Form: 8-K

Current report filing

July 30, 2015

Documents

Exhibit 99.1

 

LOGO

ResMed Inc. Announces Results for the Fourth Quarter and Fiscal Year 2015

Revenue increased 9% to $453 million; up 17% on a constant currency basis

GAAP diluted earnings per share of $0.61, or non-GAAP earnings per share of $0.68

Operating cash flow of $99.6 million

Company repurchased 941,000 shares in the fourth quarter

Quarterly dividend increased by 7% to $0.30 per share

San Diego, July 30, 2015 – ResMed Inc. (NYSE: RMD) today announced results for its quarter ended June 30, 2015. Revenue for the quarter was $453.1 million, a 9 percent increase compared with the quarter ended June 30, 2014 (a 17 percent increase on a constant currency basis). Net income was $87.5 million, consistent with the quarter ended June 30, 2014. Diluted earnings per share for the quarter were $0.61, consistent with the quarter ended June 30, 2014.

The results for the quarter ended June 30, 2015 were impacted by two non-recurring items: first, expenses of $5.0 million ($3.5 million, net of tax) associated with the field safety notice in response to results of the SERVE-HF clinical trial and second, donations of $6.0 million ($3.8 million, net of tax), which were comprised of a $5.0 million donation to the University of California—San Diego to fund a center of excellence and endowed chair in the field of pulmonary and critical care medicine and an incremental donation of $1.0 million to the ResMed Foundation. Non-GAAP net income for the quarter ended June 30, 2015 was $96.4 million, a 3 percent increase compared with the quarter ended June 30, 2014 (non-GAAP measures exclude the impact of expenses associated with the SERVE-HF field safety notice, donations and amortization of acquired intangibles in the current quarter and the restructuring expenses and amortization of acquired intangibles in the prior year quarter). Non-GAAP diluted earnings per share for the quarter were $0.68, a 3 percent increase compared with the quarter ended June 30, 2014.

“We finished the year with strong double-digit constant currency revenue growth and greater than 50 percent flow generator growth in the Americas during the fourth quarter. As expected, we have also achieved a solid return to growth in our mask business. We have continued our active share repurchase program and the board has also declared an increase in our dividend,” said Mick Farrell, ResMed’s chief executive officer. “This quarter we grew our healthcare informatics capability with the acquisition of CareTouch and earlier today, we announced the acquisition of Curative Medical, an investment in China that will provide a complementary brand with a robust respiratory care and sleep apnea product portfolio. We will continue to invest in R&D and manufacturing for the Curative brand in China as we grow our new ResMed-Curative business.” Farrell concluded, “Our global team ended fiscal year 2015 with a strong $1.7 billion in revenues as we continue to drive towards our goal of changing 20 million lives by 2020 with innovative products and solutions that improve patient outcomes, reduce the impact of chronic disease and lower healthcare costs.”

Analysis of fourth quarter results

In the fourth quarter of fiscal year 2015, revenue in the Americas was $273.7 million, a 27 percent increase over the prior year’s quarter. Revenue in combined Europe and Asia Pacific was $179.4 million, a 10 percent decrease compared with the quarter ended June 30, 2014 (a 5 percent increase on a constant currency basis).

Including one-off expenses of $5.0 million in relation to the SERVE-HF field safety notice, gross margin in the fourth quarter was 57.3 percent. Excluding these one-off expenses, the gross margin for Q4 FY15 was 58.4%, lower than the prior year’s quarter, mainly due to an unfavorable impact from foreign exchange rate movements, an unfavorable geographic mix, declines in average selling prices and an unfavorable product mix.

Selling, general and administrative expenses were $123.2 million for the fourth quarter of fiscal year 2015, a 1 percent increase (a 12 percent increase on a constant currency basis) over the quarter ended June 30, 2014. SG&A expenses improved to 27.2 percent of revenue in the quarter, compared with 29.4 percent in the quarter ended June 30, 2014.

Research and development expenses were $28.5 million for the fourth quarter of fiscal year 2015, or 6.3 percent of revenue. R&D expenses decreased by 10 percent (a 5 percent increase on a constant currency basis) compared with the quarter ended June 30, 2014.

Amortization of acquired intangible assets was $2.1 million during the quarter. Stock-based compensation costs incurred during the quarter of $13.1 million consisted of expenses associated with employee equity grants, and the company’s employee stock purchase plan.

Operating profit for the quarter was $99.5 million and cash flow from operations was $99.6 million.

Fiscal year 2015 results

Revenue for the year ended June 30, 2015 was $1.7 billion, an 8 percent increase compared with the year ended June 30, 2014 (a 13 percent increase on a constant currency basis). Net income was $352.9 million, a 2% increase compared with the year ended June 30, 2014. Diluted earnings per share for the year were $2.47, a 3% increase compared with the year ended June 30, 2014. Non-GAAP earnings per share for the year were $2.57, a 4% increase compared with the year ended June 30, 2014.

Share repurchase program

During the quarter, the company repurchased 941,000 shares at a cost of $55.9 million, as part of its ongoing capital management program.

Dividend program

The ResMed board of directors today declared a quarterly dividend of $0.30 per share, an increase of 7 percent from the previous dividend. The dividend will have a record date of August 20, 2015, payable on September 17, 2015. The dividend will be paid in U.S. currency to holders of ResMed’s common stock trading on the New York Stock Exchange. Holders of Chess Depositary Instruments trading on the Australian Securities Exchange will receive an equivalent amount in Australian currency, based on the exchange rate on the record date, and reflecting the 10:1 ratio between CDIs and NYSE shares. The ex-dividend date will be August 18, 2015 for common stock holders and for CDI holders. ResMed has received a waiver from the ASX’s settlement operating rules, which will allow ResMed to defer processing conversions between its common stock and CDI registers from August 18, 2015 through August 20, 2015, inclusive.

Webcast details

ResMed will discuss its financial and business results and outlook on its webcast at 1:30 p.m. U.S. Pacific Standard Time today. The live webcast of the call can be accessed on ResMed’s Investor Relations website at investors.resmed.com. Please go to this section of the website and click on the icon for the “Q4 2015 earnings webcast” to register and listen to the live webcast. The online archive of the broadcast will be available on ResMed’s website after the live call. In addition, a telephone replay of the conference call will be available approximately two hours after the call by dialing 855-859-2056 (U.S.) and +1 404-537-3406 (international) and entering a passcode of 77902512. The telephone replay will be available until August 13, 2015.

About ResMed

The global team at ResMed (NYSE:RMD) is united in the commitment to change millions of lives with every breath. With more than 4,000 employees and a presence in over 100 countries, the company has been pioneering new and innovative devices and treatments for sleep-disordered breathing, chronic obstructive pulmonary disease, and other chronic diseases for more than 25 years. ResMed’s world-leading products and innovative solutions improve the quality of life for millions of patients worldwide, reduce the impact of chronic disease, and save healthcare costs. For more information about ResMed and its businesses, visit www.resmed.com or follow @resmed on Twitter.

Safe harbor statement

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 ResMed’s projections of future revenue or earnings, expenses, new product development, new product launches and new markets for its 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. Additional risks and uncertainties are discussed in ResMed’s periodic reports on file with the U.S. Securities & Exchange Commission. ResMed does not undertake to update its forward-looking statements.

Investors:

Agnes Lee

Senior Director, Investor Relations

(858) 836-5971

investorrelations@resmed.com

News Media:

Alison Graves

Director, Global Corporate Communications

(858) 836-6789

news@resmed.com

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RESMED INC AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

    

Three Months Ended

June 30,

     

Twelve Months Ended

June 30,

  
     2015     2014      2015      2014  

Net revenue

    $ 453,064      $ 415,211       $ 1,678,912       $ 1,554,973   

Cost of sales

      188,605        153,953         662,487         565,187   

SERVE-HF field safety notice expenses(1)

      5,029        —           5,029         —     
  

 

 

    

 

 

     

 

 

     

 

 

  

Gross profit

   259,430      261,258      1,011,396      989,786   
  

 

 

    

 

 

     

 

 

     

 

 

  

Operating expenses:

Selling, general and administrative

   123,250      122,242      472,627      450,414   

Research and development

   28,523      31,796      114,865      118,226   

Restructuring expenses(1)

   —        6,326      —        6,326   

Donations(1)

   6,000      —        6,000      —     

Amortization of acquired intangible assets

   2,110      2,408      8,668      9,733   
  

 

 

    

 

 

     

 

 

     

 

 

  

Total operating expenses

   159,883      162,772      602,160      584,699   
  

 

 

    

 

 

     

 

 

     

 

 

  

Income from operations(1)

   99,547      98,486      409,236      405,087   
  

 

 

    

 

 

     

 

 

     

 

 

  

Other income (expenses), net:

Interest income (expense), net

   4,666      5,925      20,430      25,107   

Other, net

   (97 )    2,224      6,250      884   
  

 

 

    

 

 

     

 

 

     

 

 

  

Total other income (expenses), net

   4,569      8,149      26,680      25,991   
  

 

 

    

 

 

     

 

 

     

 

 

  

Income before income taxes

   104,116      106,635      435,916      431,078   

Income taxes

   16,654      18,897      83,030      85,805   
  

 

 

    

 

 

     

 

 

     

 

 

  

Net income(1)

 $ 87,462    $ 87,738    $ 352,886    $ 345,273   
  

 

 

    

 

 

     

 

 

     

 

 

  

Basic earnings per share

 $ 0.62    $ 0.62    $ 2.51    $ 2.44   

Diluted earnings per share(1)

 $ 0.61    $ 0.61    $ 2.47    $ 2.39   

Non-GAAP diluted earnings per share, excluding the impact of SERVE-HF field safety notice expenses, donations, restructuring expenses and amortization of acquired intangible assets(1)

 $ 0.68    $ 0.66    $ 2.57    $ 2.47   

Basic shares outstanding

   140,819      140,537      140,468      141,474   

Diluted shares outstanding

   142,702      143,086      142,687      144,359   
  

 

 

    

 

 

     

 

 

     

 

 

  

 

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

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RESMED INC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited - In thousands)

 

     June 30,
2015 		    June 30,
2014 		 

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 717,249      $ 905,730   

Accounts receivable, net

      362,568        359,593   

Inventories

      246,859        165,418   

Prepayments, deferred income taxes and other current assets

      117,506        125,468   
  

 

 

    

 

 

  

Total current assets

   1,444,182      1,556,209   
  

 

 

    

 

 

  

Property, plant and equipment, net

   387,758      434,277   

Goodwill and other intangible assets, net

   311,403      334,510   

Deferred income taxes and other non-current assets

   40,917      35,966   
  

 

 

    

 

 

  

Total non-current assets

   740,078      804,753   
  

 

 

    

 

 

  

Total assets

 $ 2,184,260    $ 2,360,962   
  

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

 $ 81,112    $ 85,405   

Accrued expenses

   132,976      130,656   

Deferred revenue

   36,097      42,370   

Income taxes payable

   16,278      10,392   

Deferred income taxes

   796      717   

Current portion of long-term debt

   0      18   
  

 

 

    

 

 

  

Total current liabilities

   267,259      269,558   
  

 

 

    

 

 

  

Non-current liabilities:

Deferred income taxes

   8,062      10,716   

Deferred revenue

   19,284      16,352   

Income taxes payable

   1,754      5,318   

Non-current portion of long-term debt

   300,594      300,770   
  

 

 

    

 

 

  

Total non-current liabilities

   329,694      333,156   
  

 

 

    

 

 

  

Total liabilities

   596,953      602,714   
  

 

 

    

 

 

  

STOCKHOLDERS’ EQUITY:

Common stock

   562      561   

Additional paid-in capital

   1,228,795      1,117,644   

Retained earnings

   1,976,020      1,780,396   

Treasury stock

   (1,444,554 )    (1,291,910 ) 

Accumulated other comprehensive income

   (173,516 )    151,557   
  

 

 

    

 

 

  

Total stockholders’ equity

 $ 1,587,307    $ 1,758,248   
  

 

 

    

 

 

  

Total liabilities and stockholders’ equity

 $ 2,184,260    $ 2,360,962   
  

 

 

    

 

 

  

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RESMED INC AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited - In thousands)

 

     Year Ended
June 30,
2015 		    Year Ended
June 30,
2014 		 

Cash flows from operating activities:

     

Net income

    $ 352,886      $ 345,273   

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

     

Depreciation and amortization

      73,056        73,454   

Changes in fair value of business combination contingent consideration

      (132 )      (6,283 ) 

Gain on disposal of business

      (709 )      —     

Stock-based compensation costs

      47,855        43,457   

Excess tax benefit from stock-based compensation arrangements

      (24,959 )      (16,335 ) 

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

     

Accounts receivable, net

      (28,259 )      (35,108 ) 

Inventories, net

      (99,524 )      (15,851 ) 

Prepaid expenses, net deferred income taxes and other current assets

      (22,849 )      5,814   

Accounts payable, accrued expenses and other liabilities

      85,815        (3,153 ) 
  

 

 

    

 

 

  

Net cash provided by operating activities

   383,180      391,268   
  

 

 

    

 

 

  

Cash flows from investing activities:

Purchases of property, plant and equipment

   (62,502 )    (72,722 ) 

Patent registration costs

   (9,442 )    (8,434 ) 

Business acquisitions, net of cash acquired

   (29,407 )    (3,852 ) 

Investments in cost-method investments

   (10,750 )    (10,850 ) 

Proceeds from sale of business

   937      —     

Purchases of foreign currency contracts

   (700 )    (1,477 ) 

(Payments) / Proceeds on maturity of foreign currency contracts

   (31,207 )    2,348   
  

 

 

    

 

 

  

Net cash used in investing activities

   (143,071 )    (94,987 ) 
  

 

 

    

 

 

  

Cash flows from financing activities:

Proceeds from issuance of common stock, net

   38,806      33,354   

Excess tax benefit from stock-based compensation arrangements

   24,959      16,335   

Purchases of treasury stock

   (160,300 )    (202,169 ) 

Payment of business combination contingent consideration

   (458 )    (1,117 ) 

Proceeds from borrowings, net of borrowing costs

   160,000      557,834   

Repayment of borrowings

   (161,536 )    (560,035 ) 

Dividends paid

   (157,262 )    (141,518 ) 
  

 

 

    

 

 

  

Net cash (used in) / provided by financing activities

   (255,791 )    (297,316 ) 
  

 

 

    

 

 

  

Effect of exchange rate changes on cash

   (172,799 )    30,717   
  

 

 

    

 

 

  

Net increase / (decrease) in cash and cash equivalents

   (188,481 )    29,682   

Cash and cash equivalents at beginning of period

   905,730      876,048   
  

 

 

    

 

 

  

Cash and cash equivalents at end of period

   717,249      905,730   
  

 

 

    

 

 

  

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Reconciliation of Non-GAAP Financial Measures (Unaudited)

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

The measure, “non-GAAP operating income” is reconciled with GAAP income from operations below:

 

    

Three Months Ended

June 30,

     

Twelve Months Ended

June 30,

  
     2015      2014      2015      2014  

GAAP income from operations

      99,547         98,486         409,236         405,087   

SERVE-HF field safety notice expenses

      5,029         —           5,029         —     

Donations

      6,000         —           6,000         —     

Restructuring expenses

      —           6,326         —           6,326   

Amortization of acquired intangible assets (A)

      2,110         2,408         8,668         9,733   
  

 

 

     

 

 

     

 

 

     

 

 

  

Non-GAAP operating income (excluding the impact of SERVE-HF field safety notice expenses, donations, restructuring expenses and amortization of acquired intangible assets)

   112,686      107,220      428,933      421,146   
  

 

 

     

 

 

     

 

 

     

 

 

  

The measures “non-GAAP net income” and “non-GAAP diluted earnings per share” are reconciled with GAAP net income and GAAP diluted earnings per share in the table below:

 

    

Three Months Ended

June 30,

     

Twelve Months Ended

June 30,

  
     2015      2014      2015      2014  

GAAP net income

      87,462         87,738         352,886         345,273   

SERVE-HF field safety notice expenses, net of tax (A)

      3,521         —           3,521         —     

Donations, net of tax (A)

      3,796         —           3,796         —     

Restructuring expenses, net of tax (A)

      —           4,222         —           4,222   

Amortization of acquired intangible assets, net of tax (A)

      1,600         1,843         6,551         7,406   
  

 

 

     

 

 

     

 

 

     

 

 

  

Non-GAAP net income (A)

  96,379      93,803      366,754      356,901   
  

 

 

     

 

 

     

 

 

     

 

 

  

Diluted shares outstanding

   142,702      143,086      142,687      144,359   
  

 

 

     

 

 

     

 

 

     

 

 

  

GAAP diluted earnings per share

 $ 0.61    $ 0.61    $ 2.47    $ 2.39   
  

 

 

     

 

 

     

 

 

     

 

 

  

Non-GAAP diluted earnings per share (A)

$ 0.68    $ 0.66    $ 2.57    $ 2.47   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(A)  ResMed excludes SERVE-HF field safety notice expenses, donations, restructuring expenses and amortization of acquired intangible assets from their evaluation of ongoing operations and believes investors benefit from excluding these charges to facilitate a more meaningful evaluation of current operating performance.

 

     ResMed believes that diluted earnings per share, which exclude the impact of SERVE-HF field safety notice expenses, donations, restructuring expenses and the amortization of acquired intangible assets, is an additional measure of performance investors can use to compare operating results between reporting periods.

 

     ResMed uses non-GAAP information internally in planning, forecasting, and evaluating the results of operations in the current period and in comparing it to past periods. ResMed believes this information provides investors better insight in evaluating ResMed’s performance from core operations and provides consistent financial reporting. Our use of non-GAAP measures 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.

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