ResMed Inc. Announces Results for the Fourth Quarter of Fiscal Year 2017
SAN DIEGO, Aug. 1, 2017 /PRNewswire/ -- 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.
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 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.
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
--------------------- ---------- ----------
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 $731,434
---------------------- -------- --------
Reconciliation of Non-GAAP Financial Measures (Unaudited)
(In US$ 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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