January 23, 2017 - EX-99.1 - 8-K: Current report filing

Exhibit 99.1

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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, ResMeds chief executive officer. We continue to pioneer game-changing products and create value with our solutions. This quarter we announced: FDA clearance for the worlds 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 years 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 years 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 ResMeds 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 ASXs 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 ResMeds 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 ResMeds 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 worlds 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 ResMeds 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 ResMeds 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 (UnauditedIn 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 (UnauditedIn 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 ResMeds 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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Form: 8-K

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