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Resmed Inc (RMD) SEC Filing 8-K Material Event for the period ending Thursday, August 2, 2018

Resmed Inc

CIK: 943819 Ticker: RMD

Exhibit 99.1

 

LOGO

 

For investors

Amy Wakeham

O: 858-836-5000

investorrelations@resmed.com

 

For media

Jayme Rubenstein

O: 858-836-6798

news@resmed.com

ResMed Inc. Announces Results for the Fourth Quarter of Fiscal Year 2018

 

   

Revenue increased 12% to $623.6 million; up 10% on a constant currency basis

 

   

Net income increased by 8%; non-GAAP net income up 24%

 

   

GAAP diluted earnings per share of $0.76; non-GAAP diluted earnings per share of $0.95

 

   

Operating cash flow of $129.4 million in the fourth quarter

 

   

Quarterly dividend increased by 6% to $0.37 per share

SAN DIEGO, August 2, 2018 – ResMed Inc. (NYSE: RMD, ASX: RMD) today announced results for its quarter ended June 30, 2018. Revenue for the quarter was $623.6 million, a 12 percent increase compared to the same period of the prior year.

“We closed out the year with strong performance across all aspects of our business, from solid top-line revenue growth—driven by geographically balanced results across our entire portfolio of offerings—to continued improvements in operating leverage, which has resulted in double-digit bottom-line growth,” said Mick Farrell, ResMed’s chief executive officer.

“We continue to advance our cloud-connected medical device strategy and are growing our cloud-based software-as-a-service business. Our clinical studies and research efforts are being recognized and the opportunity to increase awareness of sleep-related breathing disorders and improve patient quality of life is bigger than ever.”

Farrell concluded, “We believe we are well-positioned as we enter fiscal year 2019. We continue to innovate, we are improving our existing portfolio of products and offerings, and we have a robust pipeline to drive future growth.”

Analysis of fourth quarter results

Fourth quarter revenue in U.S., Canada and Latin America, excluding Brightree, was $346.7 million, a 10 percent increase over the same period of the prior year. Brightree revenue for the fourth quarter was $40.4 million, an increase of 12 percent compared to the same period of the prior year. Revenue in combined Europe, Asia and other markets was $236.5 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 58.1 percent, lower than the prior year’s quarter gross margin of 58.2 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 $146.9 million, a 15 percent increase compared with the quarter ended June 30, 2017. Non-GAAP income from operations for the quarter was $166.0 million, a 19 percent increase compared to the same period of the prior year.

Selling, general and administrative expenses were $156.8 million, a 6 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 25.1 percent of revenue in the quarter, compared with 26.6 percent reported in the quarter ended June 30, 2017.

Research and development expenses were $39.7 million, or 6.4 percent of revenue. R&D expenses increased by 8 percent compared with the same period last year, or a 6 percent increase on a constant currency basis.

Amortization of acquired intangible assets was $11.6 million during the quarter, which is consistent with the same period last year. Stock-based compensation costs incurred during the quarter of $12.5 million consisted of expenses associated with employee equity grants and our employee stock purchase plan.

Net income for the quarter was $109.8 million, an 8 percent increase compared to the same period of the prior year. Non-GAAP net income was $136.3 million, a 24 percent increase compared to the prior year.

Non-GAAP measures adjust for amortization of acquired intangibles, impact of U.S. tax reform on income tax expense, restructuring expenses and impact of foreign tax credit adjustments on income tax expense.

GAAP diluted earnings per share for the quarter increased by 7 percent to $0.76. Non-GAAP diluted earnings per share of $0.95 were 23 percent higher compared with the same period of the prior year.

Cash flow from operations for the quarter was $129.4 million compared to net income in the current quarter of $109.8 million. During the quarter we 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, we performed preliminary calculations which have been refined during the remainder of the fiscal year. Based on these refinements, and additional guidance from the U.S. Internal Revenue Service, we recognized additional income tax expense of $5.8 million during the three months ended June 30, 2018 for a total income tax expense of $138.0 million during the year ended June 30, 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 relation to foreign earnings.


Analysis of fiscal year 2018 results

Revenue for the year increased 13 percent over the prior year to $2.3 billion, or a 10 percent increase on a constant currency basis.

Income from operations for the year was $541.8 million, a 27 percent increase over the prior year. Non-GAAP income from operations for the year was $606.6 million, a 19 percent increase over the prior year.

Non-GAAP measures adjust for amortization of acquired intangibles, impact of U.S. tax reform on income tax expense, restructuring expenses, impact of foreign tax credit adjustments on income tax expense, litigation settlement expenses, acquisition related expenses and the Astral battery field safety notification expenses.

Net income for the year was $315.6 million, an 8 percent decrease over the prior year. Non-GAAP net income was $507.8 million, a 27 percent increase compared to the prior year.

GAAP diluted earnings per share decreased 9 percent to $2.19. Non-GAAP diluted earnings per share for the year was $3.53, a 25 percent increase compared with the prior year.

Cash flow from operations for the year was $505.0 million. During the year we paid $199.5 million in dividends and repaid a net amount of $796.2 million of our outstanding debt.

Debt refinancing

As reported during the previous quarter, on April 17, 2018, we 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.

Share repurchase program

During the quarter, we repurchased 250,000 shares at a cost of $25.9 million, as part of our ongoing capital management program.

Dividend program

The ResMed board of directors today declared quarterly cash dividend of $0.37 per share. The dividend will have a record date of August 16, 2018, payable on September 20, 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 August 15, 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 August 15, 2018 through August 16, 2018, inclusive.


Webcast details

ResMed will discuss its fourth 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 “Q4 2018 Earnings Webcast” to register and listen to the live webcast. A replay of the earnings webcast will be accessible on our website and available 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 800-585-8367 (U.S.) and +1 416-621-4642 (outside U.S.) and entering a passcode of 7796686. The telephone replay will be available until August 16, 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, the integration of acquisitions, leveraging of strategic investments, 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.

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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,
 
     2018     2017     2018     2017  

Net revenue

   $ 623,631     $ 556,686     $ 2,340,196     $ 2,066,737  

Cost of sales

     261,159       232,910       978,032       859,922  

Astral field safety notification expenses (1)

     —         —         —         5,070  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     362,472       323,776       1,362,164       1,201,745  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling, general and administrative

     156,810       147,940       600,369       553,968  

Research and development

     39,657       36,706       155,149       144,467  

Amortization of acquired intangible assets (1)

     11,611       11,769       46,383       46,578  

Restructuring expenses (1)

     7,510       —         18,432       12,358  

Litigation settlement expenses (1)

     —         —         —         8,500  

Acquisition related expenses (1)

     —         —         —         10,076  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     215,588       196,415       820,333       775,947  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations (1)

     146,884       127,361       541,831       425,798  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expenses), net:

        

Interest income (expense), net

     (2,780     (3,310     (11,977     (11,151

Other, net

     (3,185     (2,428     (8,542     4,096  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses), net

     (5,965     (5,738     (20,519     (7,055
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     140,919       121,623       521,312       418,743  

Income taxes (1)

     31,107       20,010       205,724       76,459  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (1)

   $ 109,812     $ 101,613     $ 315,588     $ 342,284  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.77     $ 0.72     $ 2.21     $ 2.42  

Diluted earnings per share

   $ 0.76     $ 0.71     $ 2.19     $ 2.40  

Non-GAAP diluted earnings per share (1)

   $ 0.95     $ 0.77     $ 3.53     $ 2.82  

Basic shares outstanding

     142,793       142,019       142,764       141,360  

Diluted shares outstanding

     144,004       143,119       143,987       142,453  

 

(1)

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

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RESMED INC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited - In thousands)

 

     June 30, 2018     June 30, 2017  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 188,701     $ 821,935  

Accounts receivable, net

     483,681       450,530  

Inventories

     268,701       268,319  

Prepayments and other current assets

     124,634       103,219  
  

 

 

   

 

 

 

Total current assets

     1,065,717       1,644,003  
  

 

 

   

 

 

 

Property, plant and equipment, net

     386,550       394,241  

Goodwill

     1,068,944       1,064,874  

Other intangibles, net

     215,184       261,800  

Deferred income taxes and other non-current assets

     327,528       103,569  
  

 

 

   

 

 

 

Total non-current assets

     1,998,206       1,824,484  
  

 

 

   

 

 

 

Total assets

   $ 3,063,923     $ 3,468,487  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

    

Current liabilities:

    

Accounts payable

     92,723       92,763  

Accrued expenses

     185,805       186,295  

Deferred revenue

     60,828       51,918  

Income taxes payable

     160,427       29,150  

Short-term debt

     11,466       —    
  

 

 

   

 

 

 

Total current liabilities

     511,249       360,126  
  

 

 

   

 

 

 

Non-current liabilities:

    

Deferred revenue

     71,596       53,235  

Deferred income taxes

     13,084       13,822  

Other long term liabilities

     924       2,427  

Long-term debt

     269,988       1,078,611  

Long-term income taxes payable

     138,102       —    
  

 

 

   

 

 

 

Total non-current liabilities

     493,694       1,148,095  
  

 

 

   

 

 

 

Total liabilities

     1,004,943       1,508,221  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY:

    

Common stock

     571       569  

Additional paid-in capital

     1,450,821       1,379,130  

Retained earnings

     2,432,328       2,316,237  

Treasury stock

     (1,600,412     (1,546,611

Accumulated other comprehensive income

     (224,328     (189,059
  

 

 

   

 

 

 

Total stockholders’ equity

   $ 2,058,980     $ 1,960,266  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 3,063,923     $ 3,468,487  

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RESMED INC AND SUBSIDIARIES

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

 

     Twelve Months Ended
June 30,
 
     2018     2017  

Cash flows from operating activities:

    

Net income

   $ 315,588     $ 342,284  

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

    

Depreciation and amortization

     119,960       112,157  

Stock-based compensation costs

     48,412       45,925  

Impairment of cost-method investments

     11,593       1,955  

Changes in fair value of business combination contingent consideration

     411       10,076  

Payment of business combination contingent consideration

     —         (8,460

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

    

Accounts receivable, net

     (32,356     (63,604

Inventories, net

     1,494       (41,599

Prepaid expenses, net deferred income taxes and other current assets

     (160,726     (19,257

Accounts payable, accrued expenses and other liabilities

     200,650       34,576  
  

 

 

   

 

 

 

Net cash provided by operating activities

     505,026       414,053  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property, plant and equipment

     (62,581     (62,219

Patent registration costs

     (8,876     (9,257

Business acquisitions, net of cash acquired

     (902     (7,274

Investments in cost-method investments

     (14,495     (6,464

Proceeds / (Payments) on maturity of foreign currency contracts

     (14,970     3,324  
  

 

 

   

 

 

 

Net cash used in investing activities

     (101,824     (81,890
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock, net

     23,332       30,161  

Purchases of treasury stock

     (53,801     —    

Payment of business combination contingent consideration

     (486     (11,682

Proceeds from borrowings, net of borrowing costs

     350,000       450,000  

Repayment of borrowings

     (1,146,242     (545,000

Dividends paid

     (199,497     (186,346
  

 

 

   

 

 

 

Net cash (used in) / provided by financing activities

     (1,026,694     (262,867
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (9,742     21,205  
  

 

 

   

 

 

 

Net increase / (decrease) in cash and cash equivalents

     (633,234     90,501  

Cash and cash equivalents at beginning of period

     821,935       731,434  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 188,701     $ 821,935  

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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
June 30,
     Twelve Months Ended
June 30,
 
     2018      2017      2018      2017  

GAAP income from operations

   $ 146,884      $ 127,361      $ 541,831      $ 425,798  

Amortization of acquired intangible assets (A)

     11,611        11,769        46,383        46,578  

Restructuring expenses (A)

     7,510        —          18,432        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

   $ 166,005      $ 139,130      $ 606,646      $ 508,380  

 

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,
 
     2018      2017      2018      2017  

GAAP net income

   $ 109,812      $ 101,613      $ 315,588      $ 342,284  

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

     8,435        7,999        33,694        31,679  

U.S. tax reform transition impact (A)

     1,380        —          126,881        —    

U.S. tax reform impact on deferred taxes (A)

     4,412        —          11,135        —    

Restructuring expenses, net of tax (A)

     5,013        —          13,328        8,295  

Foreign tax credit adjustment (A)

     7,204        —          7,204        —    

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)

   $ 136,256      $ 109,612      $ 507,830      $ 401,275  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted shares outstanding

     144,004        143,119        143,987        142,453  
  

 

 

    

 

 

    

 

 

    

 

 

 

GAAP diluted earnings per share

   $ 0.76      $ 0.71      $ 2.19      $ 2.40  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP diluted earnings per share (A)

   $ 0.95      $ 0.77      $ 3.53      $ 2.82  

 

(A)

ResMed adjusts for the impact of the amortization of acquired intangibles, impact of U.S. tax reform on income tax expense, restructuring expenses, impact of foreign tax credit adjustments on income tax expense, litigation settlement expenses, acquisition related expenses and the Astral battery field safety notification expenses, 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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Resmed Inc provided additional information to their SEC Filing as exhibits

Ticker: RMD
CIK: 943819
Form Type: 8-K Corporate News
Accession Number: 0001193125-18-236545
Submitted to the SEC: Thu Aug 02 2018 4:06:07 PM EST
Accepted by the SEC: Thu Aug 02 2018
Period: Thursday, August 2, 2018
Industry: Surgical And Medical Instruments And Apparatus
Events:
  1. Earnings Release
  2. Financial Exhibit
  3. Other Events

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