Form: 8-K

Current report filing

November 2, 2005

Exhibit 99.1

 

RESMED ANNOUNCES RECORD FINANCIAL RESULTS

FOR QUARTER ENDED SEPTEMBER 30, 2005

 

SAN DIEGO, California, November 2, 2005 - ResMed Inc (NYSE: RMD) today announced record revenue and income results for the quarter ended September 30, 2005. Revenue for the quarter was $127.1 million, a 45% increase over the quarter ended September 30, 2004. Excluding the incremental revenue contribution from acquisitions, revenue was $114.1 million, an increase of 30%. For the September 30, 2005 quarter, income from operations and net income, excluding the impact of stock-based compensation costs, restructuring expenses and acquisition related costs described below, were $30.4 million and $20.7 million, an increase of 33% and 37% respectively. Diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and acquisition related costs, for the quarter ended September 30, 2005, was $0.28, an increase of 33%, compared to the September 2004 quarter. Net income for the current quarter was $16.4 million or $0.23 per diluted share including after-tax stock-based compensation costs, restructuring expenses and acquisition related costs of $4.3 million. Gross margin was 63% for the quarter ended September 30, 2005.

 

Selling, general and administration (SG&A) costs for the quarter were $41.8 million, an increase of $15.1 million over the same period in fiscal 2005, excluding stock-based compensation costs. SG&A was 33% of revenue in the September quarter, compared to 30% in the same period in fiscal 2005, due to recent acquisitions, the addition of selling and administration personnel, and infrastructure investment in Europe.

 

Research and development expenditure during the quarter was $7.9 million, or approximately 6% of revenues, excluding stock-based compensation costs. R&D expense increased 16% during the quarter ended September 30, 2005 from $6.8 million in the quarter ended September 30, 2004 reflecting ResMed’s continuing commitment to clinical research and product development. ResMed intends to continue to spend approximately 6% of revenues on R&D during the rest of fiscal year 2006.

 

Restructuring expenses incurred during the quarter ended September 30, 2005, of $1.0 million ($0.6 million net of tax) predominantly consisted of expenses associated with the previously-announced integration of the Company’s German operations. Acquisition related expenses of $1.5 million ($1.0 million net of tax) incurred during the quarter ended September 30, 2005, consisted of amortization of acquired intangible assets associated with our acquisitions of Resprecare, Hoefner, Saime and Pulmomed. Stock-based compensation costs incurred during the quarter ended September 30, 2005, of $3.4 million ($2.6 million net of tax) consisted of expenses associated with stock options granted to employees and the employee stock purchase plan. The recognition of these stock-based compensation expenses is in accordance with FASB No. 123(R), which was adopted for the first time in the current quarter.

 

To accompany the above financial information, the Company is providing tabular reconciliation of GAAP operating income and GAAP net income with operating income (and net income), excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangibles, for the quarters ended September 30, 2005, and September 30, 2004.

 

Inventory, at $100.9 million, increased by $11.8 million compared to June 2005 levels primarily to accommodate sales growth, particularly in the domestic market. Accounts receivable days sales outstanding, at 71 days, were consistent with the June 2005 quarter.

 

Peter C. Farrell, PhD, Chairman and Chief Executive Officer, commented, “In the first quarter of fiscal 2006, domestic sales increased by a very robust 47% over the year ago quarter to $66.9

 

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million, reflecting strong demand for our new Mirage Swift™ patient interface and full face mask as well as a favorable reception to the S8™ flow generator platform. International sales, including incremental revenue contributions from the acquisitions of Resprecare, Hoefner, Saime and Pulmomed, totaled $60.2 million, a 43% increase over last year. Organically, international sales increased to $47.2 million, or 12% growth compared to the September 2004 quarter; and this growth occurred without the S8 platform being fully released within Europe. Net income for the September quarter, excluding stock-based compensation costs, restructuring and acquisition-related expenses, was $20.7 million, an increase of 37% over the same period in 2004, due primarily to strong sales growth. Our operating cash flow for the September quarter was $15.9 million.”

 

Dr. Farrell further continued, “During the past year, we have expanded our international operations with several strategic acquisitions. The latter have contributed ventilation products, technologies and expertise, as well as management depth, integrated distribution channels, and an expanded reach within Europe. Our team has done an excellent job integrating these acquisitions and positioning ResMed for future growth in Europe. Recently, we also entered into an agreement to acquire PolarMed Holdings AS, a leading Scandinavian distributor with offices in Norway, Sweden and Denmark. We are delighted that Stein Jacobsen, the owner of PolarMed, has agreed to direct ResMed’s operations in this growing market and to contribute his expertise in the ventilation market. Finally, we continue to make headway in the heart failure space and we are particularly happy with the recent FDA approval of VPAP Adapt SV™, our adaptive servo-ventilation device which treats periodic breathing or Cheyne-Stokes respiration, the major breathing disorder associated with severe congestive heart failure.”

 

About ResMed

 

ResMed is a leading manufacturer of medical equipment for the treatment and management of sleep-disordered breathing and other respiratory disorders. We are dedicated to developing innovative products to improve the lives of those who suffer from these conditions and to increasing awareness among patients and healthcare professionals of the potentially serious health consequences of untreated sleep-disordered breathing. For more information on ResMed, visit www.resmed.com.

 

ResMed will host a conference call at 1:30 p.m. U.S. Pacific Time today to discuss these quarterly results. Individuals wishing to access the conference call may do so via ResMed’s Web site at www.resmed.com or by dialing (866) 362-4832 (domestic) or +1 (617) 597-5364 (international) and entering conference I.D. No. 58193457. Please allow extra time prior to the call to visit the Web site and download the streaming media player (Windows Media Player) required to listen to the Internet broadcast. The online archive of the broadcast will be available approximately 90 minutes after the live call and will be available for two weeks. A telephone replay of the conference call is available by dialing (888) 286-8010 (domestic) and +1 (617) 801-6888 (international) and entering conference I.D. No. 54530695.

 

Further information can be obtained by contacting Hillary Theakston at ResMed Inc in San Diego (858) 746-2610; Brett Sandercock at ResMed Limited in Sydney on (+61 2) 9886-5406; or by visiting the Company’s multilingual Web site at www.resmed.com.

 

Statements contained in this release that are not historical facts are “forward-looking” statements as contemplated by the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the Company’s future revenue, earnings or expenses, new product development and new markets for the Company’s products, are subject to risks and uncertainties, which could cause actual results to materially differ from those projected or implied in the forward-looking statements. Those risks and uncertainties are discussed in the Company’s Annual Report on Form 10-K for its most recent fiscal year and in other reports the Company files with the US Securities & Exchange Commission. Those reports are available on the Company’s Web site.

 

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RESMED INC. AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

(In US$ thousands, except per share data)

 

     Three Months Ended
September 30,


 
     2005

    2004

 

Net revenue

   $ 127,127     $ 87,733  

Cost of sales

     47,008       31,322  
    


 


Gross profit

     80,119       56,411  
    


 


Operating expenses (A):

                

Selling, general and administrative

     44,680       26,664  

Research and development

     8,425       6,819  

Amortization of acquired intangible assets

     1,545       —    

Restructuring expenses

     956       1,968  
    


 


Total operating expenses

     55,606       35,451  
    


 


Income from operations

     24,513       20,960  
    


 


Other income (expense), net:

                

Interest income (expense), net

     (937 )     (321 )

Other, net

     291       31  
    


 


Total other income (expense), net

     (646 )     (290 )
    


 


Income before income taxes

     23,867       20,670  

Income taxes

     7,425       6,744  
    


 


Net income

   $ 16,442     $ 13,926  
    


 


Basic earnings per share

   $ 0.23     $ 0.21  

Diluted earnings per share (1)

   $ 0.23     $ 0.20  

Diluted earnings per share excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangibles (1)&(2)

   $ 0.28     $ 0.21  

Basic shares outstanding

     70,352       67,776  

Diluted shares outstanding (1)

     76,277       70,515  

(A) Includes stock-based compensation costs as follows:

                

Selling, general and administrative

   $ 2,875     $ —    

Research and development

     516       —    
    


 


Total stock-based compensation costs

   $ 3,391     $ —    
    


 


 

(1) See reconciliation of Basic and Diluted Earning per Share in table at end of press release.

 

(2) See reconciliation of non-GAAP financial measures in table at end of press release.

 

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RESMED INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

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

 

     September 30,
2005


    June 30,
2005


 

ASSETS

                

Current assets:

                

Cash and cash equivalents

   $ 129,729     $ 142,185  

Marketable securities - available for sale

     4,499       —    

Accounts receivable, net

     102,991       103,951  

Inventories

     100,883       89,107  

Deferred income taxes

     19,991       15,230  

Prepaid expenses and other current assets

     12,526       9,737  
    


 


Total current assets

     370,619       360,210  
    


 


Property, plant and equipment, net

     205,759       174,168  

Goodwill

     182,101       181,106  

Other Intangibles

     48,705       49,371  

Other assets

     9,314       9,291  
    


 


Total Non current assets

     445,879       413,936  
    


 


Total assets

   $ 816,498     $ 774,146  
    


 


LIABILITIES AND STOCKHOLDERS’ EQUITY

                

Current liabilities:

                

Accounts payable

   $ 32,187     $ 34,416  

Accrued expenses

     39,464       34,414  

Deferred revenue

     13,567       12,327  

Income taxes payable

     19,197       21,959  

Current portion of long-term debt

     125,887       115,435  
    


 


Total current liabilities

     230,302       218,551  
    


 


Non current liabilities:

                

Deferred income taxes

     11,937       11,695  

Deferred revenue

     10,242       10,901  

Long-term debt

     58,614       58,934  
    


 


Total non-current liabilities

     80,793       81,530  
    


 


Total liabilities

     311,095       300,081  
    


 


Stockholders’ Equity:

                

Common Stock

     141       140  

Additional paid-in capital

     196,238       180,005  

Retained earnings

     298,883       282,441  

Treasury stock

     (41,405 )     (41,405 )

Accumulated other comprehensive income

     51,546       52,884  
    


 


Total stockholders’ equity

     505,403       474,065  
    


 


Total liabilities and stockholders’ equity

   $ 816,498     $ 774,146  
    


 


 

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Reconciliation of Non-GAAP Financial Measures (Unaudited)

(Dollars in thousands except per share amounts)

 

In managing its business, ResMed makes use of certain non-GAAP financial measures in evaluating the Company’s results of operations. The measure, “operating income, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets” is reconciled with GAAP operating income in the table below:

 

     Three Months Ended
September 30,


     2005

   2004

GAAP operating income

   24,513    20,960

Stock-based compensation costs

   3,391    —  

Restructuring expenses

   956    1,968

Amortization of acquired intangible assets

   1,545    —  

Operating income, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets

   30,405    22,928

 

The measure “net income, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets,” is reconciled with GAAP net income in the table below:

 

     Three Months Ended
September 30,


     2005

   2004

GAAP net income

   16,442    13,926

Stock-based compensation costs, net of tax

   2,612    —  

Restructuring expenses, net of tax

   610    1,192

Amortization of acquired intangible assets, net of tax

   1,017    —  

Net income, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets

   20,681    15,118

 

ResMed believes that presenting diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets, is an additional measure of performance that investors can use to compare operating results between reporting periods. Management of the Company uses non-GAAP information internally in planning, forecasting and evaluating the Company’s results of operations in the current period and in comparing it to past periods. The Company also uses these non-GAAP measures in evaluating management performance for compensation purposes. Management believes that this information also provides investors better insight in evaluating the Company’s earnings performance from core operations, and provides consistency in financial reporting.

 

The Company initially adopted FASB No. 123(R) on July 1, 2005 using the modified prospective method, which resulted in stock-based compensation expenses being recognized during the quarter ended September 30, 2005 without corresponding expenses in the quarter ended September 30, 2004. In addition, the events giving rise to the restructuring expenses are not associated with the Company’s normal operating business and are expected to result in future market opportunities, cost savings, and other benefits.

 

Management believes disclosure of non-GAAP earnings has economic substance because the excluded expenses represent non-cash expenditures, or relate to transactions that are variable in nature between reporting periods.

 

Our use of non-GAAP earnings is intended to supplement, and not to replace, our presentation of net income and other GAAP measures. Like all non-GAAP measures, non-GAAP earnings are subject to inherent limitations because they do not include all the expenses that must be included under GAAP. We compensate for the inherent limitations of non-GAAP measures by not relying exclusively on non-GAAP measures, but rather by using such information to supplement GAAP financial measures.

 

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Reconciliation of Basic and Diluted Earnings per Share (Unaudited)

(Dollars in thousands except per share amounts)

 

    

Three Months Ended

September 30,


     2005

   2004

Numerator:

             

Net Income

   $ 16,442    $ 13,926

Adjustment for interest and deferred borrowing costs, net of income tax effect (1)

     821      —  
    

  

Net income, used in calculating diluted earnings per share

   $ 17,263    $ 13,926
    

  

Adjustment for stock-based compensation costs

     2,612      —  

Adjustment for restructuring expenses

     610      1,192

Adjustment for Amortization of acquired intangible assets

     1,017      —  
    

  

Net income, used in calculating diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets

     21,502      15,118
    

  

Denominator:

             

Basic weighted-average common shares outstanding

     70,352      67,776

Effect of dilutive securities:

             

Stock options

     2,188      2,739

Convertible subordinated notes (1)

     3,737      —  
    

  

Diluted potential common shares

     5,925      2,739
    

  

Diluted weighted average shares

     76,277      70,515
    

  

Increase in diluted weighted average shares:

             

Stock option adjustment due to the impact of FAS 123

     444      —  
    

  

Diluted weighted average shares, excluding the impact of FAS 123

     76,721      70,515
    

  

Basic earnings per share

   $ 0.23    $ 0.21

Diluted earnings per share

   $ 0.23    $ 0.20

Diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets

   $ 0.28    $ 0.21

 

(1) Diluted earnings per share has been calculated after adjusting the numerator (net income) by $821,000 and $nil for the three months ended September 30, 2005 and 2004, respectively, for the effect of assumed conversion of our convertible notes.

 

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