Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 1, 2014

Table of Contents

 

 

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 March 31, 2014

 

¨ 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)

 

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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 April 21, 2014, there were 140,330,978 shares of Common Stock ($0.004 par value) outstanding. This number excludes 35,641,013 shares held by the registrant as treasury shares.

 

 

 

 


Table of Contents

RESMED INC. AND SUBSIDIARIES

INDEX

 

Part I

  Financial Information      3   

Item 1

  Financial Statements      3  
  Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2014 and June 30, 2013      3  
  Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended March 31, 2014 and 2013      4  
  Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended March 31, 2014 and 2013      5  
  Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine months Ended March 31, 2014 and 2013      6  
  Notes to the Condensed Consolidated Financial Statements (Unaudited)      7  

Item 2

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      17  

Item 3

  Quantitative and Qualitative Disclosures About Market Risk      25  

Item 4

  Controls and Procedures      27  

Part II

  Other Information      28  

Item 1

  Legal Proceedings      28  

Item 1A

  Risk Factors      28  

Item 2

  Unregistered Sales of Equity Securities and Use of Proceeds      28  

Item 3

  Defaults Upon Senior Securities      28  

Item 4

  Mine Safety Disclosures      28  

Item 5

  Other Information      28  

Item 6

  Exhibits      29  
  Signatures      30  

 

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$ thousands, except share and per share data)

 

     March 31,
2014
    June 30,
2013
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 938,563      $ 876,048  

Accounts receivable, net of allowance for doubtful accounts of $9,469 and $9,912 at March 31, 2014 and June 30, 2013, respectively

     337,572        318,349  

Inventories (note 3)

     164,888        145,847  

Deferred income taxes

     36,021        38,552  

Income taxes receivable

     7,730        8,910  

Prepaid expenses and other current assets

     79,128        61,143  
  

 

 

   

 

 

 

Total current assets

     1,563,902        1,448,849  

Non-current assets:

    

Property, plant and equipment, net (note 4)

     429,049        411,433  

Goodwill and other intangible assets, net (note 6)

     336,938        324,468  

Deferred income taxes

     23,009        20,053  

Other assets

     11,668        5,918  
  

 

 

   

 

 

 

Total non-current assets

     800,664        761,872  
  

 

 

   

 

 

 

Total assets

   $ 2,364,566      $ 2,210,721  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accounts payable

     55,483        60,688  

Accrued expenses

     142,082        137,674  

Deferred revenue

     42,182        44,953  

Income taxes payable

     6,353        30,090  

Deferred income taxes

     774        627  

Current portion of long-term debt (note 7)

     18       300,017  
  

 

 

   

 

 

 

Total current liabilities

     246,892        574,049  

Non-current liabilities:

    

Deferred income taxes

     10,081        9,895  

Deferred revenue

     15,585        11,928  

Long-term debt (note 7)

     395,785        769  

Income taxes payable

     5,318        3,564  
  

 

 

   

 

 

 

Total non-current liabilities

     426,769        26,156  
  

 

 

   

 

 

 

Total liabilities

     673,661        600,205  
  

 

 

   

 

 

 

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; 175,932,557 issued and 140,291,544 outstanding at March 31, 2014 and 174,038,766 issued and 142,012,753 outstanding at June 30, 2013

     561        568  

Additional paid-in capital

     1,084,502        1,025,064  

Retained earnings

     1,727,789        1,576,641  

Treasury stock, at cost, 35,641,013 shares at March 31, 2014, and 32,026,013 shares at June 30, 2013

     (1,251,482     (1,083,845

Accumulated other comprehensive income

     129,535        92,088  
  

 

 

   

 

 

 

Total stockholders’ equity

     1,690,905        1,610,516  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,364,566      $ 2,210,721  
  

 

 

   

 

 

 

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$ thousands, except per share data)

 

     Three Months Ended
March 31,
     Nine Months Ended
March 31,
 
     2014      2013      2014     2013  

Net revenue

   $ 397,758       $ 383,581      $ 1,139,762      $ 1,099,850  

Cost of sales

     145,970         144,132        411,234        419,041  
  

 

 

    

 

 

    

 

 

   

 

 

 

Gross profit

     251,788         239,449        728,528        680,809  
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating expenses:

          

Selling, general and administrative

     115,101         109,628        328,172        315,745  

Research and development

     29,530         31,189        86,430        88,735  

Amortization of acquired intangible assets

     2,459         2,533        7,325        7,671  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

     147,090         143,350        421,927        412,151  
  

 

 

    

 

 

    

 

 

   

 

 

 

Income from operations

     104,698         96,099        306,601        268,658  
  

 

 

    

 

 

    

 

 

   

 

 

 

Other income, net:

          

Interest income, net

     6,015         8,078        19,182        25,047  

Other, net

     2,199         3,815        (1,340     3,587  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total other income, net

     8,214         11,893        17,842        28,634  
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     112,912         107,992        324,443        297,292  

Income taxes

     22,943         23,079        66,908        63,172  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 89,969       $ 84,913      $ 257,535      $ 234,120  
  

 

 

    

 

 

    

 

 

   

 

 

 

Basic earnings per share

   $ 0.64       $ 0.59      $ 1.82      $ 1.64  

Diluted earnings per share (note 2)

   $ 0.63       $ 0.58      $ 1.78      $ 1.60  

Dividend declared per share

   $ 0.25      $ 0.17      $ 0.75     $ 0.51  

Basic shares outstanding (000’s)

     140,959         143,293        141,774        143,049  

Diluted shares outstanding (000’s)

     143,375         146,643        144,758        146,479  

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$ thousands)

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2014      2013     2014      2013  

Net income

   $ 89,969       $ 84,913      $ 257,535       $ 234,120   

Other comprehensive income:

          

Foreign currency translation gain (loss) adjustments

     50,612         (8,361     37,447         22,659   
  

 

 

    

 

 

   

 

 

    

 

 

 

Comprehensive income

   $ 140,581       $ 76,552      $ 294,982       $ 256,779   
  

 

 

    

 

 

   

 

 

    

 

 

 

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

 

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Table of Contents
PART I – FINANCIAL INFORMATION    Item 1

 

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In US$ thousands)

 

     Nine Months Ended
March 31,
 
     2014     2013  

Cash flows from operating activities:

    

Net income

   $ 257,535     $ 234,120  

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

    

Depreciation and amortization

     53,631       58,621  

Stock-based compensation costs

     32,679       27,658  

Impairment of cost-method investments

     -        225  

Foreign currency revaluation

     (3,305     (5,728

Excess tax benefit from stock-based compensation arrangements

     (11,388     (12,757

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

    

Accounts receivable, net

     (12,873     (9,214

Inventories, net

     (15,735     9,863  

Prepaid expenses, net deferred income taxes and other current assets

     (4,020     (3,881

Accounts payable, accrued expenses and other liabilities

     (20,839     (20,006
  

 

 

   

 

 

 

Net cash provided by operating activities

     275,685       278,901  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (54,210     (47,576

Patent registration costs

     (5,691     (5,853

Business acquisitions, net of cash acquired

     (3,172     (5,418

Investments in cost-method investments

     (5,275     (1,558

Purchases of foreign currency options

     (1,337     (595

(Payments)/Proceeds from exercise of foreign currency contracts

     (2,466     9,485  
  

 

 

   

 

 

 

Net cash used in investing activities

     (72,151     (51,515
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock, net

     15,624       49,883  

Excess tax benefit from stock-based compensation arrangements

     11,388       12,757  

Purchases of treasury stock

     (169,398     (115,339

Payment of business combination contingent consideration

     (1,117     (1,641

Proceeds from borrowings, net of borrowing costs

     507,838       90,000  

Repayment of borrowings

     (415,029     (176

Dividend paid

     (106,387     (72,939
  

 

 

   

 

 

 

Net cash used in financing activities

     (157,081     (37,455
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     16,062       13,226  
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     62,515       203,157  

Cash and cash equivalents at beginning of period

     876,048       809,541  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 938,563     $ 1,012,698  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Income taxes paid, net of refunds

   $ 76,127     $ 62,371  

Interest paid

   $ 4,680     $ 4,640  
  

 

 

   

 

 

 

Fair value of assets acquired, excluding cash

   $ 2,257     $ 5,970  

Liabilities assumed

     (829     (2,278

Goodwill on acquisition

     3,227       13,876  

Deferred payments

     (1,483     -   

Fair value of contingent consideration

     -        (12,150
  

 

 

   

 

 

 

Total purchase price, excluding contingent consideration

   $ 3,172     $ 5,418  
  

 

 

   

 

 

 

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

 

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Table of Contents
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, France, Germany, Malaysia and the United States. Major distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia, Japan, Norway and Sweden.

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 Article 10 of Regulation S-X 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 year ending June 30, 2014.

The condensed consolidated financial statements for the three and nine months ended March 31, 2014 and 2013 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, 2013.

 

(2)

Earnings Per Share

Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.

Stock options of 381,837 and 312,848 for the three months ended March 31, 2014 and 2013, and stock options of 254,958 and 193,269 for the nine months ended March 31, 2014 and 2013, were not included in the computation of diluted earnings per share as the effect of exercising these options would have been anti-dilutive.

Basic and diluted earnings per share for the three and nine months ended March 31, 2014 and 2013 are calculated as follows (in thousands except per share data):

 

      Three Months Ended
March 31,
     Nine Months Ended
March 31,
 
      2014      2013      2014      2013  

Numerator:

                   

Net Income, used in calculating diluted earnings per share

   $ 89,969      $ 84,913      $ 257,535      $ 234,120  

Denominator:

                   

Basic weighted-average common shares outstanding

     140,959        143,293        141,774        143,049  

Effect of dilutive securities:

                   

Stock options and restricted stock units

     2,416        3,350        2,984        3,430  

Diluted weighted average shares

     143,375        146,643        144,758        146,479  

Basic earnings per share

   $ 0.64      $ 0.59      $ 1.82      $ 1.64  

Diluted earnings per share

   $ 0.63      $ 0.58      $ 1.78      $ 1.60  

 

(3) Inventories

Inventories were comprised of the following at March 31, 2014 and June 30, 2013 (in thousands):

 

      March 31, 2014      June 30, 2013  

Raw materials

   $ 54,562      $ 46,841  

Work in progress

     2,701        1,990  

Finished goods

     107,625        97,016  

Total inventories

   $ 164,888      $ 145,847  

 

7


Table of Contents
PART I – FINANCIAL INFORMATION    Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(4) Property, Plant and Equipment

Property, plant and equipment were comprised of the following as of March 31, 2014 and June 30, 2013 (in thousands):

 

      March 31, 2014     June 30, 2013  

Machinery and equipment

   $ 194,277     $ 165,782  

Computer equipment

     125,176       109,657  

Furniture and fixtures

     42,082       40,706  

Vehicles

     3,811       3,282  

Clinical, demonstration and rental equipment

     103,988       102,304  

Leasehold improvements

     30,726       28,466  

Land

     61,790       61,091  

Buildings

     263,401       260,857  
       825,251       772,145  

Accumulated depreciation and amortization

     (396,202     (360,712

Property, plant and equipment, net

   $ 429,049     $ 411,433  

 

(5) Cost-Method Investments

The aggregate carrying amount of our cost-method investments at March 31, 2014 and June 30, 2013, was $9.3 million and $4.0 million, respectively, and is included in the non-current balance of other assets on the condensed consolidated balance sheets.

We periodically evaluate the carrying value of our cost-method investments, when events and circumstances indicate that the carrying amount of an asset may not be recovered. We estimate the fair value of our cost-method investments to assess whether impairment losses shall be recorded using Level 3 inputs. These investments include our holdings in privately held service and research companies that are not exchange traded and therefore not supported with observable market prices. However, these investments are valued by reference to their net asset values that can be market supported and unobservable inputs including future cash flows. During the nine months ended March 31, 2014 and 2013, we recognized $Nil and $0.2 million, respectively, of impairment losses related to our cost-method investments. We have determined that the fair value of our investments exceed their carrying values.

The following table shows a reconciliation of the changes in our cost-method investments during the nine months ended March 31, 2014 and 2013 (in thousands):

 

      Nine Months Ended March 31,  
      2014      2013  

Balance at the beginning of the period

   $ 4,000      $ 2,250  

Investments

     5,275        1,558  

Impairment of cost-method investments

     -         (225

Balance at the end of the period

   $ 9,275      $ 3,583  

 

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Table of Contents
PART I – FINANCIAL INFORMATION    Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(6)

Goodwill and Other Intangible Assets, net

Goodwill

Changes in the carrying amount of goodwill for the nine months ended March 31, 2014, and 2013 were as follows (in thousands):

 

      Nine Months Ended March 31,  
      2014      2013  

Balance at the beginning of the period

   $ 274,829      $ 256,209  

Business acquisition

     3,227        13,876  

Foreign currency translation adjustments

     12,729        2,711  

Balance at the end of the period

   $ 290,785      $ 272,796  

Other Intangible Assets

Other intangible assets are comprised of the following as of March 31, 2014, and June 30, 2013 (in thousands):

 

      March 31, 2014     June 30, 2013  

Developed/core product technology

   $ 76,058     $ 72,698  

Accumulated amortization

     (52,602     (45,492

Developed/core product technology, net

     23,456       27,206  

Trade names

     2,799       2,662  

Accumulated amortization

     (2,689     (2,491

Trade names, net

     110       171  

Non-compete agreements

     2,100       2,068  

Accumulated amortization

     (1,626     (1,265

Non compete agreements, net

     474       803  

Customer relationships

     24,643       22,291  

Accumulated amortization

     (20,237     (17,095

Customer relationships, net

     4,406       5,196  

Patents

     66,972       59,962  

Accumulated amortization

     (49,265     (43,699

Patents, net

     17,707       16,263  

Total other intangibles, net

   $ 46,153     $ 49,639  

Intangible assets consist of patents, customer relationships, trade names, non-compete agreements and developed/core product technology. We amortize intangible assets over the estimated useful life of the assets, generally between two and nine years. There are no expected residual values related to these intangible assets.

 

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Table of Contents
PART I – FINANCIAL INFORMATION    Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(7)

Long-Term Debt

Long-term debt at March 31, 2014 and June 30, 2013 consists of the following (in thousands):

 

      March 31, 2014      June 30, 2013  

Current long-term debt

   $ 18      $ 300,017  

Non-current long-term debt

     395,785        769  

Total long-term debt

   $ 395,803      $ 300,786  

Credit Facility

On October 31, 2013, we entered into a credit agreement, as borrower, with lenders, including Union Bank, N.A., as administrative agent, joint lead arranger, swing line lender and letters of credit issuer, and HSBC Bank USA, National Association, as syndication agent and joint lead arranger. Our obligations under the credit agreement are guaranteed by ResMed Corp. and ResMed Motor Technologies Inc., two of our U.S. subsidiaries.

The credit agreement provides a $700 million senior unsecured five-year revolving credit facility, with an uncommitted option to increase the credit facility by an additional $300 million. The credit facility also includes a $25 million sublimit for letters of credit. The credit facility terminates on October 31, 2018, when all unpaid principal and interest under the loans must be repaid. The outstanding principal amount due under the credit facility will bear interest at a rate equal to LIBOR plus 1.0% to 2.0% (depending on the then-applicable leverage ratio). At March 31, 2014, the interest rate that was being charged on the outstanding principal amount was 1.2%. An applicable commitment fee of 0.15% to 0.25% (depending on the then-applicable leverage ratio) applies on the unused portion of the credit facility.

When we entered into the credit agreement, we used a portion of the proceeds from the initial funding of the credit facility to repay the outstanding balance under our previous revolving credit facility with Union Bank, N.A and other lenders. On that repayment, the previous credit agreement, dated as of February 10, 2011, between us and lenders (including Union Bank, N.A., as administrative agent, swing line lender and L/C Issuer, HSBC Bank USA, National Association, as syndication agent and Union Bank, N.A., HSBC Bank USA, National Association, Commonwealth Bank of Australia and Wells Fargo Bank), was terminated and the commitments under the previous credit agreement were also terminated.

Our obligations under the current credit agreement are unsecured but are guaranteed by two of our U.S. subsidiaries. The credit agreement contains customary covenants, including certain financial covenants and an obligation that we maintain certain financial ratios, including a maximum leverage ratio of funded debt to EBITDA (as defined in the credit agreement) and an interest coverage ratio. The entire principal amount of the credit facility and any accrued but unpaid interest may be declared immediately due and payable if an event of default occurs, as defined in the credit agreement. Events of default under the credit agreement include failure to make payments when due, the occurrence of a default in the performance of any covenants in the credit agreement or related documents, or certain changes of control of ResMed Inc., ResMed Corp., ResMed Motor Technologies Inc., ResMed Limited, ResMed Holdings Ltd/LLC or ResMed EAP Holdings LLC.

At March 31, 2014, there was $395.0 million outstanding under the credit agreement.

 

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Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(8)

Product Warranties

Changes in the liability for warranty costs, which is included in accrued expenses in our condensed consolidated balance sheets, for the nine months ended March 31, 2014 and 2013 are as follows (in thousands):

 

      Nine Months Ended March 31,  
      2014     2013  

Balance at the beginning of the period

   $ 16,011     $ 17,018  

Warranty accruals for the period

     2,839       7,120  

Warranty costs incurred for the period

     (5,458     (7,999

Foreign currency translation adjustments

     216       98  

Balance at the end of the period

   $ 13,608     $ 16,237  

 

(9)

Stock-Based Employee Compensation

We measure the compensation expense of all stock-based awards at fair value on the grant date. We estimate the fair value of stock options and purchase rights granted under the employee stock purchase plan (the “ESPP”) using the Black-Scholes valuation model. The fair value of restricted stock units is equal to the market value of the underlying shares as determined at the grant date less the fair value of dividends that holders are not entitled to, during the vesting period. We recognize the fair value as compensation expense using the straight-line method over the service period for awards expected to vest.

We estimate the fair value of stock options granted under our stock option plans and purchase rights granted under the ESPP using the following assumptions:

 

     Three Months Ended
March 31,
    Nine Months Ended March 31,  
     2014     2013     2014     2013  

Stock options:

               

Weighted average grant date fair value

  $ -      $ 10.72      $ 10.90      $ 10.01   

Weighted average risk-free interest rate

    -        0.73     1.44     0.67

Expected option life in years

    -        4.9        4.9        4.9   

Dividend yield

    -        1.56     2.06     1.66

Expected volatility

    -        32     30     32

ESPP purchase rights:

               

Weighted average risk-free interest rate

    0.08     0.15     0.08     0.15

Expected option life in years

    6 months        6 months        6 months        6 months   

Dividend yield

    1.96     1.67     1.44% - 1.96     1.67

Expected volatility

    28     27     24% - 28     27% - 30

During the nine months ended March 31, 2014 and 2013, we also granted performance restricted stock units (“PRSUs”), which contain a market condition, with the ultimate realizable number of PRSUs dependent on relative total stockholder return over a three-year period, up to a maximum amount to be issued under the award of 200% of the original grant. The weighted average fair value of PRSUs granted during the nine months ended March 31, 2014 and 2013 was estimated at $50.09 and $38.46 per PRSU, respectively, using a Monte-Carlo simulation valuation model.

 

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Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(10) Stockholders’ Equity

Common Stock. On February 21, 2014, our board of directors approved a new share repurchase program, authorizing us to acquire up to an aggregate of 20 million shares of our common stock. The program allows us to repurchase shares of our common stock from time to time for cash in the open market, or in negotiated or block transactions, as market and business conditions warrant and subject to applicable legal requirements. This program canceled and replaced our previous share repurchase program authorized on August 24, 2011, under which we had repurchased 18.1 million shares. The 20 million shares the new program authorizes us to purchase are in addition to the shares we repurchased on or before February 21, 2014 under our previous programs. There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors. All share repurchases since February 21, 2014 have been executed in accordance with this program.

During the three and nine months ended March 31, 2014, we repurchased 1.6 million and 3.6 million shares at a cost of $72.5 million and $167.6 million, respectively. Since the inception of our share repurchase programs and through March 31, 2014, we have repurchased a total of 35.6 million shares at a cost of $1.3 billion. Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share. At March 31, 2014, 19.1 million additional shares can be repurchased under the approved share repurchase program.

Preferred Stock. In April 1997, the board of directors designated 2,000,000 shares of our $0.01 par value preferred stock as Series A Junior Participating Preferred Stock. No shares were issued or outstanding at March 31, 2014 and June 30, 2013.

Stock Options and Restricted Stock Units. We have granted stock options and restricted stock units to personnel, including officers and directors, in accordance with ResMed Inc. 2009 Incentive Award Plan (the “2009 Plan”). These options and restricted stock units have expiration dates of seven years from the date of grant and vest over one to four years. We have granted the options with an exercise price equal to the market value as determined at the date of grant.

At the annual meeting of our stockholders on November 13, 2013, our stockholders approved an amendment to the 2009 Plan to increase the number of shares of common stock that may be issued or transferred pursuant to awards under the 2009 Plan by 8.3 million shares to 43.7 million shares. The number of securities remaining available for future issuance under the 2009 Plan at March 31, 2014 is 16.2 million. The number of shares of our common stock available for issuance under the 2009 Plan will be reduced by (i) 2.8 shares for each one share of common stock delivered in settlement of any “full-value award,” which is any award other than a stock option, stock appreciation right or other award for which the holder pays the intrinsic value and (ii) one share for each share of common stock delivered in settlement of all other awards. The maximum number of shares, that may be subject to awards granted under the 2009 Plan to any individual during any calendar year, may not exceed 3 million shares of our common stock (except in a participant’s initial year of hiring, when up to 4.5 million shares of our common stock may be granted).

At March 31, 2014, there were $85.0 million in unrecognized compensation costs related to unvested stock-based compensation arrangements. This is expected to be recognized over a weighted average period of 2.4 years. The aggregate intrinsic value of the stock-based compensation arrangements outstanding and exercisable at March 31, 2014 was $224.2 million and $101.0 million, respectively. The aggregate intrinsic value of the options exercised during the nine months ended March 31, 2014 and 2013, was $59.8 million and $56.5 million, respectively.

The following table summarizes option activity during the nine months ended March 31, 2014:

 

             

Weighted Average

Exercise Price

     Weighted Average Remaining
Contractual Term in Years
 

Outstanding at beginning of period

     6,316,136         $ 22.68          3.1     

Granted

     161,005           48.56         

Exercised

     (1,077,527)           19.28         

Forfeited

     (48,817)           39.58             

Outstanding at end of period

     5,350,797         $ 24.00          2.7     

Exercise price range of granted options

     46.15 - 51.25                

Options exercisable at end of period

     4,288,065         $ 21.13             

 

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Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The following table summarizes the activity of restricted stock units during the nine months ended March 31, 2014:

 

  

             

Weighted Average Grant-

Date Fair Value

     Weighted Average Remaining
Contractual Term in Years
 

Outstanding at beginning of period

     2,633,407         $ 33.25          1.4     

Granted

     842,315           46.67         

Vested

     (886,626)            31.41         

Forfeited

     (64,005)            33.46             

Outstanding at end of period

     2,525,091         $ 38.37          1.5     

Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, we offer participants the right to purchase shares of our common stock at a discount during successive offering periods. Each offering period under the ESPP will be for a period of time determined by the board of directors’ compensation committee of no less than 3 months and no more than 27 months. The purchase price for our common stock under the ESPP will be the lower of 85% of the fair market value of our common stock on the date of grant or 85% of the fair market value of our common stock on the date of purchase. An individual participant cannot subscribe for more than $25,000 in common stock during any calendar year. At March 31, 2014, the number of shares remaining available for future issuance under the ESPP is 1.9 million shares.

 

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Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(11) Fair Value Measurements

In determining the fair value measurements of our financial assets and liabilities, we consider the principal and most advantageous market in which we transact and consider assumptions that market participants would use when pricing the financial asset or liability. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The hierarchies of inputs are as follows:

 

•    Level 1:   

Input prices quoted in an active market for identical financial assets or liabilities;

•    Level 2:   

Inputs other than prices quoted in Level 1, such as prices quoted for similar financial assets and liabilities in active markets, prices for identical assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data; and

•    Level 3:   

Input prices quoted that are significant to the fair value of the financial assets or liabilities which are not observable nor supported by an active market.

The following table summarizes our financial assets and liabilities, as at March 31, 2014 and June 30, 2013, using the valuation input hierarchy (in thousands):

 

          Level 1          Level 2     Level 3     Total  

Balances at March 31, 2014

                 

Foreign currency hedging instruments, net

   $ -       $ (5,298   $ -      $ (5,298

Business acquisition contingent consideration

   $ -       $ -      $ (1,557   $ (1,557

Balances at June 30, 2013

                                 

Foreign currency hedging instruments, net

   $ -       $ (7,000   $ -      $ (7,000

Business acquisition contingent consideration

   $ -       $ -      $ (7,779   $ (7,779

We determine the fair value of our financial assets and liabilities as follows:

Foreign currency hedging instruments – These financial instruments are valued using third-party valuation models based on market observable inputs, including interest rate curves, on-market spot currency prices, volatilities and credit risk.

Contingent consideration – These liabilities include the fair value estimates of additional future payments that may be required for some of our previous business acquisitions based on the achievement of certain performance milestones. Each potential future payment is valued using the estimated probability of achieving each milestone, which is then discounted to present value.

The following is a reconciliation of changes in the fair value of contingent consideration for the nine months ended March 31, 2014 (in thousands):

 

     Nine Months Ended March 31, 2014  

Balance at the beginning of the period

  $ (7,779

Changes in fair value included in operating income

    5,210  

Payments

    1,117  

Foreign currency translation adjustments

    (105

Balance at the end of the period

  $ (1,557

We did not have any significant non-financial assets or liabilities measured at fair value on March 31, 2014 or June 30, 2013.

 

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(Unaudited)

 

(12) Legal Actions and Contingencies

Litigation

In the normal course of business, we are subject to routine litigation incidental to our business. While the results of this litigation cannot be predicted with certainty, we believe that their final outcome will not, individually or in aggregate, have a material adverse effect on our consolidated financial statements taken as a whole.

In March 2013, we filed parallel legal actions in the International Trade Commission, or ITC, and in U.S. district court against Taiwanese manufacturer APEX to stop the infringement of several ResMed patents. In August 2013, the ITC entered a consent decree against APEX, ordering that it not import or sell after import products that infringe the claims of the patents that ResMed asserted against APEX. Thereafter, APEX initiated inter partes review proceedings in the U.S. Patent and Trademark Office, challenging the validity of most of the claims asserted against APEX in the ITC. The U.S. district court has stayed the litigation against APEX pending resolution of the inter partes review. APEX also advised the ITC that it redesigned the accused products and requested that the ITC determine whether those products are subject to the consent decree. The ITC has referred APEX’s request to an administrative law judge for an initial determination on the question of infringement. The administrative law judge heard the request in March 2014, but has not yet rendered a decision. Therefore the matter is ongoing as to APEX. However, we do not expect the outcome of this matter to have a material adverse effect on our consolidated financial statements when taken as a whole.

In June 2013, we filed a lawsuit in U.S. district court against Chinese manufacturer BMC Medical Co., Ltd and its U.S. distributor to stop the infringement of several ResMed patents. In July 2013, we amended the district court lawsuit, and filed a parallel proceeding in the ITC. The ITC initiated an investigation of BMC’s alleged infringement in August 2013, and that matter is proceeding. The district court lawsuit has been stayed by the court pending the conclusion of the ITC proceeding. An administrative law judge heard the investigation in April 2014, but has not yet rendered a decision. Therefore the matter is ongoing as to BMC. However, we do not expect the outcome of this matter to have a material adverse effect on our consolidated financial statements when taken as a whole.

In November 2013, we obtained preliminary injunctions prohibiting APEX and BMC from marketing and selling certain products accused of patent infringement in Germany. The orders, entered by the Munich District Court, prohibit APEX and BMC from selling those products without a further court order. ResMed also filed separate actions seeking damages from each defendant. APEX and BMC have informed the court that they will contest the injunctions and the actions for damages, although in April 2014, BMC announced it was not contesting infringement or validity of one of the several asserted patents. Therefore the matters are ongoing as to APEX and BMC. However, we do not expect the outcome of these matters to have a material adverse effect on our consolidated financial statements when taken as a whole.

Contingent Obligations Under Recourse Provisions

We use independent leasing companies to provide financing to certain customers for the purchase of our products. In some cases, we are contingently liable in the event of a customer default, to the leasing companies, within certain limits, for unpaid installment receivables transferred to the leasing companies. The gross amount of receivables sold during the three months ended March 31, 2014 and 2013, amounted to $2.7 million and $0.3 million, respectively. The maximum potential amount of contingent liability under these arrangements at March 31, 2014 and June 30, 2013 were $4.1 million, and $0.3 million, respectively. The recourse liability recognized by us at March 31, 2014 and June 30, 2013, in relation to these arrangements was $0.4 million and $0.2 million, respectively.

 

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Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(13)

Derivative Instruments and Hedging Activities

We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollars. We have significant foreign currency exposure through both our Australian and Singaporean manufacturing activities, and international sales operations. We have established a foreign currency hedging program using purchased currency options and forward contracts to hedge foreign-currency-denominated financial assets, liabilities and manufacturing cash flows. The terms of such foreign currency hedging contracts generally do not exceed three years. The goal of this hedging program is to economically manage the financial impact of foreign currency exposures denominated mainly in Euros, Australian and Singapore dollars. Under this program, increases or decreases in our foreign currency denominated financial assets, liabilities, and firm commitments are partially offset by gains and losses on the hedging instruments.

We do not designate these foreign currency contracts as hedges. We have determined our hedge program to be a non-effective hedge as defined under the FASB issued authoritative guidance. All movements in the fair value of the foreign currency instruments are recorded within other income, net in our condensed consolidated statements of income. We do not enter into financial instruments for trading or speculative purposes.

We held foreign currency instruments with notional amounts totaling $465.6 million and $462.1 million at March 31, 2014 and June 30, 2013, respectively, to hedge foreign currency fluctuations. These contracts mature at various dates prior to March 31, 2017.

The following table summarizes the amount and location of our derivative financial instruments as of March 31, 2014 and June 30, 2013 (in thousands):

 

      March 31, 2014     June 30, 2013     Balance Sheet  Caption

Foreign currency hedging instruments

   $ 6,391     $ 1,350     Other assets - current

Foreign currency hedging instruments

     411       657     Other assets - non current

Foreign currency hedging instruments

     (12,100     (9,007   Accrued expenses
     $ (5,298   $ (7,000    

The following table summarizes the amount and location of gains (losses) associated with our derivative financial instruments for the nine months ended March 31, 2014 and March 31, 2013, respectively (in thousands):

 

      Gain /(Loss) Recognized     Income Statement Caption
      Nine Months Ended March 31,       
      2014     2013       

Foreign currency hedging instruments

   $ (2,085   $ 6,713     Other, net

Other foreign-currency-denominated transactions

     470       (2,997   Other, net
     $ (1,615   $ 3,716      

We are exposed to credit-related losses in the event of non-performance by counter parties to financial instruments. We minimize counterparty credit risk by entering into derivative transactions with major financial institutions and we do not expect material losses as a result of default by our counterparties.

 

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

Special Note Regarding Forward-Looking Statements

This report contains certain forward-looking statements and information that are based on the beliefs of our management as well as estimates and assumptions made by, and information currently available to, our management. All statements other than statements regarding historical facts are forward-looking statements. The words “believe,” “expect,” “anticipate,” “will continue,” “will,” “estimate,” “plan,” “future” and other similar expressions, and negative statements of such expressions, generally identify forward-looking statements, including, in particular, statements regarding the development and approval of new products and product applications, market expansion, pending litigation and the development of new markets for our products, such as cardiovascular and stroke markets. These forward-looking statements are made in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements reflect the views of our management at the time the statements are made and are subject to a number of risks, uncertainties, estimates and assumptions, including, without limitation, and in addition to those identified in the text surrounding such statements, those identified in our annual report on Form 10-K for the fiscal year ended June 30, 2013 and elsewhere in this report.

In addition, important factors to consider in evaluating such forward-looking statements include changes or developments in healthcare reform, social, economic, market, legal or regulatory circumstances, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors, the actions or omissions of third parties, including suppliers, customers, competitors and governmental authorities and various other factors. If any one or more of these risks or uncertainties materialize, or underlying estimates or assumptions prove incorrect, actual results may vary significantly from those expressed in our forward-looking statements, and there can be no assurance that the forward-looking statements contained in this report will in fact occur.

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described in our annual report on Form 10-K, in addition to the other cautionary statements and risks described elsewhere in this report and in our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock will likely decline and you may lose all or part of your investment.

 

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

 

Overview

The following is an overview of our results of operations for the three and nine months ended March 31, 2014. Management’s discussion and analysis of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of ResMed Inc. Management’s discussion and analysis is provided as a supplement to, and should be read in conjunction with the selected financial data and condensed consolidated financial statements and notes, included in this report.

We are a leading developer, manufacturer and distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing (“SDB”) and other respiratory disorders. During the three and nine months ended March 31, 2014, we continued our efforts to build awareness of the consequences of untreated SDB, and to grow our business in this market. In our efforts, we have attempted to raise awareness through market and clinical initiatives highlighting the relationship between SDB/obstructive sleep apnea and co-morbidities, such as cardiac disease, diabetes, hypertension and obesity, as well as the dangers of sleep apnea in regard to occupational health and safety, especially in the transport industry.

We are committed to ongoing investment in research and development and product enhancements. During the three and nine months ended March 31, 2014, we invested $29.5 million and $86.4 million, respectively, on research and development activities. Since the development of continuous positive airway pressure (“CPAP”) therapy, we have developed a number of innovative products for SDB and other respiratory disorders including airflow generators, diagnostic products, mask systems, headgear and other accessories. Our new product release schedule remains active across both our mask and flow generator categories. We are taking steps to increase awareness of the health dangers of SDB by sponsoring educational programs targeted at the primary care physician community. We believe these efforts should further increase awareness of both doctors and patients about the relationship between SDB, obstructive sleep apnea and co-morbidities such as cardiac disease, diabetes, hypertension and obesity. We also believe these efforts should help inform the community of the dangers of sleep apnea in occupational health and safety, especially in the transport industry.

During the three months ended March 31, 2014, our net revenue increased by 4% when compared to the three months ended March 31, 2013. Gross margin was 63.3% for the three months ended March 31, 2014 compared to 62.4% for the three months ended March 31, 2013. Diluted earnings per share for the three months ended March 31, 2014 increased to $0.63 per share, up from $0.58 per share in the three months ended March 31, 2013.

At March 31, 2014, our cash and cash equivalents totaled $938.6 million, our total assets were $2.4 billion and our stockholders’ equity was $1.7 billion.

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency basis”, which is in addition to the actual financial information presented. In order to calculate our constant currency information, we translate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period. However, constant currency measures should not be considered in isolation or as an alternative to U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.

 

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

 

Net Revenue

Net revenue increased for the three months ended March 31, 2014 to $397.8 million compared to $383.6 million for the three months ended March 31, 2013, an increase of $14.2 million or 4%. The increase in net revenue is primarily attributable to an increase in unit sales of our flow generators, masks and accessories, partially offset by a decline in average selling prices. Movements in international currencies against the U.S. dollar favorably impacted revenues by approximately $3.0 million for the three months ended March 31, 2014. Excluding the impact of foreign currency movements, net revenue for the three months ended March 31, 2014 increased by 3% compared to the three months ended March 31, 2013.

Net revenue in North and Latin America was flat for the three months ended March 31, 2014 at $216.1 million, compared to $215.2 million for the three months ended March 31, 2013. The flat net revenue is primarily attributable to an increase in unit sales of our flow generators, masks and accessories, offset by a decline in average selling prices. Net revenue in markets outside North and Latin America, for the three months ended March 31, 2014, increased to $181.6 million from $168.4 million for the three months ended March 31, 2013, an increase of 8%. Movements in international currencies against the U.S. dollar favorably impacted international revenues by approximately $3.0 million during the three months ended March 31, 2014. Excluding the impact of movements in international currencies, international sales grew by 6% compared to the three months ended March 31, 2013.

Net revenue from the sales of flow generators, including humidifiers, for the three months ended March 31, 2014 totaled $212.7 million, an increase of 1% compared to the three months ended March 31, 2013 of $210.0 million, including a decrease of 2% in North and Latin America and an increase of 4% elsewhere. Net revenue from the sales of masks and other accessories for the three months ended March 31, 2014 totaled $185.1 million, an increase of 7% compared to the three months ended March 31, 2013 of $173.6 million, including an increase of 2% in North and Latin America and 17% elsewhere.

The following table summarizes the percentage movements in our net revenue for the three months ended March 31, 2014 compared to the three months ended March 31, 2013:

 

      North and
Latin America
    International     Total     International
(Constant
Currency) *
    Total
(Constant
Currency)  *

Flow generators

     -2     4     1     2   1%

Masks and other accessories

     2     17     7     14   6%

Total

     0     8     4     6   3%

 

* Constant currency numbers exclude the impact of movements in international currencies.

Net revenue for the nine months ended March 31, 2014, was $1,139.8 million, compared to $1,099.9 million for the nine months ended March 31, 2013, an increase of 4%. For the nine months ended March 31, 2014, revenue from sales of flow generators increased by 3% compared to the nine months ended March 31, 2013, comprised of a decrease of 1% in North and Latin America and a 6% increase elsewhere. For the nine months ended March 31, 2014, revenue from sales of mask systems, motors and other accessories increased by 4% compared to the nine months ended March 31, 2013, comprised of a 2% increase in North and Latin America and an 11% increase elsewhere. Movement in international currencies against the U.S. dollar favorably impacted net revenue by approximately $10.8 million during the nine months ended March 31, 2014. Excluding the impact of favorable currency movements, total revenue for the nine months ended March 31, 2014 increased by 3% compared to the nine months ended March 31, 2013.

The following table summarizes the percentage movements in our net revenue for the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013:

 

      North and
Latin America
    International     Total     International
(Constant
Currency) *
    Total
(Constant
Currency) *
 

Flow generators

     -1     6     3     4     2

Masks and other accessories

     2     11     4     9     4

Total

     0     8     4     5     3

 

* Constant currency numbers exclude the impact of movements in international currencies.

 

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Gross Profit

Gross profit increased for the three months ended March 31, 2014 to $251.8 million from $239.4 million for the three months ended March 31, 2013, an increase of $12.3 million or 5%. Gross profit as a percentage of net revenue for the three months ended March 31, 2014 increased to 63.3% from 62.4% for the three months ended March 31, 2013.

Gross profit increased for the nine months ended March 31, 2014 to $728.5 million from $680.8 million for the nine months ended March 31, 2013, an increase of $47.7 million or 7%. Gross profit as a percentage of net revenue for the nine months ended March 31, 2014 increased to 63.9% from 61.9% for the nine months ended March 31, 2013.

The improvement in gross margins was primarily due to manufacturing and supply chain improvements, favorable product mix, positive foreign currency impact due to the depreciation of the Australian dollar against the U.S. dollar and Euro, and a favorable geographic mix of sales, partially offset by declines in our average selling prices.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the three months ended March 31, 2014 to $115.1 million from $109.6 million for the three months ended March 31, 2013, an increase of $5.5 million or 5%. Selling, general and administrative expenses, as a percentage of net revenue, were 28.9% for the three months ended March 31, 2014, compared to 28.6% for the three months ended March 31, 2013.

Selling, general and administrative expenses increased for the nine months ended March 31, 2014 to $328.2 million from $315.7 million for the nine months ended March 31, 2013, an increase of $12.4 million or 4%. Selling, general and administrative expenses, as a percentage of net revenue, were 28.8% for the nine months ended March 31, 2014, compared to 28.7% for the nine months ended March 31, 2013.

The increase in selling, general and administrative expenses was primarily due to an increase in the number of sales and administrative personnel and other related expenses to support our sales, and legal expenses related to our patent litigation. The selling, general and administrative expenses were favorably impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by approximately $2.3 million and $4.4 million for the three and nine months ended March 31, 2014, as reported in U.S. dollars. As a percentage of net revenue, we expect our selling, general and administrative expenses for the year ended June 30, 2014, to be approximately 29%.

Research and Development Expenses

Research and development expenses decreased for the three months ended March 31, 2014 to $29.5 million from $31.2 million for the three months ended March 31, 2013, a decrease of $1.7 million. The research and development expenses were favorably impacted by the depreciation of the Australian dollar against the U.S. dollar, which decreased our expenses by approximately $3.8 million for the three months ended March 31, 2014, as reported in U.S. dollars. In constant currency terms, our research and development expenses increased by 7% compared to the three months ended March 31, 2013. Research and development expenses, as a percentage of net revenue, were 7.4% for the three months ended March 31, 2014, compared to 8.1% for the three months ended March 31, 2013.

Research and development expenses decreased for the nine months ended March 31, 2014 to $86.4 million from $88.7 million for the nine months ended March 31, 2013, a decrease of $2.3 million or 3%. The research and development expenses were favorably impacted by the depreciation of the Australian dollar against the U.S. dollar, which decreased our expenses by approximately $8.3 million for the nine months ended March 31, 2014, as reported in U.S. dollars. In constant currency terms, our research and development expenses increased by 7% compared to the nine months ended March 31, 2013. Research and development expenses, as a percentage of net revenue, were 7.6% for the nine months ended March 31, 2014, compared to 8.1% for the nine months ended March 31, 2013.

The constant currency increase in research and development expenses was primarily due to an increase in the number of research and development personnel, consulting and contractor expenses and an increase in materials and tooling costs incurred to facilitate development of new products. As a percentage of net revenue, we expect our research and development expenses for the year ended June 30, 2014 to be approximately 8%.

 

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Table of Contents
PART I – FINANCIAL INFORMATION    Item 2

 

RESMED INC. AND SUBSIDIARIES

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

 

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three and nine months ended March 31, 2014 totaled $2.5 million and $7.3 million, respectively, as compared to $2.5 million and $7.7 million for the three and nine months ended March 31, 2013, respectively.

Total Other Income, Net

Other income, net for the three and nine months ended March 31, 2014 was $8.2 million and $17.8 million, respectively, compared to $11.9 million and $28.6 million, respectively, for the three and nine months ended March 31, 2013. The decrease in other income, net, during the three and nine months ended March 31, 2014, was due primarily to losses on foreign currency transactions, lower net interest income due to lower interest rates on cash balances held, and the depreciation of the Australian dollar against the U.S. dollar.

Income Taxes

Our effective income tax rate of approximately 20.3% for the three months ended March 31, 2014 was lower than our effective income tax rate of approximately 21.4% for the three months ended March 31, 2013. Our effective income tax rate of approximately 20.6% for the nine months ended March 31, 2014 was lower than our effective tax rate of 21.2% for the nine months ended March 31, 2013. Our effective income tax rate is affected by the geographic mix of our taxable income, including the lower taxes associated with our Singapore and Malaysia manufacturing operations. Our Singapore and Malaysia operations operate under certain tax holidays and tax incentive programs which will expire in whole or in part at various dates through June 30, 2020. As of March 31, 2014, we have not provided for U.S. income taxes for the undistributed earnings of our foreign subsidiaries. We intend these earnings to be permanently reinvested outside the United States.

Net Income and Earnings per Share

As a result of the factors above, our net income for the three months ended March 31, 2014 was $90.0 million compared to net income of $84.9 million for the three months ended March 31, 2013, an increase of 6% over the three months ended March 31, 2013. Our net income for the nine months ended March 31, 2014 was $257.5 million compared to net income of $234.1 million for the nine months ended March 31, 2013, an increase of 10% over the nine months ended March 31, 2013.

As a result of the increase in our net income and lower share count due to our stock repurchases, our diluted earnings per share for the three and nine months ended March 31, 2014 were $0.63 and $1.78 per diluted share, respectively, compared to $0.58 and $1.60 for the three and nine months ended March 31, 2013, an increase of 9% and 11%, respectively.

Liquidity and Capital Resources

As of March 31, 2014 and June 30, 2013, we had cash and cash equivalents of $938.6 million and $876.0 million, respectively. Working capital was $1.3 billion and $874.8 million at March 31, 2014 and June 30, 2013, respectively.

As of March 31, 2014 and June 30, 2013, our cash and cash equivalent balances held within the United States amounted to $16.8 million and $38.2 million, respectively. Our remaining cash and cash equivalent balances at March 31, 2014 and June 30, 2013, of $921.8 million and $837.8 million, respectively, were held by our non-U.S. subsidiaries and would be subject to tax if repatriated. If these funds were needed for our operations in the United States, we would be required to accrue and pay United States taxes to repatriate these funds. However, we intend to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate them to fund our United States operations. Our cash and cash equivalent balances are held at highly rated financial institutions.

 

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Table of Contents
PART I – FINANCIAL INFORMATION    Item 2

 

RESMED INC. AND SUBSIDIARIES

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

 

Inventories at March 31, 2014 were $164.9 million, a decrease of $1.6 million or 1% from the March 31, 2013 balance of $166.5 million. The decrease in inventories was mainly due to improved inventory management.

Accounts receivable at March 31, 2014 were $337.6 million, an increase of $44.1 million or 15% over the March 31, 2013 accounts receivable balance of $293.5 million. Accounts receivable days outstanding of 73 days at March 31, 2014 was higher than the 67 days at March 31, 2013. Our allowance for doubtful accounts as a percentage of total accounts receivable at March 31, 2014 was 2.7%, compared to 3.0% at June 30, 2013.

During the nine months ended March 31, 2014, we generated cash of $275.7 million from operations. This was broadly consistent with the cash generated from operations for the nine months ended March 31, 2013 of $278.9 million. Movements in foreign currency exchange rates during the nine months ended March 31, 2014 had the effect of increasing our cash and cash equivalents by $16.1 million, as reported in U.S. dollars. During the nine months ended March 31, 2014 and 2013, we repurchased 3.6 million and 2.8 million shares at a cost of $167.6 million and $115.3 million, respectively. During the nine months ended March 31, 2014 and 2013, we also paid a dividend of $106.4 million and $72.9 million, respectively.

Capital expenditures for the nine months ended March 31, 2014 and 2013 amounted to $54.2 million and $47.6 million, respectively. The capital expenditures for the nine months ended March 31, 2014 primarily reflected investment in production tooling equipment and machinery, computer hardware and software, and rental and loan equipment. At March 31, 2014, our balance sheet reflects net property, plant and equipment of $429.0 million compared to $411.4 million at June 30, 2013. At March 31, 2014, no capital lease obligations exist. Details of contractual obligations at March 31, 2014 are as follows:

 

              Payments Due by March  
In $000’s    Total      2015      2016      2017      2018      2019      Thereafter  

Long Term Debt

   $ 395,803      $ 18      $ -       $ -       $ -       $ 395,000      $ 785  

Interest on Long Term Debt

     22,037        4,778        4,778        4,778        4,778        2,803        122  

Operating Leases

     60,649        16,897        12,823        7,690        4,776        3,158        15,305  

Purchase Obligations

     104,410        104,173        156        81        -         -         -   

Total

   $ 582,899      $ 125,866      $ 17,757      $ 12,549      $ 9,554      $ 400,961      $ 16,212  

Details of other commercial commitments as at March 31, 2014 are as follows:

 

  

           
              Amount of Commitment Expiration Per Period  
In $000’s    Total      2015      2016      2017      2018      2019      Thereafter  

Guarantees*

   $ 14,116      $ 2,057      $ 35      $ 1,832      $ -       $ 2      $ 10,190  

Other

     1,252        371        371        371        93        -         46  

Total

   $ 15,368      $ 2,428      $ 406      $ 2,203      $ 93      $ 2      $ 10,236  

 

*

The above guarantees mainly relate to requirements under contractual obligations with insurance companies transacting with our German subsidiaries and guarantees provided under our facility leasing obligations.

 

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PART I – FINANCIAL INFORMATION    Item 2

 

RESMED INC. AND SUBSIDIARIES

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

 

Credit Facility

On October 31, 2013, we entered into a credit agreement, as borrower, with lenders, including Union Bank, N.A., as administrative agent, joint lead arranger, swing line lender and letters of credit issuer, and HSBC Bank USA, National Association, as syndication agent and joint lead arranger. Our obligations under the credit agreement are guaranteed by ResMed Corp. and ResMed Motor Technologies Inc., two of our U.S. subsidiaries.

The credit agreement provides a $700 million senior unsecured five-year revolving credit facility, with an uncommitted option to increase the credit facility by an additional $300 million. The credit facility also includes a $25 million sublimit for letters of credit. The credit facility terminates on October 31, 2018, when all unpaid principal and interest under the loans must be repaid. The outstanding principal amount due under the credit facility will bear interest at a rate equal to LIBOR plus 1.0% to 2.0% (depending on the then-applicable leverage ratio). At March 31, 2014, the interest rate that was being charged on the outstanding principal amount was 1.2%. An applicable commitment fee of 0.15% to 0.25% (depending on the then-applicable leverage ratio) applies on the unused portion of the credit facility.

When we entered into the credit agreement, we used a portion of the proceeds from the initial funding of the credit facility to repay the outstanding balance under our previous revolving credit facility with Union Bank, N.A and other lenders. On that repayment, the previous credit agreement, dated as of February 10, 2011, between us and lenders (including Union Bank, N.A., as administrative agent, swing line lender and L/C Issuer, HSBC Bank USA, National Association, as syndication agent and Union Bank, N.A., HSBC Bank USA, National Association, Commonwealth Bank of Australia and Wells Fargo Bank), was terminated and the commitments under that previous credit agreement were also terminated.

Our obligations under the current credit agreement are unsecured but are guaranteed by two of our U.S. subsidiaries. The credit agreement contains customary covenants, including certain financial covenants and an obligation that we maintain certain financial ratios, including a maximum leverage ratio of funded debt to EBITDA (as defined in the credit agreement) and an interest coverage ratio. The entire principal amount of the credit facility and any accrued but unpaid interest may be declared immediately due and payable if an event of default occurs, as defined in the credit agreement. Events of default under the credit agreement include failure to make payments when due, the occurrence of a default in the performance of any covenants in the credit agreement or related documents, or certain changes of control of ResMed Inc., ResMed Corp., ResMed Motor Technologies Inc., ResMed Limited, ResMed Holdings Ltd/LLC or ResMed EAP Holdings LLC.

At March 31, 2014, we were in compliance with our debt covenants and there was $395.0 million outstanding under the credit agreement.

We expect to satisfy all of our liquidity requirements through a combination of cash on hand, cash generated from operations and the unused portion of our debt facilities.

 

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Table of Contents
PART I – FINANCIAL INFORMATION    Item 2

 

RESMED INC. AND SUBSIDIARIES

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

 

Common Stock

On February 21, 2014, our board of directors approved a new share repurchase program, authorizing us to acquire up to an aggregate of 20 million shares of our common stock. The program allows us to repurchase shares of our common stock from time to time for cash in the open market, or in negotiated or block transactions, as market and business conditions warrant and subject to applicable legal requirements. This program canceled and replaced our previous share repurchase program authorized on August 24, 2011, pursuant to which we had repurchased 18.1 million shares. The 20 million shares the new program authorizes us to purchase are in addition to the shares we repurchased on or before February 21, 2014 under our previous programs. There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors. All share repurchases since February 21, 2014 have been executed in accordance with this program.

During the nine months ended March 31, 2014, we repurchased 3.6 million shares at a cost of $167.6 million. At March 31, 2014, we have repurchased a total of 35.6 million shares at a cost of $1.3 billion. Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share. At March 31, 2014, 19.1 million additional shares can be repurchased under the new share repurchase program.

Critical Accounting Principles and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, including those related to allowance for doubtful accounts, inventory reserves, warranty obligations, goodwill, potentially impaired assets, intangible assets, income taxes and contingencies.

We state these accounting policies in the notes to the financial statements and at relevant sections in this discussion and analysis. The estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

For a full discussion of our critical accounting policies, see our Annual Report on Form 10-K for the year ended June 30, 2013.

Off-Balance Sheet Arrangements

As of March 31, 2014, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

 

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PART I – FINANCIAL INFORMATION    Item 3

 

RESMED INC. AND SUBSIDIARIES

Quantitative and Qualitative Disclosures About Market Risk

 

Foreign Currency Market Risk

Our reporting currency is the U.S. dollar, although the financial statements of our non-U.S. subsidiaries are maintained in their respective local currencies. We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollar. We have significant foreign currency exposure through our Australian and Singapore manufacturing activities and our international sales operations. We have established a foreign currency hedging program using purchased currency options and forward contracts to hedge foreign-currency-denominated financial assets, liabilities and manufacturing cash flows. The goal of this hedging program is to economically manage the financial impact of foreign currency exposures predominantly denominated in euros, Australian dollars and Singapore dollars. Under this program, increases or decreases in our foreign-currency-denominated financial assets, liabilities, and firm commitments are partially offset by gains and losses on the hedging instruments. We do not enter into financial instruments for trading or speculative purposes. The foreign currency derivatives portfolio is recorded in the condensed consolidated balance sheets at fair value and included in other assets or other liabilities. All movements in the fair value of the foreign currency derivatives are recorded within other income, net, on our condensed consolidated statements of income.

The table below provides information (in U.S. dollars) on our foreign-currency-denominated financial assets by legal entity functional currency as of March 31, 2014 (in thousands):

 

      Australian
Dollar
(AUD)
    U.S.
Dollar
(USD)
    Euro
(EUR)
    Singapore
Dollar
(SGD)
    Canadian
Dollar
(CAD)
    British
Pound
(GBP)
    Malaysian
Ringgit
(MYR)
 

AUD Functional:

                

Assets

     -        188,882       87,655       645       -        -        3,032  

Liabilities

     -        (22,269     (41,887     (28     (547     (5,193     -   

Foreign Currency Hedges

     -        (165,000     6,889       -        -        3,334       (3,062

Net Total

     -        1,613       52,657       617       (547     (1,859     (30

USD Functional:

                

Assets

     -        -        -        -        9,983       -        -   

Liability

     -        -        (721     -        -        -        -   

Foreign Currency Hedges

     -        -        -        -        (8,142     -        -   

Net Total

     -        -        (721     -        1,841       -        -   

EURO Functional:

                

Assets

     2       191       -        -        -        4,072       -   

Liability

     (7     (1,731     -        (26     -        (103     -   

Foreign Currency Hedges

     -        -        -        -        -        -        -   

Net Total

     (5     (1,540     -        (26     -        3,969       -   

GBP Functional:

                

Assets

     -        -        38,591       -        -        -        -   

Liability

     -        (11     (37,176     -        -        -        -   

Foreign Currency Hedges

     -        -        -        -        -        -        -   

Net Total

     -        (11     1,415       -        -        -        -   

SGD Functional :

                

Assets

     578       105,473       83,685       -        -        -        -   

Liability

     (3,176     (100,050     (35,157     -        -        -        -   

Foreign Currency Hedges

     2,319       (7,000     (48,221     -        -        -        -   

Net Total

     (279     (1,577     307       -        -        -        -   

SEK Functional :

                

Assets

     -        -        2,174       -        -        -        -   

Liability

     -        (12     (359     -        -        -        -   

Foreign Currency Hedges

     -        -        -        -        -        -        -   

Net Total

     -        (12     1,815       -        -        -        -   

MYR Functional:

                

Assets

     -        1,987       64       -        -        -        -   

Liability

     (69     (96     -        -        -        -        -   

Foreign Currency Hedges

     -        -        -        -        -        -        -   

Net Total

     (69     1,891       64       -        -        -        -   

 

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PART I – FINANCIAL INFORMATION    Item 3

 

RESMED INC. AND SUBSIDIARIES

Quantitative and Qualitative Disclosures About Market Risk

 

The table below provides information about our foreign currency derivative financial instruments and presents the information in U.S. dollar equivalents. The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options held at March 31, 2014. The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our foreign currency derivative financial instruments. These notional amounts generally are used to calculate payments to be exchanged under the options contracts.

 

(In thousands except exchange rates)                            Fair Value Assets /
(Liabilities)
Foreign Exchange Contracts    Year 1    Year 2    Year 3    Total    March 31, 2014   June 30, 2013

Receive AUD/Pay USD

                        

Contract amount

   170,000    10,000    -    180,000    5,728   (822)

Ave. contractual exchange rate

   AUD 1 = USD 0.8967    AUD 1 = USD 1.0500         AUD 1 = USD 0.9040         

Receive AUD/Pay Euro

                        

Contract amount

   48,000    124,000    41,000    213,000    (11,434)   (6,985)

Ave. contractual exchange rate

   AUD 1 = Euro 0.6987    AUD 1 = Euro 0.8120    AUD 1 = Euro 0.7362    AUD 1 = Euro 0. 7686         

Receive SGD/Pay Euro

                        

Contract amount

   48,000    -    -    48,000    74   501

Ave. contractual exchange rate

   SGD 1 = Euro 0.5763              SGD 1 = Euro 0.5763         

Receive AUD/Pay SGD

                        

Contract amount

   2,000    -    -    2,000    63   (193)

Ave. contractual exchange rate

   SGD 1 = AUD 0.8812              SGD 1 = AUD 0.8812         

Receive USD/Pay SGD

                        

Contract amount

   7,000    -    -    7,000    27   284

Ave. contractual exchange rate

   SGD 1 = USD 0.7921              SGD 1 = USD 0.7921         

Receive GBP/Pay AUD

                        

Contract amount

   3,000    -    -    3,000    (85)   -

Ave. contractual exchange rate

   AUD 1 = GBP 0.5398              AUD 1 = GBP 0.5398         

Receive AUD/Pay MYR

                        

Contract amount

   3,000    -    -    3,000    44   -

Ave. contractual exchange rate

   AUD 1 = MYR 2.9860              AUD 1 = MYR 2.9860         

Receive USD/Pay CAD

                        

Contract amount

   8,000    -    -    8,000    285   215

Ave. contractual exchange rate

   USD 1 = CAD 1.0701              USD 1 = CAD 1.0701         

Interest Rate Risk

We are exposed to risk associated with changes in interest rates affecting the return on our cash and cash equivalents and debt. At March 31, 2014, we held cash and cash equivalents of $938.6 million, principally comprised of bank term deposits and at-call accounts, and they are invested at short-term fixed interest rates and variable interest rates. At March 31, 2014, we had total long-term debt, including the current portion of those obligations, of $395.8 million, of which $395.0 million is subject to variable interest rates. A hypothetical 10% change in interest rates during the three months ended March 31, 2014, would not have had a material impact on pretax income. We have no interest rate hedging agreements.

 

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PART I – FINANCIAL INFORMATION    Item 4

 

RESMED INC. AND SUBSIDIARIES

 

Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2014.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

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Table of Contents
PART II – OTHER INFORMATION    Item 1-6

 

RESMED INC. AND SUBSIDIARIES

 

Item 1 Legal Proceedings

The information required by this Item is incorporated herein by reference to Note 12, “Legal Actions and Contingencies”, to the unaudited condensed consolidated financial statements under Part I, Item 1 of this report.

 

Item 1A Risk Factors

The discussion of our business and operations should be read together with the risk factors contained in our annual report on Form 10-K for the fiscal year ended June 30, 2013, which was filed with the SEC and describes the various risks and uncertainties to which we are or may become subject. At March 31, 2014, there have been no material changes to the risk factors set forth in our annual report on Form 10-K for the year ended June 30, 2013.

 

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of equity securities. The following table summarizes purchases by us of our common stock during the nine months ended March 31, 2014:

 

Period    Total Number
of Shares
Purchased
     Average Price
Paid per Share
     Total Number of Shares
Purchased as Part  of
Publicly Announced
Programs (1)
     Maximum Number of Shares
that May Yet Be Purchased
Under the Program(1)
 

July 2013

     0       $ 0.00         32,026,013         4,549,168   

August 2013

     356,492         48.88         32,382,505         4,192,676   

September 2013

     75,203         48.34         32,457,708         4,117,473   

October 2013

     33,305         49.62         32,491,013         4,084,168   

November 2013

     476,060         50.20         32,967,073         3,608,108   

December 2013

     1,033,940         46.90         34,001,013         2,574,168   

January 2014

     265,000         43.91         34,266,013         2,309,168   

February - February 21, 2014

     450,000         44.40         34,716,013         1,859,168   

New Program Authorization (1)

                                20,000,000   

February 22 - February 28, 2014

     324,534         44.48         35,040,547         19,675,466   

March 2014

     600,466         44.11         35,641,013         19,075,000   

Total

     3,615,000         46.37         35,641,013         19,075,000   

 

(1)

On February 21, 2014, our board of directors approved a new share repurchase program, authorizing us to acquire up to an aggregate of 20 million shares of our common stock. The program allows us to repurchase shares of our common stock from time to time for cash in the open market, or in negotiated or block transactions, as market and business conditions warrant and subject to applicable legal requirements. This program canceled and replaced our previous share repurchase program authorized on August 24, 2011, under which we had repurchased 18.1 million shares. The 20 million shares the new program authorizes us to purchase are in addition to the shares we repurchased on or before February 21, 2014 under our previous programs. There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors. All share repurchases after February 21, 2014 have been executed under this program. Since the inception of the share buyback programs, we have repurchased 35.6 million shares at a total cost of $1.3 billion.

 

Item 3 Defaults Upon Senior Securities

None

 

Item 4 Mine Safety Disclosures

None

 

Item 5 Other Information

None

 

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Table of Contents
PART II – OTHER INFORMATION    Item 1-6

 

RESMED INC. AND SUBSIDIARIES

 

Item 6 Exhibits

Exhibits (numbered in accordance with Item 601 of Regulation S-K)

 

3.1   

First Restated Certificate of Incorporation of ResMed Inc., as amended. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2013)

3.2   

Fifth Amended and Restated Bylaws of ResMed Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K/A filed on September 17, 2012)

31.1   

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2   

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32   

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101   

The following financial statements from ResMed Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed on April 30, 2014, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, (v) the Notes to the Condensed Consolidated Financial Statements.

 

29


Table of Contents
PART II – OTHER INFORMATION    Signatures

 

RESMED INC. AND SUBSIDIARIES

 

Signatures

We have authorized the persons whose signatures appear below to sign this report on our behalf, in accordance with the Securities Exchange Act of 1934.

April 30, 2014

ResMed Inc.

 

/s/ MICHAEL J. FARRELL

Michael J. Farrell
Chief executive officer
(Principal Executive Officer)

 

/s/ BRETT A. SANDERCOCK

Brett A. Sandercock
Chief financial officer
(Principal Financial Officer)

 

30