |
|||||||
|
Developed technology |
$ |
82,000 |
7 |
$ |
11,714 |
$ |
2,929 | ||||
|
Customer relationships |
145,000 |
15 |
9,667 | 2,417 | |||||||
|
Trade names |
18,000 |
7 |
2,571 | 643 | |||||||
|
Total |
$ |
245,000 |
$ |
23,952 |
$ |
5,988 | |||||
|
Less: Elimination of MatrixCare historical intangible assets and related amortization |
(82,762) | (37,479) | (9,066) | ||||||||
|
Pro forma adjustment |
$ |
162,238 |
$ |
(13,527) |
$ |
(3,078) | |||||
|
(c) |
Acquisition-related Costs |
ResMed and MatrixCare did not incur any significant acquisition costs in the twelve months ended June 30, 2018 or the three months ended September 30, 2018. As such, no adjustment for acquisition costs has been made to the unaudited pro forma condensed consolidated income statement for the twelve months ended June 30, 2018 or the three months ended September 30, 2018. However, a pro forma adjustment to other current liabilities in the unaudited pro forma condensed consolidated balance sheet at September 30, 2018 was made to recognize direct acquisition-related costs incurred by ResMed and MatrixCare of $3.7 million and $16.7 million, respectively, which are not yet reflected in the historical financial statements.
5
Exhibit 99.2
RESMED INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
|
(d) |
Debt Transactions |
ResMed financed the acquisition with an increase in the existing revolving credit facility. This pro forma presentation assumes that ResMed utilized $762.5 million from its existing revolving credit facility. The debt obligation amount is presented as pro forma adjustment to long term debt in the unaudited pro forma condensed consolidated balance sheet at September 30, 2018.
MatrixCare’s debt balances were repaid in conjunction with the closing of the acquisition. Accordingly, MatrixCare’s short term debt of $149.4 million at September 30, 2018 is presented as repaid in the unaudited pro forma condensed consolidated balance sheet.
|
(e) |
Interest Expense |
Pro forma interest expense is presented to include ResMed’s additional $762.5 million in funds, discussed above, along with the reversal of MatrixCare’s interest expense for the twelve months ended June 30, 2018 and three months ended September 30, 2018 as presented below.
ResMed incurred debt issuance costs of $1.8 million in connection with the increase in the existing revolving credit facility. ResMed’s amortization of these debt issuance costs are included as pro forma adjustments in the unaudited pro forma condensed consolidated statements of income for the twelve months ended June 30, 2018 and three months ended September 30, 2018.
|
|
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|
|
Twelve Months Ended |
Three Months Ended |
|||||||||
|
|
June 30, 2018 |
September 30, 2018 |
|||||||||
|
|
USD(‘000) |
USD(‘000) |
USD(‘000) |
USD(‘000) |
|||||||
|
Company: |
|||||||||||
|
Credit facility borrowing |
762,494 | 762,494 | |||||||||
|
LIBOR plus 0.75% |
3.16 |
% |
3.16 |
% |
|||||||
|
Interest expense |
24,095 | 6,024 | |||||||||
|
Debt issuance cost amortization expense |
443 | 111 | |||||||||
|
Pro forma adjustment |
24,537 | 6,134 | |||||||||
|
MatrixCare: |
|||||||||||
|
Term Loan |
149,421 | 149,248 | |||||||||
|
LIBOR plus margin |
7.50 |
% |
7.50 |
% |
|||||||
|
Actual interest expense |
(9,196) | (2,314) | |||||||||
|
Debt issuance cost amortization expense |
(2,595) | (653) | |||||||||
|
Pro forma adjustment |
(11,791) | (2,966) | |||||||||
|
Total Pro forma adjustment |
12,746 | 3,168 | |||||||||
|
|
|||||||||||
The pro forma presentation of the effect on income taxes was calculated using the U.S. statutory rate for adjustments related to MatrixCare and ResMed. The adjustments to income taxes are summarized in the following table:
|
|
||||||||||||||
|
|
Twelve Months Ended |
Three Months Ended |
||||||||||||
|
|
June 30, 2018 |
September 30, 2018 |
||||||||||||
|
|
Jurisdiction |
Pro Forma Adjustment |
Tax Rate |
USD(‘000) |
Pro Forma Adjustment |
Tax Rate |
USD(‘000) |
|||||||
|
Amortization expense |
US |
(13,527) | 28.0 | (3,787) | (3,078) | 21.0 | (646) | |||||||
|
Interest expense |
US |
12,746 | 28.0 | 3,569 | 3,168 | 21.0 | 665 | |||||||
|
Total Pro forma adjustment |
(218) | 19 | ||||||||||||
Although not reflected in the pro forma financial statements, the effective tax rate of the combined company could be significantly different depending on post-acquisition activities, such as the tax treatment applicable to each entity and the geographical mix of taxable income affecting state and foreign taxes, among other factors.
|
(g) |
Equity |
MatrixCare’s historical net assets are eliminated as a pro forma adjustment to the unaudited pro forma condensed consolidated balance sheet at September 30, 2018. In addition, as discussed above in 2(c) and 2(e), pro forma adjustments to retained earnings were made for activities that are not yet reflected in the historical financial statements for acquisition-related costs. These adjustments are not reflected in and do not affect the unaudited pro forma condensed combined statements of income as they are non-recurring.
6