EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

RESMED INC ANNOUNCES RECORD FINANCIAL RESULTS FOR

QUARTER AND SIX MONTHS ENDED DECEMBER 31, 2006

SAN DIEGO, California, February 6, 2006 - ResMed Inc (NYSE: RMD) today announced record revenue and income results for the quarter ended December 31, 2006. Revenue for the quarter was $178.4 million, a 22% increase over the quarter ended December 31, 2005. For the current quarter, pro forma income from operations and pro forma net income were $47.0 million and $33.7 million, an increase of 23% and 25%, respectively (pro forma measures exclude the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets, which are described below). Pro forma diluted earnings per share for the quarter ended December 31, 2006, were $0.43, an increase of 20%, compared to the December 31, 2005, quarter. GAAP operating income was $40.7 million for the current quarter, while net income was $29.0 million or $0.37 per diluted share. Gross margin was 62.6% for the quarter ended December 31, 2006.

Pro forma selling, general and administration (SG&A) costs for the quarter were $53.5 million, an increase of $8.2 million, or 18%, over the same period in fiscal 2006. Pro forma SG&A costs were 30% of revenue in the December quarter, compared to 31% in the same period in fiscal 2006. GAAP SG&A costs were $57.3 million for the quarter, an increase of $8.4 million or 17% over the quarter ended December 31, 2005. The increase in SG&A was primarily due to the addition of selling and administration personnel and related expenses necessary to support our sales growth.

Pro forma research and development expenditure during the quarter was $11.5 million, or approximately 6% of revenues. GAAP R&D expense during the quarter was $12.0 million or approximately 7% of revenue. GAAP R&D expenses increased 40% year over year and are expected to remain between 6% and 7% of net revenue through fiscal year 2007.

For the six months ended December 31, 2006, revenues were $342.0 million, an increase of 25% over the $273.5 million for the six months ended December 31, 2005. For the six months ended December 31, 2006, pro forma income from operations and pro forma net income were $87.6 million and $62.5 million, an increase of 28% and 31%, respectively. GAAP net income for the six months ended December 31, 2006, was $54.0 million or $0.69 per diluted share.

Amortization of acquired intangibles of $1.7 million ($1.1 million net of tax) incurred during the quarter ended December 31, 2006, consisted of amortization of acquired intangible assets associated with our acquisitions of Resprecare, Hoefner, Saime, PolarMed and Pulmomed. Stock-based compensation costs incurred during the quarter ended December 31, 2006, of $4.6 million ($3.6 million net of tax) consisted of expenses associated with stock options granted to employees and the employee stock purchase plan.

The Company is providing tabular reconciliation of GAAP operating income and GAAP net income with pro forma operating income and pro forma net income, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets, for the three-month and six-month periods ended December 31, 2006, and December 31, 2005.

Inventory, at $141.9 million, increased by $25.7 million compared to June 2006 levels primarily to accommodate sales growth and the introduction of new products including the Adapt SV and Tango. Accounts receivable days sales outstanding, at 72 days, were marginally higher than the December 2005 levels of 70 days.

Peter C. Farrell, PhD, Chairman and Chief Executive Officer, commented, “In the second quarter of fiscal 2007, overall Americas sales for our sleep products increased by 23%; including sales from our motor division, Americas sales increased by 20% over the year ago quarter. In this regard it is noted that the ResMed motor division has significantly reduced sales of low margin non-core products to concentrate more exclusively on the supply of motors for ResMed products. Sales growth in sleep products for the Americas reflects continuing strong demand for our Swift nasal pillows system, our full-face masks and the Adapt SV, which was only launched in the previous quarter. Sales outside of the Americas totaled $84.4 million, a 24% increase over last year. Operating cash flow for the September quarter was $18 million.”

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Dr. Farrell continued, “We are pleased with the in-roads we continue to make into the cardiology and complex sleep apnea markets with the Adapt SV and we are making good progress with our Occupational Health strategy. We are also excited by the upcoming launch of the Tango into the value end of the CPAP market.”

About ResMed

ResMed is a leading manufacturer of medical equipment for the treatment and management of sleep-disordered breathing and other respiratory disorders. We are dedicated to developing innovative products to improve the lives of those who suffer from these conditions and to increasing awareness among patients and healthcare professionals for the potentially serious health consequences of untreated sleep-disordered breathing. For more information on ResMed, visit www.resmed.com.

ResMed will host a conference call at 2:00 p.m. U.S. Pacific Standard Time today to discuss these quarterly results. Individuals wishing to access the conference call may do so via ResMed’s Web site at www.resmed.com or by dialing (866) 770-7120 (domestic) or +1 (617) 213-8065 (international) and entering conference I.D. No. 77662910. Please allow extra time prior to the call to visit the Web site and download the streaming media player (Windows Media Player) required to listen to the Internet broadcast. The online archive of the broadcast will be available approximately 90 minutes after the live call and will be available for two weeks. A telephone replay of the conference call is available by dialing (888) 286-8010 (domestic) and +1 (617) 801-6888 (international) and entering conference I.D. No. 34006790.

Further information can be obtained by contacting Matthew Borer at ResMed Inc., San Diego, at (858) 746-2280; Brett Sandercock at ResMed Limited, Sydney, on (+61 2) 8884-2090; or by visiting the Company’s multilingual Web site at www.resmed.com.

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 the Company’s future revenue, earnings or expenses, new product development and new markets for the Company’s products, are subject to risks and uncertainties, which could cause actual results to materially differ from those projected or implied in the forward-looking statements. Those risks and uncertainties are discussed in the Company’s Annual Report on Form 10-K for its most recent fiscal year and in other reports the Company files with the U.S. Securities & Exchange Commission. Those reports are available on the Company’s Web site.

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RESMED INC AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(In US$ thousands, except per share data)

 

    

Three Months Ended

December 31,

    

Six Months Ended

December 31,

  
     2006    2005     2006     2005  

Net revenue

    $ 178,428    $ 146,416     $ 342,033     $ 273,543  

Cost of sales (A)

      66,670      54,690       128,979       101,698  
                               

Gross profit

      111,758      91,726       213,054       171,845  
                               

Operating expenses:

          

Selling, general and administrative (A)

      57,336      48,894       110,780       93,574  

Research and development (A)

      12,028      8,588       22,883       17,013  

Donation to foundation

      —        255       —         255  

Amortization of acquired intangible assets

      1,702      1,545       3,383       3,090  

Restructuring expenses

      —        168       —         1,124  
                               

Total operating expenses

      71,066      59,450       137,046       115,056  
                               

Income from operations

      40,692      32,276       76,008       56,789  
                               

Other income (expenses), net:

          

Interest income (expense), net

      1,486      (754 )     2,983       (1,691 )

Other, net

      67      1,025       (507 )     1,316  
                               

Total other income (expenses), net

      1,553      271       2,476       (375 )
                               

Income before income taxes

      42,245      32,547       78,484       56,414  

Income taxes

      13,250      10,233       24,490       17,658  
                               

Net income

    $ 28,995    $ 22,314     $ 53,994     $ 38,756  
                               

Basic earnings per share

    $ 0.38    $ 0.31     $ 0.71     $ 0.55  

Diluted earnings per share (1)

    $ 0.37    $ 0.30     $ 0.69     $ 0.53  

Pro forma diluted earnings per share excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangibles (1) & (2)

    $ 0.43    $ 0.36     $ 0.79     $ 0.64  

Basic shares outstanding

      76,358      70,922       76,300       70,623  

Diluted shares outstanding (1)

     78,142      77,183       78,271       76,716  

(A)      Includes stock-based compensation costs as follows:

          

Cost of sales

    $ 285    $ 213     $ 591     $ 213  

Selling, general and administrative

      3,787      3,576       6,657       6,451  

Research and development

      543      533       991       1,049  
                               

Total stock-based compensation costs

    $ 4,615    $ 4,322     $ 8,239     $ 7,713  
                               
(1) See reconciliation of Basic and Diluted Earning per Share in table at end of press release.
(2) See reconciliation of non-GAAP financial measures in table at end of press release.

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RESMED INC AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

(In US$ thousands except share and per share data)

 

    

December 31,

2006

    

June 30,

2006

  
    

ASSETS

     

Current assets:

     

Cash and cash equivalents

    $ 232,668     $ 219,544  

Marketable securities - available for sale

      21,950       —    

Accounts receivable, net

      143,596       138,147  

Inventories

      141,876       116,194  

Deferred income taxes

      35,492       26,636  

Prepaid expenses and other current assets

      15,326       9,763  
                

Total current assets

      590,908       510,284  
                

Property, plant and equipment, net

      282,283       245,376  

Goodwill

      202,311       195,612  

Other intangibles

      48,000       48,897  

Other assets

      8,840       7,052  
                

Total Non current assets

      541,434       496,937  
                

Total assets

    $ 1,132,342     $ 1,007,221  
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

    $ 45,485     $ 45,045  

Accrued expenses

      46,363       40,901  

Deferred revenue

      17,633       15,344  

Income taxes payable

      15,766       22,841  

Current portion of long-term debt

      38,424       4,869  
                

Total current liabilities

      163,671       129,000  
                

Non Current Liabilities:

     

Deferred income taxes

      10,629       12,377  

Deferred Revenue

      12,098       11,484  

Long-term debt

      95,124       116,212  
                

Total non-current liabilities

      117,851       140,073  
                

Total liabilities

      281,522       269,073  
                

Stockholders’ Equity:

     

Common Stock

      307       303  

Additional paid-in capital

      386,616       353,464  

Retained earnings

      424,646       370,652  

Treasury stock

      (41,405 )     (41,405 )

Accumulated other comprehensive income

      80,656       55,134  
                

Total stockholders’ equity

      850,820       738,148  
                

Total liabilities and stockholders’ equity

    $ 1,132,342     $ 1,007,221  
                

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Reconciliation of Non-GAAP Financial Measures (Unaudited)

(Dollars in thousands except per share amounts)

In managing its business, ResMed makes use of certain non-GAAP financial measures in evaluating the Company’s results of operations. The measure, “pro forma operating income” is reconciled with GAAP operating income in the table below:

 

    

Three Months Ended

December 31,

   

Six Months Ended

December 31,

     2006    2005    2006    2005

GAAP operating income

    $ 40,692    $ 32,276    $ 76,008    $ 56,789

Stock-based compensation costs

      4,615      4,322      8,239      7,713

Restructuring expenses

      —        168      —        1,124

Amortization of acquired intangible assets

      1,702      1,545      3,383      3,090

Pro forma operating income (excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets)

    $ 47,009    $ 38,311    $ 87,630    $ 68,716

The measure, “pro forma net income” is reconciled with GAAP net income in the table below:

 

    

Three Months Ended

December 31,

   

Six Months Ended

December 31,

     2006    2005    2006    2005

GAAP net income

    $ 28,995    $ 22,314    $ 53,994    $ 38,756

Stock-based compensation costs, net of tax

      3,579      3,429      6,294      6,041

Restructuring expenses, net of tax

      —        108      —        718

Amortization of acquired intangible assets, net of tax

      1,126      1,018      2,238      2,035

Pro forma net income (excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets)

    $ 33,700    $ 26,869    $ 62,526    $ 47,550

ResMed believes that presenting diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets is an additional measure of performance that investors can use to compare operating results between reporting periods. In addition, the events giving rise to the restructuring expenses are not associated with the Company’s normal operating business and are expected to result in future market opportunities, cost savings, and other benefits.

Management of the Company uses non-GAAP information internally in planning, forecasting, and evaluating the Company’s results of operations in the current period and in comparing it to past periods. The Company also uses these non-GAAP measures in evaluating management performance for compensation purposes. Management believes that this information also provides investors better insight in evaluating the Company’s earnings performance from core operations and provides consistency in financial reporting.

Management believes disclosure of non-GAAP earnings has economic substance because the excluded expenses represent non-cash expenditures, or relate to transactions that are variable in nature between reporting periods. Our use of non-GAAP earnings 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. We compensate for the inherent limitations of non-GAAP measures by not relying exclusively on non-GAAP measures, but rather by using such information to supplement GAAP financial measures.

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Reconciliation of Basic and Diluted Earnings per Share (Unaudited)

(Dollars in thousands except per share amounts)

 

    

Three Months Ended

December 31,

   

Six Months Ended

December 31,

     2006    2005    2006    2005

Numerator:

            

Net Income

    $ 28,995    $ 22,314    $ 53,994    $ 38,756

Adjustment for interest and deferred borrowing costs, net of income tax effect (1)

      —        839      —        1,660
                           

Net income, used in calculating diluted earnings per share

      28,995      23,153      53,994      40,416
                           

Adjustment for stock-based compensation costs

      3,579      3,429      6,294      6,041

Adjustment for restructuring expenses

      —        108      —        718

Adjustment for Amortization of acquired intangible assets

      1,126      1,018      2,238      2,035
                           

Pro forma net income, used in calculating diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets

    $ 33,700    $ 27,708    $ 62,526    $ 49,210
                           

Denominator:

            

Basic weighted-average common shares outstanding

      76,358      70,922      76,300      70,623

Effect of dilutive securities:

            

Stock options

      1,784      2,524      1,971      2,356

Convertible subordinated notes (1)

      —        3,737      —        3,737
                           

Diluted potential common shares

      1,784      6,261      1,971      6,093
                           

Diluted weighted average shares

      78,142      77,183      78,271      76,716
                           

Increase in diluted weighted average shares:

            

Stock option adjustment due to the impact of SFAS 123(R)

      681      381      601      415
                           

Pro forma diluted weighted average shares, excluding the impact of SFAS 123(R)

      78,823      77,564      78,872      77,131
                           

Basic earnings per share

    $ 0.38    $ 0.31    $ 0.71    $ 0.55

Diluted earnings per share

    $ 0.37    $ 0.30    $ 0.69    $ 0.53

Pro forma diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets

    $ 0.43    $ 0.36    $ 0.79    $ 0.64

(1)

Diluted earnings per share has been calculated after adjusting the numerator (net income) for the effect of assumed conversion of our convertible notes for the three months ended December 31, 2006 by $Nil (2005: $839,000) and for the six months ended December 31, 2006 by $Nil (2005: $1,660,000).

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