Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 15, 1998

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on May 15, 1998



RESMED INC. AND SUBSIDIARIES



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM ___________ TO
_____________

Commission file number: 0-26038


ResMed Inc.
(Exact name of registrant as specified in its charter)


Delaware 98-0152841
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)



10121 Carroll Canyon Road
San Diego, CA 92131-1109
United States Of America
(Address of principal executive offices)

619 689 2400
(Registrant's telephone number including area code)


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 ______

As of March 31, 1998, there were 7,269,774 shares of Common Stock ($0.004 par
value) outstanding.

RESMED INC. AND SUBSIDIARIES

INDEX




PART I FINANCIAL INFORMATION




Page

Item 1 Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 1998
(unaudited) and June 30, 1997 3

Unaudited Condensed Consolidated Statements of Income for
the Three Months Ended March 31, 1998 and 1997 and the
Nine Months ended March 31, 1998 and 1997 4

Unaudited Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1998 and 1997 5

Notes to the Unaudited Condensed Consolidated Financial
Statements 6

Item 2 Managements Discussion and Analysis of Financial Condition
and Results of Operations 11






PART II OTHER INFORMATION




Item 1 Legal Proceedings 14

Item 2 Changes in Securities 14

Item 3 Defaults Upon Senior Securities 14

Item 4 Submission of Matters to a Vote of Security Holders 14

Item 5 Other Information 14

Item 6 Exhibits and Reports on Form 8-K 14

SIGNATURES 15




- -2-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements



RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
(in US$ thousands, except per share data)




March 31, June 30,
----------- ---------
Assets 1998 1997
----------- ---------
Current assets: (unaudited)
Cash and cash equivalents 11,843 9,077
Marketable securities - available for sale 7,973 18,908
Accounts receivable, net of allowance of $211 at March 31, 1998
and $277 at June 30, 1997 11,033 7,834
Government grants 390 391
Inventories 7,170 5,797
Deferred income taxes 950 999
Prepaid expenses and other current assets 1,834 1,385
______ ______
Total current assets 41,193 44,391
______ ______
Property, plant and equipment, net of accumulated depreciation
of $4,953 at March 31, 1998 and $3,467 at June 30, 1997 10,598 4,916
Patents, net of accumulated amortization of $369 at
March 31, 1998 and $325 at June 30, 1997 399 253
Deferred income taxes 157 157
Goodwill, net of amortization of $749 at March 31, 1998 and
$433 at June 30, 1997 5,495 4,553
Other assets 919 625
______ ______
Total assets 58,761 54,895
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 2,115 2,641
Accrued expenses 5,610 3,537
Income taxes payable 1,697 3,544
Current portion of long-term debt 121 274
______ ______
Total current liabilities 9,543 9,996
______ ______
Long-term debt, less current portion 243 274
______ ______
Total liabilities 9,786 10,270
______ ______
Stockholders' equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued - -
Series A Junior Participating preferred stock, $0.01 par value,
150,000 shares authorized; none issued - -
Common Stock $0.004 par value; 15,000,000 shares authorized;
issued and outstanding 7,269,774 at March 31, 1998 and
7,202,413 at June 30, 1997 29 29
Additional paid-in capital 30,437 29,656
Retained earnings 24,162 16,568
Currency translation adjustment (5,653) (1,628)
______ ______
48,975 44,625
______ ______
Commitments and contingencies - -
______ ______
Total liabilities and stockholders' equity 58,761 54,895
====== ======


See accompanying notes to condensed consolidated financial statements.



- -3-
RESMED INC. AND SUBSIDIARIES



Unaudited Condensed Consolidated Statements of Income
(in US$ thousands, except per share data)


Three Months Ended Nine Months Ended
March 31 March 31,
------------------- ------------------


1998 1997 1998 1997
----------- -------- -------- -------

Net revenue 17,113 12,468 47,237 35,196
Cost of sales 6,098 5,120 16,697 14,685
______ ______ ______ ______
Gross profit 11,015 7,348 30,540 20,511
______ ______ ______ ______

Operating expenses
Selling, general and administrative expenses 5,300 4,064 14,994 12,120
Research and development expenses 1,290 1,065 3,789 2,747
______ ______ ______ ______
Total operating expenses 6,590 5,129 18,783 14,867
______ ______ ______ ______
Income from operations 4,425 2,219 11,757 5,644
______ ______ ______ ______

Other income (expenses), net:
Interest income, net 201 307 755 851
Government grants 128 41 476 219
Other income (expenses), net 47 266 (1,394) 1,299
______ ______ ______ ______
Total other income (expenses), net 376 614 (163) 2,369
______ ______ ______ ______

Income before income taxes 4,801 2,833 11,594 8,013
Income taxes 1,655 935 4,000 2,593
______ ______ ______ ______
Net income 3,146 1,898 7,594 5,420
====== ====== ====== ======

Basic earnings per share $ 0.43 $ 0.26 $ 1.05 $ 0.75
Diluted earnings per share $ 0.42 $ 0.26 $ 1.02 $ 0.74


See accompanying notes to condensed consolidated financial statements.



- -4-
RESMED INC. AND SUBSIDIARIES



Unaudited Condensed Consolidated Statements of Cash Flows
(in US$ thousands)


Nine Months Ended
March 31,
------------------



1998 1997
---------- --------

Cash flows from operating activities:
Net income 7,594 5,420
______ ______
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,831 1,786
Provision for service warranties 80 63
Deferred income taxes - 2
Foreign currency options revaluations 1,669 (935)
Changes in operating assets and liabilities:
Accounts receivable, net (3,271) (1,586)
Government grants (41) 139
Inventories (1744) 577
Prepaid expenses and other current assets (547) (1,139)
Accounts payable, accrued expenses and other liabilities (3,572) 2,354
______ ______
Net cash provided by operating activities 2,999 6,681
______ ______
Cash flows from investing activities:
Purchases of property, plant and equipment (8,319) (2,594)
Purchases of patents (261) (105)
Purchase of investments (389) (44)
Proceeds from sale of investments - 1,243
Loans receivable - (225)
Deferred payments - business acquisitions (1,699) (991)
Purchases of marketable securities - available for sale (24,879) (40,794)
Proceeds from sale of marketable securities - available for sale 35,638 40,148
______ ______
Net cash from (used in) investing activities 91 (3,362)
______ ______
Cash flows from financing activities:
Proceeds from issuance of common stock 781 143
Repayment of long term debt (124) (146)
______ ______
Net cash from by (used in) financing activities 657 (3)
______ ______
Effect of exchange rate changes on cash (981) (191)
______ ______
Net increase in cash and cash equivalents 2,766 3,125
______ ______
Cash and cash equivalents at beginning of period 9,077 5,510
______ ______
Cash and cash equivalents at end of period 11,843 8,635
====== ======
Supplemental disclosure of cash flow information:
Income taxes paid 5,528 1,755
Interest paid - -


See accompany notes to condensed consolidated financial statements.



- -5-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Basis of Presentation

ResMed Inc. (the Company), is a Delaware corporation formed in March 1994
as a holding company for ResMed Holdings Ltd. (RHL), a company resident in
Australia. RHL designs, manufactures and markets devices for the evaluation
and treatment of sleep disordered breathing, primarily obstructive sleep
apnea. The Company's principal manufacturing operations are located in
Australia. Other principal distribution and sales sites are located in the
United States, the United Kingdom and Europe.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three
months ended March 31, 1998 and the nine months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ended
June 30, 1998.

(2) Summary of Significant Accounting Policies

(a) Basis of Consolidation:

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.

(b) Revenue Recognition:

Revenue on product sales is recorded at the time of shipment. Royalty
revenue from license agreements is recorded when earned.

(c) Cash and Cash Equivalents:

Cash equivalents include certificates of deposit, commercial paper, and
other highly liquid investments stated at cost, which approximates market.
Investments with original maturities of 90 days or less are considered to be
cash equivalents for purposes of the consolidated statements of cash flows.

- -6-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(d) Inventories:

Inventories are stated at the lower of cost, determined principally by
the first-in first-out method, or net realizable value.

(e) Property, Plant and Equipment:

Property, plant and equipment is recorded at cost. Depreciation expense
is computed using the straight-line method over the estimated useful lives of
the assets, generally two to 10 years. Assets held under capital leases are
recorded at the lower of the net present value of the minimum lease payments
or the fair value of the leased asset at the inception of the lease.
Amortization expense is computed using the straight-line method over the
shorter of the estimated useful lives of the assets or the period of the
related lease. Straight-line and accelerated methods of depreciation are used
for tax purposes. Maintenance and repairs are charged to expense as incurred.

(f) Patents:

The registration costs for new patents are capitalized and amortized over
the estimated useful life of the patent, generally five years. In the event
of a patent being superseded, the unamortized costs are written off
immediately.

(g) Government Grants:

Government grants revenue is recognized when earned. Grants have been
obtained by the Company from the Australian Federal Government to support
continued development of the Company's proprietary positive airway pressure
technology and to assist development of export markets. Grants have been
recognized in the amount of $128,000 and $41,000 for the three month period
ended March 31, 1998 and 1997, respectively and $476,000 and $219,000 for the
nine month periods ended March 31, 1998 and 1997, respectively.

(h) Foreign Currency:

The consolidated financial statements of the Company's non-U.S.
subsidiaries are translated into U.S. dollars for financial reporting
purposes. Assets and liabilities of non-U.S. subsidiaries whose functional
currencies are other than the U.S. dollar are translated at period end
exchange rates, revenue and expense transactions are translated at average
exchange rates for the period. Cumulative translation adjustments are
reflected in stockholders' equity. Gains and losses on transactions,
denominated in other than the functional currency of the entity, are reflected
in operations.

(i) Research and Development:

All research and development costs are expensed in the period incurred.

- -7-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(j) Earnings Per Share:

During the quarter ended December 31, 1997, the Company adopted Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (Statement
128). As required by Statement 128, all prior period information has been
restated to conform to the provisions of Statement 128. The weighted average
shares used to calculate basic earnings per share was 7,258,000 and 7,193,000
for the quarters ended March 31, 1998 and 1997, respectively, and 7,245,000
and 7,186,000 for the nine month periods ended March 31, 1998 and 1997,
respectively. The difference between basic earnings per share and diluted
earnings per share is attributable to the impact of outstanding stock options
during the periods presented. Stock options had the effect of increasing the
number of shares used in the calculation (by application of the treasury stock
method) by 293,000 and 171,000 for the quarters ended March 31, 1998 and 1997,
respectively, and by 236,000 and 141,000 for the nine month periods ended
March 31, 1998 and 1997, respectively.

(k) Financial Instruments:

The carrying value of financial instruments, such as cash and cash
equivalents, marketable securities - available for sale, accounts receivable,
government grants, foreign currency option contracts, accounts payable and
long-term debt, approximate their fair value. The Company does not hold or
issue financial instruments for trading purposes.

The Fair Value of Financial Instruments is defined as the amount at which
the instrument could be exchanged in a current transaction between willing
parties.

(l) Foreign Exchange Risk Management:

The Company enters into various types of foreign exchange contracts in
managing its foreign exchange risk, including derivative financial instruments
encompassing forward exchange contracts and foreign currency options.

The purpose of the Company's foreign currency hedging activities is to
protect the Company from adverse exchange rate fluctuations with respect to
net cash movements resulting from the sales of products to foreign customers
and Australian manufacturing activities. The Company enters into foreign
currency option contracts to hedge anticipated sales and manufacturing costs
denominated in principally Australian Dollars, Pound Sterling and
Deutschmarks. The terms of such foreign exchange contracts generally do not
exceed three years.

Premiums to enter certain foreign currency options are included in other
assets and are amortized over the period of the agreement in the consolidated
statement of income against other income, net. At March 31, 1998 unamortized
premiums amounted to $457,000.

- -8-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Summary of Significant Accounting Policies, Continued

(l) Foreign Exchange Risk Management:

Unrealized gains or losses are recognized as incurred in the Consolidated
Balance Sheet as either other assets or other liabilities and are recorded
within other income, net on the Company's consolidated statements of income.
Unrealized gains and losses on currency derivatives are determined based on
dealer quoted prices.

Foreign currency option contracts have been purchased in part by the
issue of put options to counterparts. As a result, should foreign exchange
rates drop below a specified level, on a specific date, the Company is
required to deliver certain funds to counterparts at contracted foreign
exchange rates. As at March 31, 1998 no put options issued by the Company
were outstanding.

The Company is exposed to credit-related losses in the event of
non-performance by counterparts to financial instruments, but it does not
expect any counterparts to fail to meet their obligations given their high
credit ratings. The credit exposure of foreign exchange options is
represented by the fair value of options with a positive fair value at the
reporting date.

At March 31, 1998 the Company held foreign currency option contracts with
notional amounts totaling $35,049,000 to hedge foreign currency items. These
contracts mature at various dates prior to March 1999.

(m) Income Taxes:

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (Statement 109).
Statement 109 requires an asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

- -9-
RESMED INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(3) Inventories

Inventories were comprised of the following at March 31, 1998 and June
30, 1997:




March 31, June 30,
1998 1997
---------- ---------
$ '000 $ '000

Raw materials $ 2,692 $ 1,797
Work in progress 753 284
Finished goods 3,725 3,716
______ ______
$ 7,170 $ 5,797
====== ======



(4) Commitments and contingencies

The Company is currently engaged in significant patent litigation
relating to the enforcement and defense of certain of its patents. In January
1995, the Company filed a complaint for patent infringement in the United
States against Respironics. The complaint seeks monetary damages from, and
injunctive relief against Respironics resulting from its alleged infringement
of three of the Company's patents. In February 1995, Respironics filed a
complaint against the Company seeking a declaratory judgment that Respironics
does not infringe claims of these patents and that the Company's patents are
invalid and unenforceable. The two actions have been combined and will
proceed in the United States District Court for the Western District of
Pennsylvania.

In June 1996, the Company initiated a further action in Pennsylvania
against Respironics regarding alleged infringement of a fourth patent, granted
June 4, 1996, related to the delay timer feature. This action was again
consolidated with the ongoing case such that the two remaining actions are to
proceed together. On July 1, 1997 the Court granted Respironics a motion for
partial summary judgment in which Respironics alleged its accused products do
not infringe one of the four patents in suit. Subsequently, the court
undertook a de novo review of the motion and on January 27, 1998 confirmed the
initial ruling. It is ResMed's intention to appeal to the Court of Appeal for
the Federal Circuit once a final judgment has been rendered.

On May 17, 1995, Respironics and its Australian distributor filed a
Statement of Claim against the Company and Dr. Peter Farrell in the Federal
Court of Australia. The Statement of Claim alleges that the Company engaged
in unfair trade practices, including the misuse of the power afforded by its
Australian patent and dominant market position in violation of the Australian
Trade Practices Act. The Statement of Claim asserts damage claims in the
aggregate amount of approximately $730,000, constituting lost profit on sales.
While the Company intends to defend this action, there can be no assurance
that the Company will be successful in defending such action or that the
Company will not be required to make significant payments to the claimants.
Furthermore, the Company expects to incur ongoing legal costs in defending
such action.

- -10-
RESMED INC. AND SUBSIDIARIES

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Net Revenue

Net revenue increased for the three months ended March 31, 1998 to $17.1
million from $12.5 million for the three months ended March 31, 1997, an
increase of $4.6 million or 37%. For the nine month period ended March 31,
1998 net revenue increased to $47.2 million from $35.2 million in the nine
month period ended March 31, 1997 an increase of $12.0 million or 34%. Both
the three month and nine month increases in net revenue were attributable to
an increase in unit sales of the Company's flow generators and accessories in
North America and to a lesser extent Europe. In fiscal 1998 net revenue in
North America increased to $8.4 million from $5.4 million for the quarter, and
to $23.5 million from $14.7 million for the nine month period ended March 31.
In Europe net revenue increased to $6.3 million from $5.2 million for the
quarter, and to $17.2 million from $15.8 million for the nine month period
ended March 31, respectively.

Gross Profit

Gross profit increased for the three months ended March 31, 1998 to $11.0
million from $7.3 million for the three months ended March 31, 1997, an
increase of $3.7 million or 50%. Gross profit as a percentage of net revenue
increased for the quarter ended March 31, 1998 to 64% from 59% in three months
ended March 31, 1997. These increases resulted primarily from increased unit
sales of higher margin products and a devaluation of the Australian dollar in
which the Company's manufacturing activities are denominated.

For the nine month period ended March 31, 1998 gross profit also increased to
$30.5 million from $20.5 million in the same period of fiscal 1997 an increase
of $10.0 million or 49%. Gross profit as a percentage of net revenue
increased for the nine month period ended March 31, 1998 to 65% from 58%
achieved for the nine months ended March 31, 1997. These increases also
resulted from increased unit sales of higher margin products and the
devaluation of the Australian dollar.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the three months
ended March 31, 1998 to $5.3 million from $4.1 million for the three months
ended March 31, 1997, an increase of $1.2 million or 30%. This increase was
primarily due to an increase from 103 to 136 in the number of sales and
administrative personnel. As a percentage of net revenue, selling, general
and administrative expenses declined to 31% for the quarter ended March 31,
1998 from 33% for the three months ended March 31, 1997. This decrease was a
result of increased efficiencies resulting from higher revenues and a marginal
decrease in legal costs associated with ongoing legal action (refer Note 4)
marginally declined to $307,000 from $331,000.

Selling, general and administrative expenses for the nine months ended March
31, 1998 also increased to $15.0 million from $12.1 million for the nine
months ended March 31, 1997, an increase of $2.9 million or 24%. As a
percentage of net revenue, selling, general and administration expenses
declined to 32% for the nine months ended March 31, 1998 from 34% in the nine
months ended March 31, 1997.

- -11-
RESMED INC. AND SUBSIDIARIES

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Research and Development Expenses

Research and development expenses increased for the three months ended March
31, 1998 to $1.3 million from $1.1 for the three months ended March 31, 1997,
an increase of $225,000 or 21%. The increase was due to an increased use of
consultants as well as increased evaluation and testing procedures incurred to
facilitate development of a number of new products. As a percentage of net
revenue, research and development expenses for the three months ended March
31, 1998 declined to 8% from 9% for the period ended March 31, 1997.

For the nine month period ended March 31, 1998 research and development
expenses increased to $3.8 million from $2.7 million for the corresponding
period in fiscal 1997, an increase of $1.1 million or 38%. The increase was
due to additional costs relating to development and evaluation of new
products. As a percentage of net revenue, research and development expenses
remained static for the nine months ended March 31, 1998 at 8 %.

Other Income (Expenses), Net

Other income (expenses), net declined for the three months ended March 31,
1998 to $376,000 from $614,000 for the three months ended March 31, 1997, a
decrease of $238,000 or 39%. The decline in other income (expenses), net
reflects the net impact of losses associated with the Company's foreign
exchange position, costs incurred in relation to the transfer of Australian
manufacturing activities offset by receipt of $1,250,000 in relation to the
granting of licenses to three of the Company's Patents to Invacare
Corporation.

Other income (expenses), net declined for the nine months ended March 31, 1998
to a loss of $163,000, from net income of $2.4 million for the nine months
ended March 31, 1997 a decline of $2.5 million. The decline in other income
(expense), net over the nine month period for the corresponding period in
fiscal 1997, primarily reflects foreign currency losses associated with the
marked devaluation of the Australian dollar, partially offset by the receipt
of licensing fees from Invacare.

Income Taxes

The Company's effective income tax rate for the three months ended March 31,
1998 marginally increased to 34.5% of income from 33% for the three months
ended March 31, 1997 and to 34.5% from 32.4% for the nine month period then
ended. The increase in effective tax rates reflects a decline in Research and
Development deductions in Australia and increase profitability in the
Company's European operations on which higher tax rates are incurred.

- -12-
RESMED INC. AND SUBSIDIARIES

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Liquidity and Capital Resources

As of March 31, 1998 and June 30, 1997, the Company had cash and cash
equivalents and marketable securities available for sale of approximately
$19.8 million and $28.0 million, respectively. The Company's working capital
approximated $31.7 million and $34.4 million, at March 31, 1998 and June 30,
1997, respectively. The decline in working capital balances reflects the
construction of a new Australian manufacturing facility partially offset by
cash generated from operations.

During the nine months ended March 31, 1998, the Company's operations
generated $3.0 million of cash from operations, primarily as a result of
increased profit from operations, offset partially by increases in accounts
receivable and inventory due to increased sales. During the nine months ended
March 31, 1997 approximately $6.7 million of cash was generated by operations.

The Company's capital expenditures for the nine month period ended March 31,
1998 and 1997 aggregated $8.6 million and $2.7 million, respectively. The
majority of the expenditures in the nine month period ending March 31, 1998
relate to purchase of land and associated construction costs, with respect to
a new Australian manufacturing facility and to a lessor extent purchases of
computer software and hardware, production tooling and equipment, office
furniture and research and development equipment. As a result of these
capital expenditures, the Company's March 31, 1998 balance sheet reflects net
property plant and equipment of approximately $10.6 million, compared to $4.9
million at June 30, 1997.

In addition, during the nine month period ended March 31, 1998 the Company
paid $1.7 million in business acquisition payments in relation to the
acquisition of Priess, the liquid silicone moulding operations of TQR Pty
Limited and its Singapore distributor.

The company anticipates to expend approximately $9.0 million in relation to
the construction of its new manufacturing facility and computer systems over
the next twelve months. These payments are to be funded through cash flows
from operations and existing cash resources.

The results of the Company's international operations are affected by changes
in exchange rates between currencies. Changes in exchange rates may
negatively affect the Company's consolidated net revenue and gross profit
margins from international operations. The Company however has a substantial
exposure to fluctuations in the Australian dollar with respect to its
manufacturing and research activities which is managed through foreign
currency option contracts.

In May 1993, the Australian Federal Government agreed to lend the Company up
to $870,000 over a six year term. Such a loan bears no interest for the first
three years but bears interest at a rate of 3.8% thereafter until maturity.
The outstanding principal balance of such loan was $364,000 and $548,000 at
March 31, 1998 and June 30, 1997, respectively.

- -13-

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Refer Note 4 to Condensed Consolidated Financial Statements

Item 2. Changes in Securities

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Report on Form 8K

Exhibits

The following exhibits are filed as part of this report

Exhibit 11.1 Statement re: Computation of Earnings of Share
Exhibit 27.1 Financial Data Schedule

Report on Form 8-K

None

- -14-

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



ResMed Inc.






/S/ PETER C FARRELL
Peter C Farrell
President and Chief Executive Officer





/S/ ADRIAN M SMITH
Adrian M Smith
Vice President Finance and Chief Financial Officer


- -15-

Exhibit 11.1



RESMED INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


Three Months Ended Nine Months Ended
------------------- ------------------


March 31, March 31, March 31, March 31,
--------------- ------------- ---------- ----------
1998 1997 1998 1997
--------------- ------------- ---------- ----------
BASIC EARNINGS
Net income 3,146 1,898 7,594 5,420
====== ====== ====== ======
Shares
Weighted average number of common
shares outstanding 7,258 7,193 7,245 7,186
====== ====== ====== ======

Basic earnings per share: $ 0.43 $ 0.26 $ 1.05 $ 0.75
====== ====== ====== ======


DILUTED EARNINGS
Net Income 3,146 1,898 7,594 5,420
====== ====== ====== ======
Shares
Weighted average number of common
shares outstanding 7,258 7,193 7,245 7,186
Additional shares assuming conversion of
stock options under treasury stock method 293 171 236 141
______ ______ ______ ______
Weighted average number of common and
common equivalent shares outstanding
as adjusted 7,551 7,364 7,481 7,327
====== ====== ====== ======

Diluted earnings per share: $ 0.42 $ 0.26 $ 1.02 $ 0.74
====== ====== ====== ======




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Exhibit 27.1



ARTICLE. 5 FDS FOR 3RD QUARTER 10-Q

This schedule contains summary financial information extracted from ResMed
Inc's third quarter March 31, 1998 financial report and is qualified in its
entirety by reference to such financial statements.

CURRENCY USD $ CURRENCY




PERIOD-TYPE 9-MOS 9-MOS
FISCAL-YEAR-END JUN-30-1998 JUN-30-1997
PERIOD-END MAR-31-1998 MAR-31-1997
EXCHANGE-RATE 1 1
CASH 11,843,000 8,635,000
SECURITIES 7,973,000 18,667,000
RECEIVABLES 11,033,000 7,794,000
ALLOWANCES 211,000 188,000
INVENTORY 7,170,000 5,165,000
CURRENT-ASSETS 41,193,000 43,154,000
PP&E 10,598,000 4,407,000
DEPRECIATION 00 0
TOTAL-ASSETS 58,761,000 53,643,000
CURRENT-LIABILITIES 9,543,000 9,641,000
BONDS 0 0
PREFERRED-MANDATORY 0 0
PREFERRED 0 0
COMMON 29,000 29,000
OTHER-SE 30,437,000 29,551,000
TOTAL-LIABILITY-AND-EQUITY 58,761,000 53,643,000
SALES 47,237,000 35,196,000
TOTAL-REVENUES 47,237,000 35,196,000
CGS 16,697,000 14,685,000
TOTAL-COSTS 0 0
OTHER-EXPENSES 0 0
LOSS-PROVISION 0 0
INTEREST-EXPENSE 0 0
INCOME-PRETAX 11,594,000 8,013,000
INCOME-TAX 4,000,000 2,593,000
INCOME-CONTINUING 7,594,000 5,420,000
DISCONTINUED 0 0
EXTRAORDINARY 0 0
CHANGES 0 0
NET-INCOME 7,594,000 5,420,000
EPS-BASIC $ 1.05 $ 0.75
EPS-DILUTED $ 1.02 $ 0.74



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