SAN DIEGO--(BUSINESS WIRE)--ResMed (NYSE: RMD) (ASX: RMD) today announced results for its quarter
ended March 31, 2018. Revenue for the quarter was $591.6 million, a 15
percent increase compared to the same period of the prior year.
“We had a strong quarter, with solid revenue growth at the top line, and
operating leverage improving the bottom line”
“We had a strong quarter, with solid revenue growth at the top line, and
operating leverage improving the bottom line,” said ResMed CEO Mick
Farrell. “Our cloud-connected medical device strategy is succeeding; the
major markets for our sleep business are adopting remote monitoring
systems, which plays to the strength of our offerings. Our mask business
performed well across all markets, and our cloud-based
software-as-a-service business also grew rapidly in Q3.”
“We believe we are well-positioned,” Farrell said. “We continue to
innovate. We are improving our existing products and solutions, and have
a robust pipeline for the future.”
Analysis of third quarter results
Third quarter revenue in the United States, Canada and Latin America,
excluding Brightree, was $317.5 million, a 7 percent increase over the
same period of the prior year. Brightree revenue for the third quarter
was $39.9 million, an increase of 14 percent compared to the same period
of the prior year. Revenue in combined Europe, Asia and other markets
was $234.2 million, an increase of 16 percent on a constant currency
basis, compared to the same period of the prior year.
Gross margin in the third quarter was 58.2 percent, lower than the prior
year’s quarter gross margin of 58.3 percent, mainly due to declines in
average selling prices, which were partially offset by manufacturing and
procurement efficiencies.
Income from operations for the quarter was $136.4 million, a 27 percent
increase compared with the quarter ended March 31, 2017. Non-GAAP income
from operations for the quarter was $159.0 million, a 25 percent
increase compared to the same period of the prior year.
Selling, general and administrative expenses were $147.9 million, a 7
percent increase over the same period in the prior year, or a 3 percent
increase on a constant currency basis. SG&A expenses improved to 25.0
percent of revenue in the quarter, compared with 26.8 percent reported
in the quarter ended March 31, 2017.
Research and development expenses were $37.4 million, or 6.3 percent of
revenue. R&D expenses increased by 7 percent compared with the same
period last year, or a 4 percent increase on a constant currency basis.
Amortization of acquired intangible assets was $11.7 million during the
quarter, which is consistent with the same period last year. Stock-based
compensation costs incurred during the quarter of $12.0 million
consisted of expenses associated with employee equity grants and
ResMed’s employee stock purchase plan.
Net income for the quarter was $110.1 million, a 25 percent increase
compared to the same period of the prior year. Non-GAAP net income was
$132.5 million, a 32 percent increase compared to the prior year.
Non-GAAP measures adjust for amortization of acquired intangibles, the
impact of U.S. tax reform on income tax expense, restructuring expenses,
litigation settlement expenses, acquisition-related expenses and the
Astral battery field safety notification expenses.
GAAP diluted earnings per share for the quarter increased by 23 percent
to $0.76. Non-GAAP diluted earnings per share of $0.92 were 30 percent
higher compared with the same period of the prior year.
Cash flow from operations for the quarter was $149.1 million compared to
net income in the current quarter of $110.1 million. During the quarter
ResMed paid $50.0 million in dividends.
Impact of U.S. tax reform on income tax expense
On December 22, 2017, “H.R.1,” originally known as the Tax Cuts and Jobs
Act, was enacted into law (“U.S. tax reform”). ASC 740 Income
Taxes requires companies to recognize the effect of any tax laws
during the period in which they are enacted. Accordingly, during the
quarter ended December 31, 2017, ResMed performed preliminary
calculations which have been refined during the current quarter. Based
on these refinements and additional guidance from the U.S. Internal
Revenue Service, ResMed recognized additional income tax expense of $5.6
million during the three months ended March 31, 2018, for a total income
tax expense of $132.2 million during the nine months ended March 31,
2018.
The U.S. tax reform significantly revises the U.S. corporate income tax
by, among other things, imposing a one-time transition tax on unremitted
foreign earnings, lowering the corporate income tax rate from 35 percent
to 21 percent and implementing a territorial tax system in regard to
foreign earnings. The one-time transition tax on unremitted foreign
earnings results in additional income tax expense of $5.6 million for
the three months ended March 31, 2018, and $125.5 million for the nine
months ended March 31, 2018. ResMed recorded $11.4 million in income
taxes payable and $114.1 million as long-term income taxes payable for
the transition tax. The lower corporate tax rate reduces net deferred
tax assets by $6.7 million and increases income tax expense by $6.7
million for the nine months ended March 31, 2018. The amounts recorded
as part of U.S. tax reform should be considered provisional and may
continue to be revised through ResMed’s quarter ending December 31, 2018.
Australian Taxation Office audit update
In connection with the audit by the Australian Taxation Office (“ATO”)
for the tax years 2009 through 2013, ResMed received Notices of Amended
Assessments in March 2018. Based on these assessments, the ATO is
asserting that ResMed owes $151.7 million in additional income tax and
$38.4 million in accrued interest. In April 2018, ResMed agreed to a
payment arrangement with the ATO to pay $75.9 million, 50 percent of the
additional assessed tax, with the remaining amounts only due if it is
unsuccessful in defending its position. ResMed does not agree with the
ATO’s assessments and intends to pursue administrative and legal steps
to defend its position. ResMed continues to believe it will be
successful in defending its position and therefore has not recognized
any income tax expense in relation to these assessments. At March 31,
2018, ResMed recorded a liability of $75.9 million in short-term income
taxes payable, which was offset by an equivalent asset recorded in other
long-term assets.
Debt refinancing
On April 16, 2018, ResMed entered into a new unsecured syndicated
facility (“Facility”) that provides for an $800 million five-year
revolving Credit Facility and a $200 million five-year Term Loan. The
proceeds from the initial funding of the Term Loan were used to repay a
portion of the outstanding balance of the Credit Facility. As a result
of the refinancing, ResMed has classified the outstanding balance at
March 31, 2018, as long-term debt.
Share repurchase program
During the quarter, ResMed repurchased 200,000 shares at a cost of $19.4
million, as part of its ongoing capital management program.
Dividend program
The ResMed board of directors today declared a quarterly cash dividend
of $0.35 per share. The dividend will have a record date of May 10,
2018, payable on June 14, 2018. 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 May 9, 2018, 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 May 9, 2018, through May 10, 2018,
inclusive.
Webcast details
ResMed will discuss its third quarter fiscal year 2018 results 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
“Q3 2018 earnings webcast” to register and listen to the live webcast. A
replay of the earnings webcast will be accessible on ResMed’s website
approximately two hours after the live webcast. In addition, a telephone
replay of the conference call will be available approximately two hours
after the webcast by dialing +1 800.585.8367 (U.S.) and +1 416.621.4642
(outside U.S.) and entering a passcode of 7899017. The telephone replay
will be available until May 10, 2018.
About ResMed
ResMed (NYSE: RMD, ASX: RMD), a world-leading connected health company
with more than 5 million cloud-connected devices for daily remote
patient monitoring, changes lives with every breath. Its award-winning
devices and software solutions help treat and manage sleep apnea,
chronic obstructive pulmonary disease and other respiratory conditions.
Its 6,000-member team strives to improve patients’ quality of life,
reduce the impact of chronic disease and save 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, new
markets for its products, litigation, and tax outlook – 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.
|
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
March 31,
|
|
|
March 31,
|
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
591,634
|
|
|
$
|
514,204
|
|
|
$
|
1,716,566
|
|
|
$
|
1,510,051
|
|
Cost of sales
|
|
247,339
|
|
|
|
214,490
|
|
|
|
716,874
|
|
|
|
627,012
|
|
Astral field safety notification expenses (1)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,070
|
|
Gross profit
|
|
344,295
|
|
|
|
299,714
|
|
|
|
999,692
|
|
|
|
877,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
147,893
|
|
|
|
137,864
|
|
|
|
443,559
|
|
|
|
406,028
|
|
Research and development
|
|
37,434
|
|
|
|
35,130
|
|
|
|
115,492
|
|
|
|
107,761
|
|
Amortization of acquired intangible assets (1)
|
|
11,673
|
|
|
|
11,378
|
|
|
|
34,772
|
|
|
|
34,809
|
|
Restructuring expenses (1)
|
|
10,922
|
|
|
|
7,945
|
|
|
|
10,922
|
|
|
|
12,358
|
|
Litigation settlement expenses (1)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,500
|
|
Acquisition related expenses (1)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,076
|
|
Total operating expenses
|
|
207,922
|
|
|
|
192,317
|
|
|
|
604,745
|
|
|
|
579,532
|
|
Income from operations (1)
|
|
136,373
|
|
|
|
107,397
|
|
|
|
394,947
|
|
|
|
298,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses), net:
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
|
(3,491
|
)
|
|
|
(2,911
|
)
|
|
|
(9,196
|
)
|
|
|
(7,841
|
)
|
Other, net
|
|
(2,739
|
)
|
|
|
3,504
|
|
|
|
(5,357
|
)
|
|
|
6,525
|
|
Total other income (expenses), net
|
|
(6,230
|
)
|
|
|
593
|
|
|
|
(14,553
|
)
|
|
|
(1,316
|
)
|
Income before income taxes
|
|
130,143
|
|
|
|
107,990
|
|
|
|
380,394
|
|
|
|
297,121
|
|
Income taxes (1)
|
|
20,018
|
|
|
|
20,167
|
|
|
|
174,617
|
|
|
|
56,449
|
|
Net income (1)
|
$
|
110,125
|
|
|
$
|
87,823
|
|
|
$
|
205,777
|
|
|
$
|
240,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
$
|
0.77
|
|
|
$
|
0.62
|
|
|
$
|
1.44
|
|
|
$
|
1.70
|
|
Diluted earnings per share
|
$
|
0.76
|
|
|
$
|
0.62
|
|
|
$
|
1.43
|
|
|
$
|
1.69
|
|
Non-GAAP diluted earnings per share (1)
|
$
|
0.92
|
|
|
$
|
0.71
|
|
|
$
|
2.58
|
|
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding
|
|
142,898
|
|
|
|
141,714
|
|
|
|
142,688
|
|
|
|
141,266
|
|
Diluted shares outstanding
|
|
143,985
|
|
|
|
142,724
|
|
|
|
143,895
|
|
|
|
142,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) See the reconciliation of non-GAAP financial
measures in the table at the end of the press release.
|
|
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited - In thousands)
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
2018
|
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
704,281
|
|
|
$
|
821,935
|
|
Accounts receivable, net
|
|
498,425
|
|
|
|
450,530
|
|
Inventories
|
|
288,703
|
|
|
|
268,319
|
|
Prepayments and other current assets
|
|
112,997
|
|
|
|
103,219
|
|
Total current assets
|
|
1,604,406
|
|
|
|
1,644,003
|
|
Property, plant and equipment, net
|
|
397,981
|
|
|
|
394,241
|
|
Goodwill
|
|
1,080,948
|
|
|
|
1,064,874
|
|
Other intangibles, net
|
|
228,223
|
|
|
|
261,800
|
|
Deferred income taxes and other non-current assets
|
|
222,650
|
|
|
|
103,569
|
|
Total non-current assets
|
|
1,929,802
|
|
|
|
1,824,484
|
|
Total assets
|
$
|
3,534,208
|
|
|
$
|
3,468,487
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
88,157
|
|
|
|
92,763
|
|
Accrued expenses
|
|
190,733
|
|
|
|
186,295
|
|
Deferred revenue
|
|
58,001
|
|
|
|
51,918
|
|
Income taxes payable
|
|
124,569
|
|
|
|
29,150
|
|
Total current liabilities
|
|
461,460
|
|
|
|
360,126
|
|
Non-current liabilities:
|
|
|
|
|
|
Deferred revenue
|
|
66,834
|
|
|
|
53,235
|
|
Deferred income taxes
|
|
12,758
|
|
|
|
13,822
|
|
Other long term liabilities
|
|
2,473
|
|
|
|
2,427
|
|
Long-term debt
|
|
810,000
|
|
|
|
1,078,611
|
|
Long-term income taxes payable
|
|
113,719
|
|
|
|
-
|
|
Total non-current liabilities
|
|
1,005,784
|
|
|
|
1,148,095
|
|
Total liabilities
|
|
1,467,244
|
|
|
|
1,508,221
|
|
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
Common stock
|
|
571
|
|
|
|
569
|
|
Additional paid-in capital
|
|
1,424,027
|
|
|
|
1,379,130
|
|
Retained earnings
|
|
2,372,487
|
|
|
|
2,316,237
|
|
Treasury stock
|
|
(1,574,508
|
)
|
|
|
(1,546,611
|
)
|
Accumulated other comprehensive income
|
|
(155,613
|
)
|
|
|
(189,059
|
)
|
Total stockholders’ equity
|
$
|
2,066,964
|
|
|
$
|
1,960,266
|
|
Total liabilities and stockholders' equity
|
$
|
3,534,208
|
|
|
$
|
3,468,487
|
|
|
|
|
|
|
|
RESMED INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited - In
thousands)
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
March 31,
|
|
|
2018
|
|
|
|
2017
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
$
|
205,777
|
|
|
$
|
240,672
|
|
Adjustment to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
88,256
|
|
|
|
83,989
|
|
Stock-based compensation costs
|
|
35,933
|
|
|
|
34,263
|
|
Impairment of cost-method investments
|
|
3,620
|
|
|
|
588
|
|
Changes in fair value of business combination contingent
consideration
|
|
383
|
|
|
|
10,076
|
|
Payment of business combination contingent consideration
|
|
-
|
|
|
|
(8,460
|
)
|
Changes in operating assets and liabilities, net of effect of
acquisitions:
|
|
|
|
|
|
Accounts receivable, net
|
|
(39,421
|
)
|
|
|
(32,793
|
)
|
Inventories, net
|
|
(11,146
|
)
|
|
|
(38,146
|
)
|
Prepaid expenses, net deferred income taxes and other current assets
|
|
(72,332
|
)
|
|
|
(28,554
|
)
|
Accounts payable, accrued expenses and other
|
|
164,540
|
|
|
|
12,105
|
|
Net cash provided by operating activities
|
|
375,610
|
|
|
|
273,740
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(44,961
|
)
|
|
|
(43,857
|
)
|
Patent registration costs
|
|
(6,743
|
)
|
|
|
(6,980
|
)
|
Business acquisitions, net of cash acquired
|
|
(482
|
)
|
|
|
(3,394
|
)
|
Investments in cost-method investments
|
|
(6,445
|
)
|
|
|
(6,464
|
)
|
Proceeds / (Payments) on maturity of foreign currency contracts
|
|
(4,667
|
)
|
|
|
10,085
|
|
Net cash used in investing activities
|
|
(63,298
|
)
|
|
|
(50,610
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from issuance of common stock, net
|
|
9,603
|
|
|
|
15,255
|
|
Purchases of treasury stock
|
|
(27,897
|
)
|
|
|
-
|
|
Payment of business combination contingent consideration
|
|
(205
|
)
|
|
|
(11,682
|
)
|
Proceeds from borrowings, net of borrowing costs
|
|
120,000
|
|
|
|
350,000
|
|
Repayment of borrowings
|
|
(390,000
|
)
|
|
|
(355,000
|
)
|
Dividends paid
|
|
(149,527
|
)
|
|
|
(139,546
|
)
|
Net cash (used in) / provided by financing activities
|
|
(438,026
|
)
|
|
|
(140,973
|
)
|
Effect of exchange rate changes on cash
|
|
8,060
|
|
|
|
13,719
|
|
Net increase / (decrease) in cash and cash equivalents
|
|
(117,654
|
)
|
|
|
95,876
|
|
Cash and cash equivalents at beginning of period
|
|
821,935
|
|
|
|
731,434
|
|
Cash and cash equivalents at end of period
|
$
|
704,281
|
|
|
$
|
827,310
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Nine Months Ended
|
|
|
March 31,
|
|
|
March 31,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
GAAP income from operations
|
$
|
136,373
|
|
$
|
107,397
|
|
$
|
394,947
|
|
$
|
298,437
|
Amortization of acquired intangible assets (A)
|
|
11,673
|
|
|
11,378
|
|
|
34,772
|
|
|
34,809
|
Restructuring expenses (A)
|
|
10,922
|
|
|
7,945
|
|
|
10,922
|
|
|
12,358
|
Litigation settlement expenses (A)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,500
|
Acquisition related expenses (A)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,076
|
Astral battery field safety notification expenses (A)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,070
|
Non-GAAP income from operations
|
$
|
158,968
|
|
$
|
126,720
|
|
$
|
440,641
|
|
$
|
369,250
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Nine Months Ended
|
|
|
March 31,
|
|
|
March 31,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
GAAP net income
|
$
|
110,125
|
|
$
|
87,823
|
|
$
|
205,777
|
|
$
|
240,672
|
Amortization of acquired intangible assets, net of tax (A)
|
|
8,483
|
|
|
7,704
|
|
|
25,260
|
|
|
23,679
|
U.S. tax reform transition impact (A)
|
|
5,621
|
|
|
-
|
|
|
125,501
|
|
|
-
|
U.S. tax reform impact on deferred taxes (A)
|
|
-
|
|
|
-
|
|
|
6,723
|
|
|
-
|
Restructuring expenses, net of tax (A)
|
|
8,316
|
|
|
5,210
|
|
|
8,316
|
|
|
8,295
|
Litigation settlement expenses, net of tax (A)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,392
|
Acquisition related expenses (A)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,076
|
Astral battery field safety notification expenses (A)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,549
|
Non-GAAP net income (A)
|
$
|
132,545
|
|
$
|
100,737
|
|
$
|
371,577
|
|
$
|
291,663
|
Diluted shares outstanding
|
|
143,985
|
|
|
142,724
|
|
|
143,895
|
|
|
142,363
|
GAAP diluted earnings per share
|
$
|
0.76
|
|
$
|
0.62
|
|
$
|
1.43
|
|
$
|
1.69
|
Non-GAAP diluted earnings per share (A)
|
$
|
0.92
|
|
$
|
0.71
|
|
$
|
2.58
|
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) ResMed adjusts for the impact of the
amortization of acquired intangibles, impact of U.S. tax reform,
restructuring expenses, litigation settlement expenses,
acquisition-related expenses and the Astral battery field safety
notification expenses, from its 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. ResMed’s
use of non-GAAP measures is intended to supplement, and not to
replace, its 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.
|