10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on January 27, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2022
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
______________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
______________________________________________________________________________________________
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
(Address of principal executive offices, including zip code)
(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 | ||||||||||||
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 o
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 such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
x | Accelerated Filer | o | ||||||||||||
Non-Accelerated Filer | o | 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
At January 23, 2023 there were 146,909,413 shares of Common Stock ($0.004 par value) outstanding. This number excludes 41,836,234 shares held by the registrant as treasury shares.
RESMED INC. AND SUBSIDIARIES
INDEX
Part I |
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Item 1 |
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2
PART I – FINANCIAL INFORMATION | Item 1 |
Item 1. Financial Statements
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In US$ and in thousands, except share and per share data)
December 31, 2022 |
June 30, 2022 |
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Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ |
|||||||||||
Inventories (note 3) | |||||||||||
Prepaid expenses and other current assets (note 3) | |||||||||||
Total current assets | |||||||||||
Non-current assets: | |||||||||||
Property, plant and equipment, net (note 3) | |||||||||||
Operating lease right-of-use assets | |||||||||||
Goodwill (note 4) | |||||||||||
Other intangible assets, net (note 3) | |||||||||||
Deferred income taxes | |||||||||||
Prepaid taxes and other non-current assets | |||||||||||
Total non-current assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Operating lease liabilities, current | |||||||||||
Deferred revenue | |||||||||||
Income taxes payable (note 6) | |||||||||||
Short-term debt, net (note 8) | |||||||||||
Total current liabilities | |||||||||||
Non-current liabilities: | |||||||||||
Deferred revenue | |||||||||||
Deferred income taxes | |||||||||||
Operating lease liabilities, non-current | |||||||||||
Other long-term liabilities | |||||||||||
Long-term debt, net (note 8) | |||||||||||
Long-term income taxes payable (note 6) | |||||||||||
Total non-current liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (note 10) | |||||||||||
Stockholders’ equity: | |||||||||||
Preferred stock, $ |
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Common stock, $ |
|||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Treasury stock, at cost, |
( |
( |
|||||||||
Accumulated other comprehensive loss | ( |
( |
|||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
See the accompanying notes to the unaudited condensed consolidated financial statements.
3
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(In US$ and in thousands, except per share data)
Three Months Ended December 31, |
Six Months Ended December 31, |
||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net revenue - Sleep and Respiratory Care products | $ | $ | $ | $ | |||||||||||||||||||
Net revenue - Software as a Service | |||||||||||||||||||||||
Net revenue | |||||||||||||||||||||||
Cost of sales - Sleep and Respiratory Care products | |||||||||||||||||||||||
Cost of sales - Software as a Service | |||||||||||||||||||||||
Cost of sales (exclusive of amortization shown separately below) | |||||||||||||||||||||||
Amortization of acquired intangible assets - Sleep and Respiratory Care products | |||||||||||||||||||||||
Amortization of acquired intangible assets - Software as a Service | |||||||||||||||||||||||
Amortization of acquired intangible assets | |||||||||||||||||||||||
Total cost of sales | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Selling, general, and administrative | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Amortization of acquired intangible assets | |||||||||||||||||||||||
Acquisition related expenses | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
Other income (loss), net: | |||||||||||||||||||||||
Interest (expense) income, net | ( |
( |
( |
( |
|||||||||||||||||||
Loss attributable to equity method investments (note 5) | ( |
( |
( |
( |
|||||||||||||||||||
Gain (loss) on equity investments (note 5) | ( |
||||||||||||||||||||||
Other, net | ( |
( |
( |
||||||||||||||||||||
Total other income (loss), net | ( |
( |
( |
( |
|||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Income taxes | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Basic earnings per share (note 9) | $ | $ | $ | $ | |||||||||||||||||||
Diluted earnings per share (note 9) | $ | $ | $ | $ | |||||||||||||||||||
Dividend declared per share | $ | $ | $ | $ | |||||||||||||||||||
Basic shares outstanding (000's) | |||||||||||||||||||||||
Diluted shares outstanding (000's) |
See the accompanying notes to the unaudited condensed consolidated financial statements.
4
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In US$ and in thousands)
Three Months Ended December 31, |
Six Months Ended December 31, |
||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive income (loss), net of taxes: | |||||||||||||||||||||||
Unrealized losses on designated hedging instruments | ( |
( |
|||||||||||||||||||||
Foreign currency translation (loss) gain adjustments | ( |
( |
|||||||||||||||||||||
Comprehensive income | $ | $ | $ | $ |
See the accompanying notes to the unaudited condensed consolidated financial statements.
5
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
Capital
|
Treasury Stock |
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total | |||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Balance, June 30, 2022 |
|
$ |
|
$ |
|
( |
$ | ( |
$ |
|
$ | ( |
$ |
|
||||||||||||
Common stock issued on exercise of options |
— | — | — | — | — | |||||||||||||||||||||
Common stock issued on vesting of restricted stock units, net of shares withheld for tax | — | ( |
— | — | — | — | ( |
|||||||||||||||||||
Stock-based compensation costs | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | ( |
( |
||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||
Dividends declared ($ |
— | — | — | — | — | ( |
— | ( |
||||||||||||||||||
Balance, September 30, 2022 |
|
$ |
|
$ |
|
( |
$ | ( |
$ |
|
$ | ( |
$ |
|
||||||||||||
Common stock issued on exercise of options | — | — | — | — | ||||||||||||||||||||||
Common stock issued on vesting of restricted stock units, net of shares withheld for tax | ( |
— | — | — | — | ( |
||||||||||||||||||||
Common stock issued on employee stock purchase plan | — | — | — | — | ||||||||||||||||||||||
Stock-based compensation costs | — | — | — | — | — | — | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||
Dividends declared ($ |
— | — | — | — | — | ( |
— | ( |
||||||||||||||||||
Balance, December 31, 2022 |
|
$ |
|
$ |
|
( |
$ | ( |
$ |
|
$ | ( |
$ |
|
||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
6
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
Capital
|
Treasury Stock |
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total |
|||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Balance, June 30, 2021 |
|
$ |
|
$ |
|
( |
$ | ( |
$ |
|
$ | ( |
$ |
|
||||||||||||
Common stock issued on exercise of options |
— | — | — | — | — | |||||||||||||||||||||
Common stock issued on vesting of restricted stock units, net of shares withheld for tax | — | ( |
— | — | — | — | ( |
|||||||||||||||||||
Stock-based compensation costs | — | — | — | — | — | — | ||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | ( |
( |
||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||
Dividends declared ($ |
— | — | — | — | — | ( |
— | ( |
||||||||||||||||||
Balance, September 30, 2021 |
|
$ |
|
$ |
|
( |
$ | ( |
$ |
|
$ | ( |
$ |
|
||||||||||||
Common stock issued on exercise of options | — | — | — | — | — | |||||||||||||||||||||
Common stock issued on vesting of restricted stock units, net of shares withheld for tax | ( |
— | — | — | — | ( |
||||||||||||||||||||
Common stock issued on employee stock purchase plan | — | — | — | — | — | |||||||||||||||||||||
Stock-based compensation costs | — | — | — | — | — | — | ||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | ( |
( |
||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||
Dividends declared ($ |
— | — | — | — | — | ( |
— | ( |
||||||||||||||||||
Balance, December 31, 2021 |
|
$ |
|
$ |
|
( |
$ | ( |
$ |
|
$ | ( |
$ |
|
||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
7
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In US$ and in thousands)
Six Months Ended December 31, |
|||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | $ | |||||||||
Adjustment to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Amortization of right-of-use assets | |||||||||||
Stock-based compensation costs | |||||||||||
Loss attributable to equity method investments (note 5) | |||||||||||
(Gain) loss on equity investments (note 5) | ( |
( |
|||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | ( |
||||||||||
Inventories | ( |
( |
|||||||||
Prepaid expenses, net deferred income taxes and other current assets | ( |
( |
|||||||||
Accounts payable, accrued expenses, income taxes payable and other | ( |
( |
|||||||||
Net cash provided by operating activities |
|||||||||||
Cash flows from investing activities: | |||||||||||
Purchases of property, plant and equipment | ( |
( |
|||||||||
Patent registration and acquisition costs | ( |
( |
|||||||||
Business acquisitions, net of cash acquired (note 12) | ( |
( |
|||||||||
Purchases of investments (note 5) | ( |
( |
|||||||||
(Payments) / proceeds on maturity of foreign currency contracts | ( |
||||||||||
Net cash used in investing activities | ( |
( |
|||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of common stock, net | |||||||||||
Taxes paid related to net share settlement of equity awards | ( |
( |
|||||||||
Proceeds from borrowings, net of borrowing costs | |||||||||||
Repayment of borrowings | ( |
( |
|||||||||
Dividends paid | ( |
( |
|||||||||
Net cash (used in) / provided by financing activities |
( |
||||||||||
Effect of exchange rate changes on cash | ( |
||||||||||
Net decrease in cash and cash equivalents | ( |
( |
|||||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Income taxes paid, net of refunds | $ | $ | |||||||||
Interest paid | $ | $ | |||||||||
Fair value of assets acquired, excluding cash | $ | $ | |||||||||
Liabilities assumed | ( |
( |
|||||||||
Goodwill on acquisition | |||||||||||
Previously held equity interest | ( |
||||||||||
Deferred payments |
( |
||||||||||
Fair value of contingent consideration |
( |
$ | |||||||||
Cash paid for acquisitions | $ | $ |
See the accompanying notes to the unaudited condensed consolidated financial statements.
8
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(1) Summary of Significant Accounting Policies
Organization and Basis of Presentation
ResMed Inc. (referred to herein as “we”, “us”, “our” or the “Company”) is a Delaware corporation formed in March 1994 as a holding company for the ResMed Group. Through our subsidiaries, we design, manufacture and market equipment for the diagnosis and treatment of sleep-disordered breathing and other respiratory disorders, including obstructive sleep apnea. Our manufacturing operations are located in Australia, Singapore, Malaysia, France, China and the United States. Major distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia, Japan, China, Finland, Norway and Sweden. We also operate a Software as a Service (“SaaS”) business in the United States and Germany that includes out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and the rules of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023.
The condensed consolidated financial statements for the three and six months ended December 31, 2022 and December 31, 2021 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K (our “Form 10-K”) for the year ended June 30, 2022.
Revenue Recognition
In accordance with Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, we account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business management software as a service to out-of-hospital care providers (“SaaS”). Our Sleep and Respiratory Care revenue relates primarily to the sale of our products that are therapy-based equipment. Some contracts include additional performance obligations such as the provision of extended warranties and provision of data for patient monitoring. Our SaaS revenue relates to the provision of software access with ongoing support and maintenance services as well as professional services such as training and consulting.
9
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Disaggregation of revenue
The following table summarizes our net revenue disaggregated by segment, product and region (in thousands):
Three Months Ended December 31, |
Six Months Ended December 31, |
||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
U.S., Canada and Latin America | |||||||||||||||||||||||
Devices | $ | $ | $ | $ | |||||||||||||||||||
Masks and other | |||||||||||||||||||||||
Total U.S., Canada and Latin America |
$ | $ | $ | $ | |||||||||||||||||||
Combined Europe, Asia and other markets | |||||||||||||||||||||||
Devices | $ | $ | $ | $ | |||||||||||||||||||
Masks and other | |||||||||||||||||||||||
Total Combined Europe, Asia and other markets |
$ | $ | $ | $ | |||||||||||||||||||
Global revenue | |||||||||||||||||||||||
Total Devices |
$ | $ | $ | $ | |||||||||||||||||||
Total Masks and other |
|||||||||||||||||||||||
Total Sleep and Respiratory Care | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Software as a Service |
|
|
|
|
|||||||||||||||||||
Total | $ |
|
$ |
|
$ |
|
$ |
|
Performance obligations and contract balances
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; generally, this occurs with the transfer of risk and/or control of our products at a point in time. For products in our Sleep and Respiratory Care business, we transfer control and recognize a sale when products are shipped to the customer in accordance with the contractual shipping terms. For our SaaS business, revenue associated with cloud-hosted services are recognized as they are provided. We defer the recognition of a portion of the consideration received when performance obligations are not yet satisfied. Consideration received from customers in advance of revenue recognition is classified as deferred revenue. Performance obligations resulting in deferred revenue in our Sleep and Respiratory Care business relate primarily to extended warranties on our devices and the provision of data for patient monitoring. Performance obligations resulting in deferred revenue in our SaaS business relate primarily to the provision of software access with maintenance and support over an agreed term and material rights associated with future discounts upon renewal of some SaaS contracts. Generally, deferred revenue will be recognized over a period of one year to five years . Our contracts do not contain significant financing components.
The following table summarizes our contract balances (in thousands):
December 31, 2022 |
June 30, 2022 |
Balance sheet caption | |||||||||||||||
Contract assets | |||||||||||||||||
Accounts receivable, net | $ | $ | Accounts receivable, net | ||||||||||||||
Unbilled revenue, current | Prepaid expenses and other current assets | ||||||||||||||||
Unbilled revenue, non-current | Prepaid taxes and other non-current assets | ||||||||||||||||
Contract liabilities | |||||||||||||||||
Deferred revenue, current | ( |
( |
Deferred revenue (current liabilities) | ||||||||||||||
Deferred revenue, non-current | ( |
( |
Deferred revenue (non-current liabilities) |
Transaction price determination
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. In our Sleep and Respiratory Care segment, the amount of consideration received and revenue recognized varies with changes in marketing incentives (e.g. rebates, discounts, free goods) and returns offered to our customers and their
10
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
customers. When we give customers the right to return eligible products and receive credit, returns are estimated based on an analysis of our historical experience. However, returns of products, excluding warranty-related returns, have historically been infrequent and insignificant. We adjust the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed.
We offer our Sleep and Respiratory Care customers cash or product rebates based on volume or sales targets measured over quarterly or annual periods. We estimate rebates based on each customer’s expected achievement of its targets. In accounting for these rebate programs, we reduce revenue ratably as sales occur over the rebate period by the expected value of the rebates to be returned to the customer. Rebates measured over a quarterly period are updated based on actual sales results and, therefore, no estimation is required to determine the reduction to revenue. For rebates measured over annual periods, we update our estimates each quarter based on actual sales results and updated forecasts for the remaining rebate periods.
We participate in programs where we issue credits to our Sleep and Respiratory Care distributors when they are required to sell our products below negotiated list prices if we have preexisting contracts with the distributors' customers. We reduce revenue for future credits at the time of sale to the distributor, which we estimate based on historical experience using the expected value method.
We also offer discounts to both our Sleep and Respiratory Care as well as our SaaS customers as part of normal business practice and these are deducted from revenue when the sale occurs.
When Sleep and Respiratory Care or SaaS contracts have multiple performance obligations, we generally use an observable price to determine the stand-alone selling price by reference to pricing and discounting practices for the specific product or service when sold separately to similar customers. Revenue is then allocated proportionately, based on the determined stand-alone selling price, to each performance obligation. An allocation is not required for many of our Sleep and Respiratory Care contracts that have a single performance obligation, which is the shipment of our therapy-based equipment.
Accounting and practical expedient elections
We have elected to account for shipping and handling activities associated with our Sleep and Respiratory Care segment as a fulfillment cost within cost of sales, and record shipping and handling costs collected from customers in net revenue. We have also elected for all taxes assessed by government authorities that are imposed on and concurrent with revenue-producing transactions, such as sales and value added taxes, to be excluded from revenue and presented on a net basis. We have elected two practical expedients including the “right to invoice” practical expedient, which is relevant for some of our SaaS contracts as it allows us to recognize revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date. The second practical expedient adopted permits relief from considering a significant financing component when the payment for the good or service is expected to be one year or less.
Provision for Warranty
We provide for the estimated cost of product warranties on our Sleep and Respiratory Care products at the time the related revenue is recognized. We determine the amount of this provision by using a financial model, which takes into consideration actual historical expenses and potential risks associated with our different products. We use this financial model to calculate the future probable expenses related to warranty and the required level of the warranty provision. Although we engage in product improvement programs and processes, our warranty obligation is affected by product failure rates and costs incurred to correct those product failures. Should actual product failure rates or estimated costs to repair those product failures differ from our estimates, we would be required to revise our estimated warranty provision.
11
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(2) Segment Information
We have quantitatively and qualitatively determined that we operate in two operating segments, which are the Sleep and Respiratory Care segment and the SaaS segment.
We evaluate the performance of our segments based on net revenues and income from operations. The accounting policies of the segments are the same as those described in note 2 of our consolidated financial statements included in our Form 10-K for the year ended June 30, 2022. Segment net revenues and segment income from operations do not include inter-segment profits and revenue is allocated to a geographic area based on where the products are shipped to or where the services are performed.
Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, acquisition related expenses, net interest expense (income), loss attributable to equity method investments, gains and losses on equity investments, and other, net. We neither discretely allocate assets to our operating segments, nor does our Chief Operating Decision Maker evaluate the operating segments using discrete asset information.
Additionally, effective in the first quarter of fiscal year 2023, we updated the extent of allocation and method of attribution of certain shared costs that are principally managed at the corporate level as part of our evaluation of segment operating performance. As a result, certain shared administrative costs, including shared IT, legal and other administrative functions, which were previously included in segment operating results, are now reported in Corporate costs within our reconciliation of segment operating profit to income before income taxes. The financial information presented herein reflects the impact of the preceding reporting change for all periods presented.
The table below presents a reconciliation of net revenues and net operating profit by reportable segments (in thousands):
Three Months Ended December 31, |
Six Months Ended December 31, |
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2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net revenue by segment | |||||||||||||||||||||||
Total Sleep and Respiratory Care | $ | $ | $ | $ | |||||||||||||||||||
Software as a Service | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Depreciation and amortization by segment | |||||||||||||||||||||||
Sleep and Respiratory Care | $ | $ | $ | $ | |||||||||||||||||||
Software as a Service | |||||||||||||||||||||||
Amortization of acquired intangible assets and corporate assets | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Net operating profit by segment | |||||||||||||||||||||||
Sleep and Respiratory Care | $ | $ | $ | $ | |||||||||||||||||||
Software as a Service | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Reconciling items | |||||||||||||||||||||||
Corporate costs | $ | $ | $ | $ | |||||||||||||||||||
Amortization of acquired intangible assets | |||||||||||||||||||||||
Acquisition related expenses |
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Interest expense (income), net | |||||||||||||||||||||||
Loss attributable to equity method investments | |||||||||||||||||||||||
(Gain) loss on equity investments | ( |
( |
( |
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Other, net | ( |
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Income before income taxes | $ | $ | $ | $ |
12
PART I – FINANCIAL INFORMATION | Item 1 |
RESMED INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(3) Supplemental Balance Sheet Information
Components of selected captions in the condensed consolidated balance sheets consisted of the following (in thousands):
Inventories | December 31, 2022 |
June 30, 2022 |
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Raw materials | $ | $ | |||||||||
Work in progress | |||||||||||
Finished goods | |||||||||||
Total inventories | $ | $ |
Prepaid expenses and other current assets | December 31, 2022 |
June 30, 2022 |
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Prepaid taxes | $ | $ | |||||||||
Prepaid inventories | |||||||||||
Other prepaid expenses and current assets | |||||||||||
Total prepaid expenses and other current assets | $ | $ |
Property, Plant and Equipment | December 31, 2022 |
June 30, 2022 |
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Property, plant and equipment, at cost | $ | $ | |||||||||
Accumulated depreciation and amortization | ( |
( |
|||||||||
Property, plant and equipment, net | $ | $ |
Other Intangible Assets | December 31, 2022 |
June 30, 2022 |
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Developed/core product technology | $ | $ | |||||||||
Accumulated amortization | ( |
( |
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Developed/core product technology, net | |||||||||||
Customer relationships | |||||||||||
Accumulated amortization | ( |
( |
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Customer relationships, net | |||||||||||
Other intangibles | |||||||||||
Accumulated amortization | ( |
( |
|||||||||
Other intangibles, net | |||||||||||
Total other intangibles, net | $ | $ |
Intangible assets consist of developed/core product technology, trade names, non-compete agreements, customer relationships, and patents, which we amortize over the estimated useful life of the assets, generally between two years to fifteen years . There are no expected residual values related to these intangible assets.
(4) Goodwill
A reconciliation of changes in our goodwill by reportable segment is as follows (in thousands):
Six Months Ended December 31, 2022 | |||||||||||||||||
Sleep and Respiratory Care |
SaaS | Total | |||||||||||||||
Balance at the beginning of the period | $ | $ | $ | ||||||||||||||
Business acquisitions | |||||||||||||||||
Foreign currency translation adjustments |