Form: 8-K

Current report filing

January 23, 2017

Exhibit 99.1

 

LOGO

 

Contacts:   

For Investors

Agnes Lee

O: 858-836-5971

investorrelations@resmed.com

  

For News Media

Alison Graves

O: 858-836-6789

news@resmed.com

ResMed Inc. Announces Results for the Second Quarter of Fiscal Year 2017

Revenue increased 17% to $530.4 million; up 18% on a constant currency basis

GAAP diluted earnings per share of $0.54; non-GAAP diluted earnings per share of $0.73

Operating cash flow of $119.9 million in the second quarter

SAN DIEGO, January 23, 2017 – ResMed Inc. (NYSE: RMD) today announced results for its quarter ended December 31, 2016. Revenue for the quarter was $530.4 million, a 17 percent increase compared to the same period of the prior year. Excluding the contribution from the Brightree business acquired in April 2016, revenue for the quarter was $496.6 million, a 9 percent increase.

“We had a strong quarter with 18 percent constant currency revenue growth led by solid growth in our Brightree software offerings and global device sales,” said Mick Farrell, ResMed’s chief executive officer. “We continue to pioneer game-changing products and create value with our solutions. This quarter we announced: FDA clearance for the world’s smallest travel CPAP; the creation of SleepScore Labs to focus on consumer sleep wellness; reaching the milestone of one billion nights of sleep data; and new research demonstrating that the use of myAir™ significantly improves patient adherence to sleep therapy in Europe.”

Farrell concluded, “We are focused on our goal of changing the lives of 20 million patients by 2020 and we continue to lead the industry through an exciting pipeline of new products and connected care solutions that improve patient outcomes, create efficiencies for our homecare customers, and help physicians and providers better manage chronic disease and lower healthcare costs.”

Analysis of second quarter results

Second quarter revenue in the Americas was $326.8 million, a 21 percent increase over the same period of the prior year. This included Brightree revenue of $33.8 million. Excluding Brightree, revenue in the Americas was $293.0 million, a 9 percent increase over the prior year. Revenue in combined EMEA and APAC was $203.6 million, an increase of 13 percent on a constant currency basis, compared to the same period of the prior year.


Gross margin in the second quarter was 58.3 percent, higher than the prior year’s quarter gross margin of 58.1 percent, excluding the prior year release of $2.4 million in accrued expenses associated with the SERVE-HF field safety notice. The improvement in gross margin compared to prior year’s quarter was due to manufacturing and procurement efficiencies and an incremental contribution from the Brightree acquisition, partly offset by changes in product mix and declines in average selling prices.

Income from operations for the quarter was $96.9 million, a 10 percent decline compared with the quarter ended December 31, 2015. Non-GAAP income from operations for the quarter was $131.6 million, a 13 percent increase compared to the same period of the prior year.

Selling, general and administrative expenses were $139.3 million, an 18 percent increase over the same period in the prior year, also an 18 percent increase on a constant currency basis. SG&A expenses increased to 26.3 percent of revenue in the quarter, compared with 26.0 percent reported in the quarter ended December 31, 2015.

Research and development expenses were $38.2 million, or 7.2 percent of revenue. R&D expenses increased by 32 percent compared with the same period last year, or a 28 percent increase on a constant currency basis.

Amortization of acquired intangible assets was $11.7 million during the quarter, an increase of $7.3 million compared with the same period last year. The increase in amortization of acquired intangible assets was primarily due to the amortization expense associated with the Brightree and Inova acquisitions. Stock-based compensation costs incurred during the quarter of $10.8 million consisted of expenses associated with employee equity grants, and our employee stock purchase plan.

Net income for the quarter was $76.7 million, a 20 percent decrease compared to the same period of the prior year. Non-GAAP net income was $103.3 million, a 1 percent increase compared to the prior year.

Non-GAAP measures adjust for amortization of acquired intangibles, litigation settlement expenses, acquisition related expenses associated with additional contingent consideration on recent acquisitions and restructuring expenses.

GAAP diluted earnings per share for the quarter decreased 21 percent to $0.54. Non-GAAP diluted earnings per share of $0.73 were consistent with the same period of the prior year.

Cash flow from operations for the quarter was $119.9 million compared to net income in the current quarter of $76.7 million.

Dividend program

The ResMed board of directors today declared a quarterly cash dividend of $0.33 per share. The dividend will have a record date of February 9, 2017, payable on March 16, 2017. 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 February 8, 2017 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 February 7, 2017 through February 9, 2017 inclusive.

Webcast details

ResMed will discuss its financial and business results and outlook on its webcast at 1:30 p.m. U.S. Pacific Time today. The live webcast of the call can be accessed on ResMed’s Investor Relations website at investor.resmed.com. Please go to this section of the website and click on the icon for the “Q2 2017 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 40778584. The telephone replay will be available until February 6, 2017.

About ResMed

ResMed (NYSE:RMD) changes lives with award-winning medical devices and cutting-edge cloud-based software applications that better diagnose, treat and manage sleep apnea, chronic obstructive pulmonary disease (COPD) and other chronic diseases. ResMed is a global leader in connected care, with more than 2 million patients remotely monitored every day. Our 5,000-strong team is committed to creating the world’s best tech-driven medical device company – improving quality of life, reducing the impact of chronic disease, and saving healthcare costs in more than 100 countries.

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 and the integration of acquisitions – 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.

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RESMED INC AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

 

    

Three Months Ended

December 31,

   

Six Months Ended

December 31,

 
     2016     2015     2016     2015  

Net revenue

   $ 530,397      $ 454,540      $ 995,846      $ 866,187   

Cost of sales

     221,326        190,433        412,522        363,461   

Astral field safety notification expenses (1)

     —          —          5,070        —     

SERVE-HF accrual release (1)

     —          (2,402     —          (2,402
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     309,071        266,509        578,254        505,128   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling, general and administrative

     139,307        118,219        268,158        229,314   

Research and development

     38,190        28,970        72,637        56,162   

Restructuring expenses (1)

     4,413        6,914        4,413        6,914   

Litigation settlement expenses (1)

     8,500        —          8,500        —     

Acquisition related expenses (1)

     10,076        —          10,076        —     

Amortization of acquired intangible assets (1)

     11,690        4,429        23,431        6,736   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     212,176        158,532        387,215        299,126   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations (1)

     96,895        107,977        191,039        206,002   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expenses), net:

        

Interest income (expense), net

     (2,437     2,476        (4,929     5,898   

Other, net

     1,749        3,242        3,021        1,239   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses), net

     (688     5,718        (1,908     7,137   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     96,207        113,695        189,131        213,139   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income taxes excluding ASU 2016-09 (2)

     19,439        23,178        38,735        42,220   

Income taxes relating to ASU 2016-09 (2)

     25        (5,059     (2,453     (7,574
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income taxes

     19,464        18,119        36,282        34,646   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (1)

   $ 76,743      $ 95,576      $ 152,849      $ 178,493   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.54      $ 0.68      $ 1.08      $ 1.27   

Diluted earnings per share

   $ 0.54      $ 0.68      $ 1.08      $ 1.26   

Non-GAAP diluted earnings per share (1)

   $ 0.73      $ 0.73      $ 1.34      $ 1.32   

Basic shares outstanding

     141,310        139,926        141,048        140,118   

Diluted shares outstanding

     142,097        141,423        141,982        141,837   

 

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

 

(2) As a result of the adoption of ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting” during the quarter ended June 30, 2016 we now recognize an income tax impact relating to share-based payment transactions. The income taxes for the three and six months ended December 31, 2015 have been restated to reflect the adoption of the standard as the benefit was previously recorded as a reduction to Additional Capital.

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RESMED INC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited—In thousands)

 

     December 31,
2016
    June 30,
2016
 

ASSETS:

    

Current assets:

    

Cash and cash equivalents

   $ 788,146      $ 731,434   

Accounts receivable, net

     383,992        382,086   

Inventories

     253,108        224,456   

Prepayments and other current assets

     95,028        81,743   
  

 

 

   

 

 

 

Total current assets

     1,520,274        1,419,719   
  

 

 

   

 

 

 

Property, plant and equipment, net

     375,928        384,276   

Goodwill

     1,046,304        1,059,245   

Other intangibles, net

     275,422        299,808   

Deferred income taxes and other non-current assets

     104,642        93,657   
  

 

 

   

 

 

 

Total non-current assets

     1,802,296        1,836,986   
  

 

 

   

 

 

 

Total assets

   $ 3,322,570      $ 3,256,705   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

    

Current liabilities:

    

Accounts payable

   $ 94,100      $ 92,571   

Accrued expenses

     216,225        156,805   

Deferred revenue

     46,389        50,009   

Income taxes payable

     25,869        39,166   

Short-term debt

     299,812        299,438   
  

 

 

   

 

 

 

Total current liabilities

     682,395        637,989   
  

 

 

   

 

 

 

Non-current liabilities:

    

Deferred income taxes

     13,789        9,061   

Deferred revenue

     46,682        40,281   

Other long term liabilities

     864        1,211   

Long-term debt

     868,690        873,332   
  

 

 

   

 

 

 

Total non-current liabilities

     930,025        923,885   
  

 

 

   

 

 

 

Total liabilities

     1,612,420        1,561,874   
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY:

    

Common stock

     566        563   

Additional paid-in capital

     1,335,895        1,303,238   

Retained earnings

     2,220,283        2,160,299   

Treasury stock

     (1,546,611     (1,546,611

Accumulated other comprehensive income

     (299,983     (222,658
  

 

 

   

 

 

 

Total stockholders’ equity

   $ 1,710,150      $ 1,694,831   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,322,570      $ 3,256,705   
  

 

 

   

 

 

 

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RESMED INC AND SUBSIDIARIES

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

 

    

Six Months Ended

December 31,

 
     2016     2015  

Cash flows from operating activities:

    

Net income

   $ 152,849      $ 178,493   

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

    

Depreciation and amortization

     55,504        39,920   

Impairment of long-lived asset

     —          2,815   

Stock-based compensation costs

     22,802        23,841   

Changes in fair value of business combination contingent consideration

     10,076        —     

Impairment of cost-method investments

     206        750   

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

    

Accounts receivable, net

     (7,080     24,533   

Inventories, net

     (36,104     8,751   

Prepaid expenses, net deferred income taxes and other current assets

     (15,197     14,398   

Accounts payable, accrued expenses and other

     23,086        (13,279
  

 

 

   

 

 

 

Net cash provided by operating activities

     206,142        280,222   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (29,247     (30,934

Patent registration costs

     (4,603     (4,902

Business acquisitions, net of cash acquired

     (3,184     (152,118

Investments in cost-method investments

     (3,867     (7,582

Proceeds / (Payments) on maturity of foreign currency contracts

     8,209        (28,326
  

 

 

   

 

 

 

Net cash used in investing activities

     (32,692     (223,862
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock, net

     9,816        8,066   

Purchases of treasury stock

     —          (102,058

Payment of business combination contingent consideration

     —          (1,120

Proceeds from borrowings, net of borrowing costs

     75,000        200,000   

Repayment of borrowings

     (80,000     (100,160

Dividends paid

     (92,865     (84,054
  

 

 

   

 

 

 

Net cash (used in) / provided by financing activities

     (88,049     (79,326
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (28,689     (35,479
  

 

 

   

 

 

 

Net increase / (decrease) in cash and cash equivalents

     56,712        (58,445

Cash and cash equivalents at beginning of period

     731,434        717,249   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 788,146      $ 658,804   
  

 

 

   

 

 

 

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Reconciliation of Non-GAAP Financial Measures (Unaudited)

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

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

 

    

Three Months Ended

December 31

    

Six Months Ended

December 31,

 
     2016      2015      2016      2015  

GAAP income from operations

   $ 96,895       $ 107,977       $ 191,039       $ 206,002   

SERVE-HF accrual release (A)

     —           (2,402      —           (2,402

Astral battery field safety notification expenses (A)

     —           —           5,070         —     

Restructuring expenses (A)

     4,413         6,914         4,413         6,914   

Litigation settlement expenses (A)

     8,500         —           8,500         —     

Acquisition related expenses (A)

     10,076         —           10,076         —     

Amortization of acquired intangible assets (A)

     11,690         4,429         23,431         6,736   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP income from operations

   $ 131,574       $ 116,918       $ 242,529       $ 217,250   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

December 31,

    

Six Months Ended

December 31,

 
     2016      2015      2016      2015  

GAAP net income

   $ 76,743       $ 95,576       $ 152,849       $ 178,493   

SERVE-HF accrual release, net of tax (A)

     —           (1,682      —           (1,682

Astral battery field safety notification expenses (A)

     —           —           3,549         —     

Restructuring expenses, net of tax (A)

     3,085         5,204         3,085         5,204   

Litigation settlement expenses, net of tax (A)

     5,392         —           5,392         —     

Acquisition related expenses (A)

     10,076         —           10,076         —     

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

     7,968         3,439         15,975         5,156   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income (A)

   $ 103,264       $ 102,537       $ 190,926       $ 187,171   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     142,097         141,423         141,982         141,837   
  

 

 

    

 

 

    

 

 

    

 

 

 

GAAP diluted earnings per share

   $ 0.54       $ 0.68       $ 1.08       $ 1.26   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP diluted earnings per share (A)

   $ 0.73       $ 0.73       $ 1.34       $ 1.32   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(A)  ResMed adjusts for the impact of the Astral battery field safety notification expenses, release of SERVE-HF accrual, restructuring expenses, litigation settlement expenses, acquisition related expenses and amortization of acquired intangible assets from their evaluation of ongoing operations and believes investors benefit from adjusting these items to facilitate a more meaningful evaluation of current operating performance.

ResMed believes that non-GAAP diluted earnings per share 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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