Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

October 25, 2019

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________________________________________________________________________

FORM 10-Q

 

______________________________________________________________________________________________

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

 

 

¨

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: 001-15317

______________________________________________________________________________________________

ResMed Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________________

Delaware

(State or other jurisdiction of incorporation or organization)

98-0152841

(I.R.S. Employer Identification No.)

9001 Spectrum Center Blvd.

San Diego, CA 92123

United States of America

(Address of principal executive offices)

(858) 836-5000

(Registrant’s telephone number, including area code)

 

______________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.004 per share

RMD

New York Stock Exchange

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 by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

x

  

Accelerated Filer

 

¨

Non-Accelerated Filer

 

¨  

  

Smaller Reporting Company

 

¨

Emerging Growth Company

¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes  ¨    No   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

At October 21, 2019, there were 143,786,123 shares of Common Stock ($0.004 par value) outstanding. This number excludes 41,836,234 shares held by the registrant as treasury shares. 


RESMED INC. AND SUBSIDIARIES

Index

Part I

Financial Information

3

Item 1

Financial Statements

3

Condensed Consolidated Balance Sheets (Unaudited)

3

Condensed Consolidated Statements of Income (Unaudited)

4

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

5

Condensed Consolidated Statements of Changes in Equity (Unaudited)

6

Condensed Consolidated Statements of Cash Flows (Unaudited)

8

Notes to the Condensed Consolidated Financial Statements (Unaudited)

9

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4

Controls and Procedures

30

Part II

Other Information

31

Item 1

Legal Proceedings

31

Item 1A

Risk Factors

31

  

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3

Defaults Upon Senior Securities

32

Item 4

Mine Safety Disclosures

32

  

Item 5

Other Information

32

Item 6

Exhibits

33

Signatures

34

 

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1

Item 1. Financial Statements

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

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

September 30,
2019

June 30,
2019

Assets

Current assets:

Cash and cash equivalents

$

172,154 

$

147,128 

Accounts receivable, net of allowance for doubtful accounts of $24,492 and $25,171
  at September 30, 2019 and June 30, 2019, respectively

493,836 

528,484 

Inventories (note 3)

357,033 

349,641 

Prepaid expenses and other current assets

138,075 

120,113 

Total current assets

1,161,098 

1,145,366 

Non-current assets:

Property, plant and equipment, net (note 3)

382,970 

387,460 

Operating lease right-of-use assets (note 9)

81,650 

-

Goodwill (note 4)

1,856,427 

1,856,449 

Other intangible assets, net (note 3)

496,847 

521,950 

Deferred income taxes

34,232 

45,478 

Prepaid taxes and other non-current assets

141,334 

150,979 

Total non-current assets

2,993,460 

2,962,316 

Total assets

$

4,154,558 

$

4,107,682 

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

109,742 

$

115,725 

Accrued expenses

231,253 

266,359 

Operating lease liabilities, current (note 9)

19,548 

-

Deferred revenue

86,954 

88,667 

Income taxes payable (note 6)

90,968 

73,248 

Short-term debt, net (note 8)

11,992 

11,992 

Total current liabilities

550,457 

555,991 

Non-current liabilities:

Deferred revenue

82,668 

81,143 

Deferred income taxes

15,177 

11,380 

Operating lease liabilities, non-current (note 9)

65,838 

-

Other long-term liabilities

2,047 

2,058 

Long-term debt, net (note 8)

1,208,210 

1,258,861 

Long-term income taxes payable (note 6)

112,910 

126,056 

Total non-current liabilities

1,486,850 

1,479,498 

Total liabilities

2,037,307 

2,035,489 

Commitments and contingencies (note 12)

 

 

Stockholders’ equity: (note 10)

Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued

-

-

Common stock, $0.004 par value, 350,000,000 shares authorized;

  185,605,478 issued and 143,769,244 outstanding at September 30, 2019 and

  185,491,064 issued and 143,654,830 outstanding at June 30, 2019

575 

575 

Additional paid-in capital

1,530,011 

1,511,473 

Retained earnings

2,500,506 

2,436,410 

Treasury stock, at cost, 41,836,234 shares at September 30, 2019 and 41,836,234 shares at June 30, 2019

(1,623,256)

(1,623,256)

Accumulated other comprehensive loss

(290,585)

(253,009)

Total stockholders’ equity

2,117,251 

2,072,193 

Total liabilities and stockholders’ equity

$

4,154,558 

$

4,107,682 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

3


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

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

Three Months Ended
September 30,

2019

2018

Net revenue

$

681,056 

$

588,279 

Cost of sales (excluding amortization of acquired intangible assets)

276,001 

245,186 

Gross profit

405,055 

343,093 

Operating expenses:

Selling, general and administrative

167,440 

147,303 

Research and development

48,033 

38,791 

Amortization of acquired intangible assets

18,480 

12,867 

Total operating expenses

233,953 

198,961 

Income from operations

171,102 

144,132 

Other income (loss), net:

Interest income

449 

922 

Interest expense

(10,992)

(3,708)

Loss attributable to equity method investments (note 5)

(6,863)

-

Other, net

(3,109)

(2,465)

Total other income (loss), net

(20,515)

(5,251)

Income before income taxes

150,587 

138,881 

Income taxes

30,439 

33,144 

Net income

$

120,148 

$

105,737 

Basic earnings per share (note 11)

$

0.84 

$

0.74 

Diluted earnings per share (note 11)

$

0.83 

$

0.73 

Dividend declared per share

$

0.39 

$

0.37 

Basic shares outstanding (000's)

143,719 

142,668 

Diluted shares outstanding (000's)

145,099 

144,030 

 


See the accompanying notes to the unaudited condensed consolidated financial statements.

4


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In US$ and in thousands)

Three Months Ended
September 30,

2019

2018

Net income

$

120,148

$

105,737 

Other comprehensive income (loss):

Foreign currency translation (loss) gain adjustments

(37,576)

(12,872)

Comprehensive income

$

82,572

$

92,865 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

5


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(In US$ and in thousands)

Common Stock

Additional
Paid-in

Treasury Stock

Retained

Accumulated
Other
Comprehensive

Shares

Amount

Capital

Shares

Amount

Earnings

Income (Loss)

Total

Balance, June 30, 2019

185,491 

$

575 

$

1,511,473 

(41,836)

$

(1,623,256)

$

2,436,410 

$

(253,009)

$

2,072,193 

Common stock issued on exercise of options

110 

-

5,609 

-

-

-

-

5,609 

Common stock issued on vesting of restricted stock units, net of shares withheld for tax

4 

-

(327)

-

-

-

-

(327)

Stock-based compensation costs

-

-

13,256 

-

-

-

-

13,256 

Other comprehensive income

-

-

-

-

-

-

(37,576)

(37,576)

Net income

-

-

-

-

-

120,148 

-

120,148 

Dividends declared

-

-

-

-

-

(56,052)

-

(56,052)

Balance, September 30, 2019

185,605 

$

575 

$

1,530,011 

(41,836)

$

(1,623,256)

$

2,500,506 

$

(290,585)

$

2,117,251 


See the accompanying notes to the unaudited condensed consolidated financial statements.

6


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(In US$ and in thousands)

Common Stock

Additional Paid-in

Treasury Stock

Retained

Accumulated Other Comprehensive

Shares

Amount

Capital

Shares

Amount

Earnings

Income (Loss)

Total

Balance, June 30, 2018

184,316 

$

571 

$

1,450,821 

(41,636)

$

(1,600,412)

$

2,432,328 

$

(224,328)

$

2,058,980 

Common stock issued on exercise of options

12 

-

513 

-

-

-

-

513 

Common stock issued on vesting of restricted stock units, net of shares withheld for tax

2 

-

(141)

-

-

-

-

(141)

Treasury stock purchases

-

(1)

-

(200)

(22,844)

-

-

(22,845)

Stock-based compensation costs

-

-

12,476 

-

-

-

-

12,476 

Other comprehensive income

-

-

-

-

-

-

(12,872)

(12,872)

Net income

-

-

-

-

-

105,737 

-

105,737 

Cumulative effect of change in accounting
standards

-

-

-

-

-

(188,799)

-

(188,799)

Dividends declared

-

-

-

-

-

(52,793)

-

(52,793)

Balance, September 30, 2018

184,330 

$

570 

$

1,463,669 

(41,836)

$

(1,623,256)

$

2,296,473 

$

(237,200)

$

1,900,256 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

7


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In US$ and in thousands)

Three Months Ended
September 30,

2019

2018

Cash flows from operating activities:

Net income

$

120,148 

$

105,737 

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

Depreciation and amortization

37,954 

30,424 

Amortization of right-of-use-assets

5,963 

-

Stock-based compensation costs

13,256 

12,477 

Loss attributable to equity method investments (note 5)

6,863 

-

Impairment of equity investments (note 5)

2,590 

1,711 

Changes in fair value of business combination contingent consideration

(8)

(183)

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

Accounts receivable

28,286 

20,342 

Inventories

(14,204)

(15,661)

Prepaid expenses, net deferred income taxes and other current assets

(8,407)

(7,703)

Accounts payable, accrued expenses and other

(30,078)

(99,025)

Net cash provided by operating activities

162,363 

48,119 

Cash flows from investing activities:

Purchases of property, plant and equipment

(22,671)

(12,994)

Patent registration costs

(2,069)

(2,611)

Business acquisitions, net of cash acquired (note 13)

-

(126,439)

Purchases of investments (note 5)

(2,741)

(2,467)

Payments on maturity of foreign currency contracts

(5,743)

(3,678)

Net cash used in investing activities

(33,224)

(148,189)

Cash flows from financing activities:

Proceeds from issuance of common stock, net

5,609 

513 

Taxes paid related to net share settlement of equity awards

(326)

(124)

Purchases of treasury stock

-

(19,399)

Payments of business combination contingent consideration

(302)

(240)

Proceeds from borrowings, net of borrowing costs

565,000 

303,000 

Repayment of borrowings

(614,003)

(86,133)

Dividends paid

(56,052)

(52,793)

Net cash provided by (used in) financing activities

(100,074)

144,824 

Effect of exchange rate changes on cash

(4,039)

(3,267)

Net increase in cash and cash equivalents

25,026 

41,487 

Cash and cash equivalents at beginning of period

147,128 

188,701 

Cash and cash equivalents at end of period

$

172,154 

$

230,188 

Supplemental disclosure of cash flow information:

Income taxes paid, net of refunds

$

30,937