-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GUeewqfcFvMMH6bV9gbMfXCo9YkMupw2cRkUOrHvbj0cOY8hod2PD8H8iagcqX4Z QEHCp5J8piRmGlaxy/MUpA== 0000943819-96-000004.txt : 19960620 0000943819-96-000004.hdr.sgml : 19960620 ACCESSION NUMBER: 0000943819-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESMED INC CENTRAL INDEX KEY: 0000943819 STANDARD INDUSTRIAL CLASSIFICATION: 3842 IRS NUMBER: 980152841 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26038 FILM NUMBER: 96562405 BUSINESS ADDRESS: STREET 1: 82 WATERLOO RD STREET 2: NORTH RYDE CITY: NEW SOUTH WALES AU STATE: C3 BUSINESS PHONE: 6128785244 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSACTION PERIOD FROM ___________ TO _____________ Commission file number: 0-26038 ResMed Inc. (Exact name of registrant as specified in its charter) Delaware 98-015286 (State or other jurisdiction of (I.R.S Employer incorporation or organisation) Identification No.) 82 Waterloo Road North Ryde New South Wales 2113 Australia (Address of principal executive offices) 011 61 2 878 5244 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of March 31, 1996, 7,149,908 shares of Common Stock($0.004 par value) were outstanding. ResMed Inc. and Subsidiaries INDEX
Part I Financial Information Page Item 1 Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1996 (unaudited) and June 30, 1995 3 Condensed Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 1996 and 1995 and the Nine Months ended March 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended March 31, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II Other Information Item 1 Legal Proceedings 15 Item 2 Changes in Securities 15 Item 3 Defaults Upon Senior Securities 15 Item 4 Submission of Matters to a Vote of Security Holders 15 Item 5 Other Information 15 Item 6 Exhibits and Reports on Form 8-K 16 Reports on Form 8-K with respect to the purchase of the business and associated assets of Dieter W Priess Medizintechnik Exhibits thereto: 2.1 Purchase agreement dated February 7, 1996 between Dieter W Priess Medizinische technische Gerate and ResMed-Priess GmbH. (filed by reference) 23.1 Consent of KPMG Deutsche Treuhand Gesellschaft. (filed by Reference) 99.3 Press Release, dated February 12, 1996 issued by ResMed, Inc. (filed by Reference) Signatures 17
2 ResMed Inc. and Subsidiaries PART I. FINANCIAL INFORMATION Item 1. Financial Statements RESMED INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in US$ thousands, except per share data)
March 31, June 30, 1996 1995 (unaudited) Assets Current assets: Cash and cash equivalents $ 4,009 $ 3,256 Marketable securities - available for sale 18,081 20,510 Accounts receivable, net of allowance of $167 at March 31, 1996 and $144 at June 30, 1995 5,745 3,792 Government grants receivable 914 825 Inventories (note 3) 6,137 4,350 Prepaid expenses and other current assets 941 280 _______ ________ Total current assets 35,827 33,013 _______ ________ Property, plant and equipment, net 2,954 1,981 Patents, net of accumulated amortization of $240 at March 31,1996 and $179 at June 30, 1995 177 161 Deferred income taxes 128 139 Goodwill, net 4,384 - Other assets 879 19 _______ ________ Total assets $44,349 $35,313 ======= ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 2,313 $ 2,572 Accrued expenses 2,210 2,006 Income taxes payable 1,449 1,081 _______ ________ Total current liabilities 5,972 5,659 _______ ________ Long-term debt 861 787 _______ ________ Total liabilities 6,833 6,446 _______ ________ Stockholders' equity: Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued - - Common Stock $0.004 par value; 15,000,000 shares authorized; issued and outstanding 7,149,908 at March 31, 1996 and 6,534,000 at June 30, 1995 29 26 Additional paid-in capital 29,381 24,393 Retained Earnings 7,609 4,600 Currency translation adjustment 497 (152) _______ ________ 37,516 28,867 Commitments and contingencies _______ ________ $44,349 $35,313 ======= ======== See accompanying notes to condensed consolidated financial statements.
3 ResMed Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (in US$ thousands, except per share data)
Three Months Ended Three Months Ended March 31, March 31, 1996 1995 1996 1995 Net revenue $ 9,360 $ 6,380 $ 23,959 $16,755 Cost of sales 4,774 3,046 11,990 8,167 ________ ________ ________ _______ Gross profit 4,586 3,334 11,969 8,588 ________ ________ ________ _______ Operating expenses Selling, general and administrative expenses 2,902 1,956 7,501 5,248 Research and development expenses 640 556 2,011 1,443 ________ ________ ________ _______ Total operating expenses 3,542 2,512 9,512 6,691 ________ ________ ________ _______ Income from operations 1,044 822 2,457 1,897 ________ ________ ________ _______ Other income, net: Interest income, net 283 36 814 121 Government grants 129 68 434 253 Other income, net 353 144 594 333 ________ ________ ________ _______ Total other income, net 765 248 1,842 707 ________ ________ ________ _______ Income before income taxes 1,809 1,070 4,299 2,604 Income taxes 602 267 1,290 652 ________ ________ ________ _______ Net income $ 1,207 $ 803 $ 3,009 $ 1,952 ======== ======== ======== ======= Net income per common and common equivalent share: Primary $0.17 $0.18 $0.42 $0.45 Assuming full dilution $0.17 $0.18 $0.42 $0.45 Weighted average shares per common and common equivalent outstanding: Primary 7,193 4,355 7,179 4,310 Assuming full dilution 7,227 4,357 7,201 4,311 See accompanying notes to condensed consolidated financial statements.
4 ResMed Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in US$ thousands)
Nine Months Ended March 31, 1996 1995 Cash flows from operating activities: Net income $ 3,009 $ 1,952 _______ ________ Adjustment to reconcile net income to net cash used in operating activities: Depreciation and amortization 693 449 Provision for service warranties (8) 199 Deferred income taxes 11 387 Goodwill amortization 50 - Foreign currency options (493) (34) Changes in operating assets and liabilities, net of effects from acquisition: Accounts receivable, net (1,805) (1,162) Government grants (48) (18) Inventories (133) (1,828) Prepaid expenses and other current assets (585) (120) Accounts payable, accrued expenses and income taxes payable 270 302 _______ ________ Net cash provided by operating activities 961 127 _______ ________ Cash flows used in investing activities: Purchases of property, plant and equipment (931) (1,141) Purchases of patents (44) - Purchase of Priess (6,517) - Purchase of non-trading investments (350) 15 Purchases of marketable securities - available for sale (76,392) - Proceeds from sale of marketable securities - available for sale 78,821 - _______ ________ Net cash used in investing activities (5,413) (1,126) _______ ________ Cash flows provided by (used in) financing activities: Proceeds from issuance of common stock 4,991 24 Proceeds from issuance of long-term debt - 210 Deferred offering costs - (515) _______ ________ Net cash provided by (used in) financing activities 4,991 (281) _______ ________ Effect of exchange rate changes on cash 214 52 _______ ________ Net increase (decrease) in cash and cash equivalents 753 (1,228) _______ ________ Cash and cash equivalents at beginning of period 3,256 3,739 _______ ________ Cash and cash equivalents at end of period $ 4,009 $ 2,511 ======= ======== Supplemental disclosure of cash flow information: Income taxes paid 945 600 See accompany notes to condensed consolidated financial statements.
5 ResMed Inc. and Subsidiaries (1) Organization and Basis of Presentation ResMed Inc. (the Company), is a Delaware corporation formed in March 1994 as a holding company for ResMed Holdings Ltd. (RHL), a company resident in Australia. RHL designs, manufactures and markets devices for the evaluation and treatment of sleep disordered breathing, primarily obstructive sleep apnea. The Company's principal manufacturing operations are located in Australia. Other principal distribution and sales sites are located in the United States, the United Kingdom, Germany and Europe. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1996 and the nine months ended March 31,1996 are not necessarily indicative of the results that may be expected for the year ended June 30, 1996. In May 1994, the stockholders of RHL approved a reorganization and reincorporation of RHL resulting in the exchange of the shares of the outstanding common stock of RHL for the shares of the Company. In addition, effective in March 1995, the Company effected a 5:2 stock split. As a result of the reorganization, reincorporation and the stock split, the accounts within the consolidated financial statements have been restated to reflect a par value of $.004 per share. The board of directors also authorized 2,000,000 shares of $0.01 par value preferred stock. None of the preferred stock was issued or outstanding at March 31, 1996. (2) Summary of Significant Accounting Policies (a) Basis of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. (b) Revenue Recognition: Revenue on product sales is recorded at the time of shipment. Royalty revenue from license agreements is recorded when earned. (c) Cash and Cash Equivalents: Cash equivalents include certificates of deposit, commercial paper, and other highly liquid investments stated at cost, which approximates market. Investments with original maturities of 90 days or less are considered to be cash equivalents for purposes of the consolidated statements of cash flows. 6 ResMed Inc. and Subsidiaries (2) Summary of Significant Accounting Policies, Continued (d) Inventories: Inventories are stated at the lower of cost, determined principally by the first-in, first-out method, or net realizable value. (e) Property, Plant and Equipment: Property, plant and equipment is recorded at cost. Depreciation expense is computed using the straight- line method over the estimated useful lives of the assets, generally two to 10 years. Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. Straight-line and accelerated methods of depreciation are used for tax purposes. Maintenance and repairs are charged to expense as incurred. (f) Patents: The registration costs for new patents are capitalized and amortized over the estimated useful life of the patent, generally five years. In the event of a patent being superseded, the unamortized costs are written off immediately. (g) Government Grants: Government grants revenue is recognized when earned. Grants have been obtained by the Company from the Australian Federal Government to support continued development and export of the Company's proprietary positive airway pressure technology and to assist development of export markets in the amount of $129,000 for the three month period ended March 31, 1996 and $434,000 for the nine month period ended March 31, 1996. (h) Foreign Currency: The consolidated financial statements of the Company's non-U.S. subsidiaries are translated into U.S. dollars for financial reporting purposes. Assets and liabilities of non-U.S. subsidiaries whose functional currencies are other than the U.S. dollar are translated at period end exchange rates, revenue and expense transactions are translated at average exchange rates for the period. Cumulative translation effects are reflected in stockholders' equity. Gains and losses on transactions, denominated in other than the functional currency of the entity, are reflected in operations. (i) Research and Development: All research and development costs are expensed in the period incurred. 7 ResMed Inc. and Subsidiaries (2) Summary of Significant Accounting Policies, Continued (j) Net Income per Common and Common Equivalent Share: Primary net income per common and common equivalent share and net income per common and common equivalent share assuming full dilution are computed using the weighted average number of shares outstanding, adjusted for the incremental shares attributed to outstanding options to purchase common stock as determined under the treasury stock method. (k) Financial Instruments: The carrying value of financial instruments, such as cash and cash equivalents, foreign currency option contracts, accounts receivable, accounts payable, marketable securities and long-term debt approximate their fair value. The Company does not hold or issue financial instruments for trading purposes. The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at March 31, 1996 and June 30, 1995. The Fair Value of Financial Instruments is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties.
March 31, 199 June 30, 1995 Carrying Fair Carrying Fair Amount Value Amount Value (US$ in thousands) Financial assets Cash and cash equivalents 4,009 4,009 3,256 3,256 Marketable securities - available for sale 18,081 18,081 20,510 20,510 Government grants receivable 914 914 825 825 Accounts Receivable 5,745 5,745 3,792 3,792 Other assets 879 879 19 19 Financial liabilities Accounts Payable 2,313 2,313 2,572 2,572 Long term debt 861 861 787 787
The carrying amounts shown in the table are included in the statement of financial position under the indicated captions. (l) Foreign Exchange Risk Management: The Company enters into various types of foreign exchange contracts in managing its foreign exchange risk, including derivative financial instruments encompassing forward exchange contracts and foreign currency options. 8 ResMed Inc. and Subsidiaries (2) Summary of Significant Accounting Policies, Continued (l) Foreign Exchange Risk Management, Continued The purpose of the Company's foreign currency hedging activities is to protect the Company from adverse exchange rate fluctuations with respect to net cash movements resulting from the sales of products to foreign customers and Australian manufacturing activities. The Company enters into foreign currency option contracts to hedge anticipated sales and manufacturing costs denominated in principally Australian Dollars, Pound Sterling and Deutschmarks. The term of such currency derivatives is rarely more than three years. Premiums to enter certain foreign currency options are included in other assets and are amortized over the period of the agreement in the consolidated statement of income against other income, net. At March 31, 1996 unamortized premiums amounted to $329,000. Unrealised gains or losses are recognised as incurred in the statement of financial position as either other assets or other liabilities and are recorded within other income, net on the Company's consolidated statement of income. Unrealised gains and losses on currency derivatives are determined based on dealer quoted prices. Foreign currency option contracts have been purchased in part by the issue of put options to counterparts. As a result, should foreign exchange rates drop below a specified level, on a specific date, the Company is required to deliver certain funds to counterparts at contracted foreign exchange rates. As at March 31, 1996 none of the put options issued by the Company are excersizable as foreign exchange rates remain above the foreign exchange rates specified. The Company is exposed to credit-related losses in the event of nonperformance by counterparts to financial instruments, but it does not expect any counterparts to fail to meet their obligations given their high credit ratings. The credit exposure of foreign exchange options is represented by the fair value of options with a positive fair value at the reporting date. At March 31, 1996 the Company held foreign currency option contracts with notional amounts totalling $44,100,000 to hedge foreign currency items. These contracts mature at various dates prior to June 30, 1998. (m) Income Taxes: The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (Statement 109). Statement 109 requires an asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which 9 ResMed Inc. and Subsidiaries (2) Summary of Significant Accounting Policies, Continued (m) Income Taxes, Continued: those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (n) Priess Purchase On February 7, 1996 the Company's fully owned German subsidiary ResMed Priess GmbH acquired the business and associated assets of Dieter W Priess Medizintechnik (Priess), its German distributor for $6,350,000 in cash. Priess is based in Moenchengladbach, Germany and is engaged in the sale and distribution of respiratory products. The acquisition has been accounted for as a purchase and, accordingly, the results of operations of Priess have been included in the Company's consolidated financial statements from February 7, 1996. The excess of the purchase price over the fair value of the net identifiable assets acquired of $4,461,000 has been recorded as goodwill and is being amortized on a straight-line basis over 15 years. The purchase agreement also provides for additional payments of up to $4,000,000 over the next four years contingent on future sales revenues of Priess. The additional payments, if any, will be accounted for as additional goodwill.
$'000 Consideration Outflow of cash 6,517 _____ Fair value of assets acquired Inventory 1,524 Property Plant and equipment 532 _____ 2,056 _____ Goodwill on acquisition 4,461 _____ Cash consideration 6,517 =====
The following unaudited pro forma financial information presents the combined results of operations of the Company and Priess as if the acquisition had occurred as of the beginning of the nine month periods ended March 31, 1996 and March 31, 1995, after giving effect to certain adjustments, including amortization of goodwill, additional depreciation expense, reduced interest income from use of IPO funds relating to the acquisition, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Priess constituted a single entity during such periods. 10 ResMed Inc. and Subsidiaries (2) Summary of Significant Accounting Policies, Continued (n) Priess Purchase, Continued:
Nine Months Ended March 31, (unaudited) 1996 1995 $'000 $'000 Net sales 27,954 21,369 Net income 3,962 2,927 Net income per common and common equivalent share: Primary $0.55 $0.68 Assuming full dilution $0.55 $0.68
(3) Inventories Inventories were comprised of the following at March 31, 1996 and June 30, 1995:
March 31, June 30, 1996 1995 Raw Materials $ 2,404 $ 1,990 Work in progress 671 888 Finished goods 3,062 1,472 _______ _______ $ 6,137 $ 4,350 ======= =======
11 ResMed Inc. and Subsidiaries Net Revenues Net revenues increased for the three months ended March 31, 1996 to $9.4 million from $6.4 million for the three months ended March 31, 1995, an increase of $3.0 million or 47%. For the nine month period ended March 31, 1996 net revenues increased to $24.0 million from $16.8 million in fiscal 1995 an increase of $7.2 million or 43%. Both the three month and nine month increase in net revenues are primarily attributable to an increases in unit sales of the Company's flow generators and accessories in North America and Europe and additional revenues generated in Germany from the Priess business since February 7, 1996, date of acquisition. Net revenues in North America increased to $4.5 million from $3.4 million for the quarter, $12.1 million from $8.8 million for the nine months and in Europe to $3.6 million from $2.0 million for the quarter, $8.0 million from $4.7 million for the nine months, respectively. Gross Profit Gross profit increased for the three months ended March 31, 1996 to $4.6 million from $3.3 million for the three months ended March 31, 1995, an increase of $1.3 million or 38%. The increase resulted primarily from increased unit sales during the quarter ended March 31, 1996. Gross profit as a percentage of net revenues decreased for the three months ended March 31, 1996 to 49% from 52% in the three months ended March 31, 1995. This decrease was primarily due to a 5% increase of the Australian dollar with respect to the United States dollar over the three months ended March 1996 and to a lesser extent product mix changes. For the nine month period ended March 31, 1996 gross profit increased to $12 million from $8.6 million in the same period of fiscal 1995 an increase of $3.4 million or 39%. Gross profit as a percentage of net revenues decreased for the nine month period ended March 31, 1996 to 50% from 51%, for the nine months ended March 31, 1995. Selling, General and Administrative Expenses Selling, general and administrative expenses increased for the three months ended March 31, 1996 to $2.9 million from $2.0 million for the three months ended March 31, 1995, an increase of $946,000 or 48%. As a percentage of net revenues, selling, general and administrative expenses remained static at 31% for the quarter ended March 31, 1996 and the three months ended March 31, 1995. The increase in gross expenses was due primarily to an increase from 56 to 90 in the number of sales and administrative personnel, including 24 persons employed on acquisition of Priess, legal costs associated with ongoing legal action (refer Part II Item 1) and other expenses related to the increase in Company sales. Selling, general and administrative expenses for the nine months ended March 31, 1996 also increased to $7.5 million from $5.2 million for the nine months ended March 31, 1995 an increase of $2.3 million or 43%. As a percentage of net revenues selling, general and administration expenses remained static at 31% for the nine months ended March 31, 1996 and 1995. 12 ResMed Inc. and Subsidiaries Research and Development Expenses Research and development expenses increased for the three months ended March 31, 1996 to $640,000 from $556,000 for the three months ended March 31, 1995, an increase of $84,000 or 15%. As a percentage of net revenues, research and development expenses for the three months ended March 31, 1996 decreased to 7% from 9% for the period ended March 31, 1996. The increase in gross research and development expenses was due to an increase from 24 to 31 in the number of engineering personnel and increased payment for consulting fees to facilitate product development of a number of new products. For the nine month period ended March 31, 1996 research and development expenses also increased to $2.0 million from $1.4 million for fiscal 1995 an increase of $568,000 or 39%. As a percentage of net revenues research and development expenses remained relatively consistent for the nine months ended March 31, 1996 and the nine months ended March 31, 1995. The gross increase in research and development expenses for the nine months ended March 31, 1996 reflects the cost increases noted for the quarter ended March 31, 1996 relating to the development of new products. Other Income, net Other income, net increased for the three months ended March 31, 1996 to $765,000 from $248,000 for the three months ended March 31, 1995, an increase of $517,000 or 209%. This increase was due primarily to interest revenue of $283,000 arising from the initial public offering of the Company and net foreign exchange gains of $333,000 relating to foreign exchange option contracts. Government grant income also increased for the three months ended March 31, 1996 to $129,000 from $68,000 for the three months ended March 31, 1995 reflecting an increase in both manufacturing and research activity. Other income, net also increased for the nine months ended March 31, 1996 to $1.8 million, from $707,000 for the nine months ended March 31, 1995 an increase of $1.1 million or 161%. The increase in other income, net over the nine month period reflects increased interest income of $693,000 relating to the initial public offering of the Company, additional government grant incomes, which increased to $434,000 from $253,000 for the nine months ended March 31, 1995 and the receipt of $242,000 from Teijin Limited of Japan for certain marketing rights for respiratory and related products in Japan. Income Taxes The Company's effective income tax rate for the three months ended March 31, 1996 increased to approximately 33% from approximately 25.0% for the three months ended March 31, 1995. For the nine month period ended March 31, 1996 the Company's effective income tax rate increased to 30% from 25% for the nine months ended March 31, 1995. These increases are primarily due to an increase in the Australian corporate tax rate from 33% to 36% on July 1, 1995 an effective German corporate taxation rate of 51%, partially offset by additional research and development expenses incurred in Australia for which the Company receives a 150% deduction for tax purposes. 13 ResMed Inc. and Subsidiaries Liquidity and Capital Resources As of March 31, 1996 and June 30, 1995, the Company had cash and cash equivalents and marketable securities available for sale of approximately $22.1 million and $23.8 million, respectively. The Company's working capital approximated $29.9 million and $27.4 million, at March 31, 1996 and June 30, 1995, respectively. The increase in working capital balances reflects the increase in cash balances arising from increased selling activity, the receipt of approximately $5 million from the exercise of 153,000 stock options and the exercise, by the underwriters of the Company's initial public offering of their full over allotment of 450,000 shares at a net offering price of $10.23 per share. These increases were offset by the payment of $6.5 million to acquire the Priess business. During the nine months ended March 31, 1996, the Company's operations generated $961,000 cash from operations, primarily as a result of increased profit from operations offset partially by increases in both inventory for new product introductions and accounts receivable due to increased sales. During the nine months ended March 31, 1995 approximately $127,000 of cash was generated from operations. The Company's capital expenditures for the nine month period ended March 31, 1996 and 1995 aggregated $7.4 million and $1.1 million, respectively. The majority of the expenditures in the nine month period ending March 31, 1996 relate to the purchase of Priess, the purchase of production tooling and equipment and, to a lesser extent, office furniture, computers and research and development equipment. As a result of these capital expenditures, the Company's March 31, 1996 balance sheet reflects net property plant and equipment of approximately $3.0 million at March 31, 1996, compared to $2.0 million at June 30, 1995. The results of the Company's international operations are affected by changes in exchange rates between currencies. Changes in exchange rates may negatively affect the Company's consolidated net sales and gross profit margins from international operations. The Company is exposed to the risk that the dollar-value equivalent of anticipated cash flows will be adversely affected by changes in foreign currency exchange rates. The Company manages this risk through foreign currency option contracts. In May 1993, the Australian Federal Government agreed to lend the Company up to $800,000 over a six year term. Such loan bears no interest for the first three years and bears interest at a rate of 3.8% thereafter until maturity. The outstanding principal balance of such loan was $861,000 and $787,000 at March 31, 1996 and June 30, 1995, respectively. 14 ResMed Inc. and Subsidiaries PART II OTHER INFORMATION Item 1. Legal Proceedings In October 1994, in Australia, a patent held by ResMed was revoked on appeal on grounds that the patent was not entitled to claim priority to a "provisional" application, which was filed before the inventor's publication. As a result of this claim, ResMed based in part on advice from legal counsel, at June 30, 1994 accrued approximately $300,000 for costs associated with this patent litigation which remains outstanding at March 31, 1996. This amount is included in accrued expenses on the consolidated balance sheets. In January 1995, the Company filed a complaint for patent infringement in the United States District Court against Respironics Inc., a Delaware registered company. In response, in February 1995, Respironics filed a complaint against the Company that asserts, (i) Respironics does not infringe the subject patents; and (ii) that the subject patents are invalid and unenforceable. Management believes, based in part on advise from legal counsel, that this action will not have a material adverse effect on the operations or financial position of the Company. In May 1995, Respironics and its Australian distributor filed a statement of claim against the Company and its President in the Federal Court of Australia, New South Wales District Registry. The statement of claim alleges that the Company engaged in unfair trade practices, including misuse of the power afforded by its Australian patents and dominant market position in violation of the Australian Trade Practices Act. The statement of claim asserts damage claims in the aggregate amount of approximately $730,000, constituting lost profit on sales. While the Company intends to defend this action vigorously, there can be no assurance that the Company will be successful in defending such action or that the Company will not be required to make significant payments to the claimants. Furthermore, the Company expects to incur ongoing legal costs in defending such action. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None 15 ResMed Inc. and Subsidiaries Item 6. Exhibits and Report on Form 8K Exhibits 27.1 Financial Data Schedule Report on Form 8-K The Company lodged a report under item 2 of Form 8-K and an amended report under Item 2 of Form 8-K on February 21, 1996 and April 26, 1996, respectively to reflect the acquisition of the business of Priess Medizintechnik on February 7, 1996. Incorporated within the initial report on Form 8-K and the amended report on Form 8-K, the Company lodged the following: * Audited Financial Statements of Dieter W Priess Medizintechnik for the years ended December 31, 1995 and December 31, 1994, respectively. * Independent Auditors Report therein dated March 27, 1996. * Unaudited Proforma Condensed Consolidated Financial Statements of ResMed, Inc. as of December 31, 1995 for the year ended June 30, 1995 and the six months ended December 31, 1995, respectively. Exhibits thereto 2.1 Purchase Agreement dated February 7, 1996 between Dieter W Priess Medizinische technische Gerate and ResMed- Priess GmbH (I, GR). 23.1 Consent of KPMG Deutsche Treuhand Gesellschaft. 99.3 Press Release, dated February 12, 1996, issued by ResMed, Inc. 16 ResMed Inc. and Subsidiaries SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorised. ResMed Inc. Peter C Farrell Peter C Farrell President and Chief Executive Officer Adrian M Smith Adrian M Smith Vice President Finance and Chief Financial Officer 17 EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RESMED INC'S THIRD QUARTER MARCH 31, 1996 FINANCIAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000943819 RESMED INC 1 USD $ CURRENCY 9-MOS 9-MOS JUN-30-1996 JUN-30-1995 MAR-31-1996 MAR-31-1995 1 1 4,009,000 2,511,000 18,081,000 0 5,889,000 3,547,000 (144,000) (143,000) 6,137,000 3,671,000 35,827,000 10,397,000 2,954,000 1,510,000 0 0 44,349,000 12,915,000 5,972,000 4,766,000 0 0 0 0 0 0 29,000 15,000 29,381,000 3,752,000 44,349,000 12,915,000 23,959,000 16,755,000 23,959,000 16,755,000 11,990,000 8,167,000 0 0 0 0 0 0 0 0 4,299,000 2,604,000 1,290,000 652,000 3,009,000 1,952,000 0 0 0 0 0 0 3,009,000 1,952,000 $0.42 $0.45 $0.42 $0.45
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