Form: 8-K

Current report filing

August 1, 2017

Exhibit 99.1

 

LOGO

 

Contacts:         
For Investors       For News Media   
Agnes Lee       Alison Graves   
O: 858-836-5971       O: 858-836-6789   
investorrelations@resmed.com    news@resmed.com   

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

Revenue increased 7% to $556.7 million; up 8% on a constant currency basis

GAAP diluted earnings per share of $0.71; non-GAAP diluted earnings per share of $0.77

Operating cash flow of $140.3 million in the fourth quarter

Quarterly dividend increased by 6% to $0.35 per share

SAN DIEGO, August 1, 2017 – ResMed Inc. (NYSE: RMD) today announced results for its quarter ended June 30, 2017. Revenue for the quarter was $556.7 million, a 7 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 $520.5 million, a 6 percent increase.

“We finished the year with solid constant currency revenue growth, fuelled by sales of our devices, masks, and software-as-a-service revenue from Brightree,” said Mick Farrell, ResMed’s chief executive officer.

“During the quarter, we made two acquisitions to augment our Brightree solutions, we presented and published results from clinical studies in sleep and COPD, and we launched two new products: AirTouch - the softest CPAP mask from ResMed and AirMini - the world’s smallest CPAP.

Farrell concluded, “Our board of directors has declared a 6 percent increase in our dividend this quarter, reflecting confidence in our long-term outlook and 2020 strategy. We are positioned for another great year ahead, as we deliver products and solutions that improve patient outcomes, create efficiencies for our customers, lower overall healthcare system costs and deliver cash to our shareholders.”

Analysis of fourth quarter results

Fourth quarter revenue in the Americas was $350.2 million, an 8 percent increase over the same period of the prior year. This included Brightree revenue of $36.2 million. Excluding Brightree, revenue in the Americas was $314.0 million, a 6 percent increase over the prior year. Revenue in combined EMEA and APAC was $206.5 million, an increase of 9 percent on a constant currency basis, compared to the same period of the prior year.


Gross margin in the fourth quarter was 58.2 percent, higher than the prior year’s quarter gross margin of 58.1 percent. The improvement in gross margin compared to prior year’s quarter was due to manufacturing and procurement efficiencies partially offset by declines in average selling prices and changes in product mix.

Income from operations for the quarter was $127.4 million, a 7 percent increase compared with the quarter ended June 30, 2016. Non-GAAP income from operations for the quarter was $139.1 million, a 3 percent increase compared to the same period of the prior year.

Selling, general and administrative expenses were $147.9 million, a 10 percent increase over the same period in the prior year, also an 11 percent increase on a constant currency basis. SG&A expenses increased to 26.6 percent of revenue in the quarter, compared with 25.8 percent reported in the quarter ended June 30, 2016.    

Research and development expenses were $36.7 million, or 6.6 percent of revenue. R&D expenses increased by 7 percent compared with the same period last year, or a 6 percent increase on a constant currency basis.

Amortization of acquired intangible assets was $11.8 million during the quarter, a decrease of $0.9 million compared with the same period last year. Stock-based compensation costs incurred during the quarter of $11.7 million consisted of expenses associated with employee equity grants, and our employee stock purchase plan.

Net income for the quarter was $101.6 million, a 22 percent increase compared to the same period of the prior year. Non-GAAP net income was $109.6 million, a 5 percent increase compared to the prior year.

Non-GAAP measures adjust for amortization of acquired intangibles, the one-time deferred revenue fair value adjustment, the SERVE-HF accrual release and acquisition related expenses.

GAAP diluted earnings per share for the quarter increased 20 percent to $0.71. Non-GAAP diluted earnings per share of $0.77 were 4 percent higher compared with the same period of the prior year.

Cash flow from operations for the quarter was $140.3 million compared to net income in the current quarter of $101.6 million.

Analysis of fiscal year 2017 results

Revenue for the year increased 12 percent over the prior year to $2.1 billion, or a 13 percent increase on a constant currency basis.

Income from operations for the year was $425.8 million, a 1 percent decrease over the prior year. Non-GAAP income from operations for the year was $508.4 million, a 9 percent increase compared to the prior year.

Non-GAAP measures adjust for amortization of acquired intangibles, the Astral battery field safety notification expenses, restructuring expenses, litigation settlement expenses, acquisition related expenses, the one-time deferred revenue fair value adjustment and the SERVE-HF accrual release.

Net income for the year was $342.3 million, a 3 percent decrease over the prior year. Non-GAAP net income was $401.3 million, a 6 percent increase compared to the prior year.

GAAP diluted earnings per share decreased 4 percent to $2.40. Non-GAAP diluted earnings per share for the year was $2.82, a 5 percent increase compared with the prior year.


Cash flow from operations for the year was $414.1 million. During the year we paid $186.3 million in dividends and repaid $95.0 million of our outstanding debt.

Dividend program

The ResMed board of directors today declared a 6 percent increase in the quarterly cash dividend to $0.35 per share. The dividend will have a record date of August 17, 2017, payable on September 21, 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 August 16, 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 August 16, 2017 through August 17, 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 “Q4 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 800-585-8367 (U.S.) and +1 416-621-4642 (outside U.S.) and entering a passcode of 48372777. The telephone replay will be available until August 15, 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 3 million patients remotely monitored every day. Our 6,000-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 120 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   Twelve Months Ended
     June 30,   June 30,
     2017   2016   2017   2016
         

Net revenue

  $ 556,686     $ 518,647     $ 2,066,737     $ 1,838,713  

Cost of sales

    232,910       217,560       859,922       775,020  

Astral field safety notification expenses (1)

    -       -       5,070       -  

SERVE-HF accrual release (1)

    -       (402     -       (2,804

 

Gross profit

 

   

 

323,776

 

 

 

   

 

301,489

 

 

 

   

 

1,201,745

 

 

 

   

 

1,066,497

 

 

 

         

Operating expenses:

               

Selling, general and administrative

    147,940       133,929       553,968       482,593  

Research and development

    36,706       34,380       144,467       118,651  

Restructuring expenses (1)

    -       -       12,358       6,914  

Litigation settlement expenses (1)

    -       -       8,500       -  

Acquisition related expenses (1)

    -       1,914       10,076       5,464  

Amortization of acquired intangible assets (1)

    11,769       12,629       46,578       23,923  

 

Total operating expenses

 

 

 

 

 

 

196,415

 

 

 

 

 

 

 

 

 

182,852

 

 

 

 

   

 

775,947

 

 

 

   

 

637,545

 

 

 

 

Income from operations (1)

 

   

 

127,361

 

 

 

   

 

118,637

 

 

 

   

 

425,798

 

 

 

   

 

428,952

 

 

 

         

Other income (expenses), net:

               

Interest income (expense), net

    (3,310     (2,374     (11,151     5,654  

Other, net

    (2,428     1,168       4,096       4,960  

 

Total other income (expenses), net

 

   

 

(5,738

 

 

   

 

(1,206

 

 

   

 

(7,055

 

 

   

 

10,614

 

 

 

 

Income before income taxes

 

   

 

121,623

 

 

 

   

 

117,431

 

 

 

   

 

418,743

 

 

 

   

 

439,566

 

 

 

Income taxes excluding ASU 2016-09 (2)

    22,194       35,572       82,530       98,329  

Income taxes relating to ASU 2016-09 (2)

    (2,184     (1,267     (6,071     (11,172

 

Total income taxes

 

   

 

20,010

 

 

 

   

 

34,305

 

 

 

   

 

76,459

 

 

 

   

 

87,157

 

 

 

 

Net income (1)

 

 

 

$

 

 

101,613

 

 

 

 

 

 

$

 

 

83,126

 

 

 

 

 

 

$

 

 

342,284

 

 

 

 

 

 

$

 

 

352,409

 

 

 

 

         

Basic earnings per share (2)

  $ 0.72     $ 0.59     $ 2.42     $ 2.51  

Diluted earnings per share (2)

  $ 0.71     $ 0.59     $ 2.40     $ 2.49  

Non-GAAP diluted earnings per share (1) (2)

  $ 0.77     $ 0.74     $ 2.82     $ 2.68  
         

Basic shares outstanding

    142,019       140,551       141,360       140,242  

Diluted shares outstanding (2)

 

   

 

143,119

 

 

 

   

 

141,654

 

 

 

   

 

142,453

 

 

 

   

 

141,669

 

 

 

 

  (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 twelve months ended June 30, 2016 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)

 

                                           
     June 30,   June 30,
     2017   2016
ASSETS        

Current assets:

       

Cash and cash equivalents

  $ 821,935     $ 731,434  

Accounts receivable, net

    450,530       382,086  

Inventories

    268,319       224,456  

Prepayments and other current assets

    103,219       81,743  

 

Total current assets

 

 

 

 

 

 

1,644,003

 

 

 

 

 

 

 

 

 

1,419,719

 

 

 

 

Property, plant and equipment, net

    394,241       384,276  

Goodwill

    1,064,874       1,059,245  

Other intangibles, net

    261,800       299,808  

Deferred income taxes and other non-current assets

    103,569       93,657  

 

Total non-current assets

 

 

 

 

 

 

1,824,484

 

 

 

 

 

 

 

 

 

1,836,986

 

 

 

 

 

Total assets

 

  $

 

3,468,487

 

 

 

  $

 

3,256,705

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:        

Current liabilities:

       

Accounts payable

    92,763       92,571  

Accrued expenses

    186,295       156,805  

Deferred revenue

    51,918       50,009  

Income taxes payable

    29,150       39,166  

Short-term debt

    -       299,438  

 

Total current liabilities

 

   

 

360,126

 

 

 

   

 

637,989

 

 

 

Non-current liabilities:

       

Deferred income taxes

    13,822       9,061  

Deferred revenue

    53,235       40,281  

Other long term liabilities

    2,427       1,211  

Long-term debt

    1,078,611       873,332  

 

Total non-current liabilities

 

 

 

 

 

 

1,148,095

 

 

 

 

 

 

 

 

 

923,885

 

 

 

 

 

Total liabilities

 

   

 

1,508,221

 

 

 

   

 

1,561,874

 

 

 

STOCKHOLDERS’ EQUITY:

       

Common stock

    569       563  

Additional paid-in capital

    1,379,130       1,303,238  

Retained earnings

    2,316,237       2,160,299  

Treasury stock

    (1,546,611     (1,546,611

Accumulated other comprehensive income

    (189,059     (222,658

 

Total stockholders’ equity

 

  $

 

1,960,266

 

 

 

  $

 

1,694,831

 

 

 

 

Total liabilities and stockholders’ equity

 

 

 

$

 

 

3,468,487

 

 

 

 

 

 

$

 

 

3,256,705

 

 

 

 

 

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RESMED INC AND SUBSIDIARIES

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

 

                                           
     Twelve Months
     June 30,
     2017   2016

Cash flows from operating activities:

       

Net income

  $ 342,284     $ 352,409  

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

       

Depreciation and amortization

    112,157       86,849  

Impairment of long-lived asset

    -       2,815  

Stock-based compensation costs

    45,925       46,408  

Changes in fair value of business combination contingent consideration

    10,076       (2,986

Payment of business combination contingent consideration

    (8,460     -  

Impairment of cost-method investments

    1,955       750  

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

       

Accounts receivable, net

    (63,604     (27,307

Inventories, net

    (41,599     30,492  

Prepaid expenses, net deferred income taxes and other current assets

    (19,257     12,121  

Accounts payable, accrued expenses and other

    34,576       46,382  

 

Net cash provided by operating activities

 

   

 

414,053

 

 

 

   

 

547,933

 

 

 

Cash flows from investing activities:

       

Purchases of property, plant and equipment

    (62,219     (58,534

Patent registration costs

    (9,257     (9,295

Business acquisitions, net of cash acquired

    (7,274     (1,041,864

Investments in cost-method investments

    (6,464     (8,965

Proceeds from sale of business

    -       468  

Proceeds / (Payments) on maturity of foreign currency contracts

    3,324       (7,564

 

Net cash used in investing activities

 

   

 

(81,890

 

 

   

 

(1,125,754

 

 

Cash flows from financing activities:

       

Proceeds from issuance of common stock, net

    30,161       27,694  

Purchases of treasury stock

    -       (102,058

Payment of business combination contingent consideration

    (11,682     (1,228

Proceeds from borrowings, net of borrowing costs

    450,000       1,140,000  

Repayment of borrowings

    (545,000     (283,694

Dividends paid

    (186,346     (168,130

 

Net cash (used in) / provided by financing activities

 

   

 

(262,867

 

 

   

 

612,584

 

 

 

 

Effect of exchange rate changes on cash

 

    21,205       (20,578

Net increase / (decrease) in cash and cash equivalents

    90,501       14,185  

Cash and cash equivalents at beginning of period

    731,434       717,249  

 

Cash and cash equivalents at end of period

 

  $

 

821,935

 

 

 

  $

 

731,434

 

 

 

 

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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   Twelve Months Ended
     June 30,   June 30,
     2017    2016   2017    2016

GAAP income from operations

    $     127,361      $     118,637     $     425,798      $ 428,952

Deferred revenue fair value adjustment (A)

      -        2,332       -        2,332

SERVE-HF accrual release (A)

      -        (402 )           -        (2,804 )

Astral battery field safety notification expenses (A)

      -        -       5,070        -

Restructuring expenses (A)

      -        -       12,358        6,914

Litigation settlement expenses (A)

      -        -       8,500        -

Acquisition related expenses (A)

      -        1,914       10,076        5,464

Amortization of acquired intangible assets (A)

      11,769        12,629       46,578        23,923

 

Non-GAAP income from operations

 

    $

 

139,130

 

 

     $

 

135,110

 

 

    $

 

508,380

 

 

     $

 

464,781

 

 

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   Twelve Months Ended
     June 30,   June 30,
     2017    2016   2017    2016

GAAP net income

    $     101,613      $ 83,126     $ 342,284      $ 352,409

Deferred revenue fair value adjustment (A)

      -        1,478       -        1,478

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

      -        (281 )           -        (1,963 )

Astral battery field safety notification expenses (A)

      -        -       3,549        -

Restructuring expenses, net of tax (A)

      -        -       8,295        5,204

Litigation settlement expenses, net of tax (A)

      -        -       5,392        -

Acquisition related expenses (A)

      -        1,393       10,076        4,943

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

      7,999        8,794       31,679        17,366
Cumulative ASU 2016-09 income tax benefit not reflected in the quarter ended June 30, 2016 (A)       -        9,905       -        -

 

Non-GAAP net income (A)

 

    $

 

109,612

 

 

     $

 

104,415

 

 

    $

 

401,275

 

 

     $

 

379,437

 

 

 

Diluted shares outstanding

 

     

 

143,119

 

 

      

 

141,654

 

 

     

 

142,453

 

 

      

 

141,669

 

 

 

GAAP diluted earnings per share

 

    $

 

0.71

 

 

     $

 

0.59

 

 

    $

 

2.40

 

 

     $

 

2.49

 

 

 

Non-GAAP diluted earnings per share (A)

 

    $

 

0.77

 

 

     $

 

0.74

 

 

    $

 

2.82

 

 

     $

 

2.68

 

 

 

(A) ResMed adjusts for the impact of the Astral battery field safety notification expenses, release of SERVE-HF accrual, restructuring expenses, litigation settlement expenses, one-time deferred revenue fair value adjustment 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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