Company Quick10K Filing
Quick10K
Resmed
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$101.85 143 $14,600
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-K 2018-06-30 Annual: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-K 2017-06-30 Annual: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-K 2016-06-30 Annual: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-K 2015-06-30 Annual: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-K 2014-06-30 Annual: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-01-24 Earnings, Other Events, Exhibits
8-K 2019-01-24 Earnings, Other Events, Exhibits
8-K 2018-11-14 Officers, Shareholder Vote, Exhibits
8-K 2018-11-13 M&A, Regulation FD, Exhibits
8-K 2018-11-05 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-10-25 Earnings, Other Events, Exhibits
8-K 2018-08-02 Earnings, Other Events, Exhibits
8-K 2018-04-26 Earnings, Other Events, Exhibits
8-K 2018-04-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-22 Earnings, Other Events, Exhibits
UBS UBS 50,630
SIRI Sirius XM 28,230
GRA WR Grace 5,180
PFS Provident Financial Services 1,810
INGN Inogen 1,800
TVTY Tivity Health 966
QTNT Quotient 578
ASUR Asure Software 127
SSNT Silversun Technologies 14
OFFLP Ceres Orion 0
RMD 2018-12-31
Part I – Financial Information Item 1
Item 1. Financial Statements
Part I – Financial Information Item 2
Part I – Financial Information Item 3
Part I – Financial Information Item 4
Part II – Other Information Item 1-6
Item 1 Legal Proceedings
Item 1A Risk Factors
Part II – Other Information Item 1-6
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Mine Safety Disclosures
Item 5 Other Information
Part II – Other Information Item 1-6
Item 6 Exhibits
Part II – Other Information Signatures
EX-31.1 rmd-20181231xex31_1.htm
EX-31.2 rmd-20181231xex31_2.htm
EX-32 rmd-20181231xex32.htm

Resmed Earnings 2018-12-31

RMD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 rmd-20181231x10q.htm 10-Q Form 10-Q Q2 FY19

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________________________________________________________________________



FORM 10-Q

 

______________________________________________________________________________________________

(Mark One)



 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended December 31, 2018

 



 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from              to             



Commission File Number: 001-15317



______________________________________________________________________________________________



ResMed Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________________



Delaware

(State or other jurisdiction of incorporation or organization)

98-0152841

(I.R.S. Employer Identification No.)



9001 Spectrum Center Blvd.

San Diego, CA 92123

United States of America

(Address of principal executive offices)



(858) 836-5000

(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      No  



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    

Yes      No  



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 



 

 

 

 

 

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes      No   



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No   



At January 28, 2019, there were 143,300,009 shares of Common Stock ($0.004 par value) outstanding.  This number excludes 41,836,234 shares held by the registrant as treasury shares. 



 

 


 

RESMED INC. AND SUBSIDIARIES



Index





 

 

Part I

Financial Information



 

 

Item 1

Financial Statements



 

 



Condensed Consolidated Balance Sheets (Unaudited)



 

 



Condensed Consolidated Statements of Income (Unaudited)



 

 



Condensed Consolidated Statements of Comprehensive Income (Unaudited)



 

 



Condensed Consolidated Statements of Cash Flows (Unaudited)



 

 



Notes to the Condensed Consolidated Financial Statements (Unaudited)



 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21 



 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

31 



 

 

Item 4

Controls and Procedures

33 



 

 

Part II

Other Information

34 



 

 

Item 1

Legal Proceedings

34 



 

 

 

Item 1A

Risk Factors

34 

  



 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

35 



 

 

Item 3

Defaults Upon Senior Securities

35 



 

 

 

Item 4

Mine Safety Disclosures

35 

  



 

 

Item 5

Other Information

35 



 

 

Item 6

Exhibits

36 



 

 



Signatures

37 

 



 

2


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 



Item 1.  Financial Statements

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

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





 

 

 

 

 



 

 

 

 

 



December 31,

2018

 

June 30,
2018

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

149,468 

 

$

188,701 

Accounts receivable, net of allowance for doubtful accounts of $25,002 and $19,258

  at December 31, 2018 and June 30, 2018, respectively

 

477,191 

 

 

483,681 

Inventories (note 2)

 

296,511 

 

 

268,701 

Prepaid expenses and other current assets

 

140,369 

 

 

124,634 

Total current assets

 

1,063,539 

 

 

1,065,717 

Non-current assets:

 

 

 

 

 

Property, plant and equipment, net (note 3)

 

381,505 

 

 

386,550 

Goodwill (note 4)

 

1,759,045 

 

 

1,068,944 

Other intangible assets, net (note 5)

 

484,926 

 

 

215,184 

Deferred income taxes

 

32,703 

 

 

53,818 

Prepaid taxes and other non-current assets

 

138,098 

 

 

273,710 

Total non-current assets

 

2,796,277 

 

 

1,998,206 

Total assets

$

3,859,816 

 

$

3,063,923 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

110,335 

 

$

92,723 

Accrued expenses

 

191,564 

 

 

185,805 

Deferred revenue

 

72,685 

 

 

60,828 

Income taxes payable (note 7)

 

49,881 

 

 

160,427 

Short-term debt, net (note 9)

 

11,978 

 

 

11,466 

Total current liabilities

 

436,443 

 

 

511,249 

Non-current liabilities:

 

 

 

 

 

Deferred revenue

 

76,773 

 

 

71,596 

Deferred income taxes

 

79,057 

 

 

13,084 

Other long-term liabilities

 

 -

 

 

924 

Long-term debt, net (note 9)

 

1,185,500 

 

 

269,988 

Long-term income taxes payable (note 7)

 

125,999 

 

 

138,102 

Total non-current liabilities

 

1,467,329 

 

 

493,694 

Total liabilities

 

1,903,772 

 

 

1,004,943 

Commitments and contingencies (note 13)

 

 

 

 

 

Stockholders’ equity: (note 10)

 

 

 

 

 

Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued

 

 -

 

 

 -

Common stock, $0.004 par value, 350,000,000 shares authorized;

  185,115,251 issued and 143,279,017 outstanding at December 31, 2018 and

  184,315,866 issued and 142,679,632 outstanding at June 30, 2018

 

573 

 

 

571 

Additional paid-in capital

 

1,460,705 

 

 

1,450,821 

Retained earnings

 

2,368,339 

 

 

2,432,328 

Treasury stock, at cost, 41,836,234 shares at December 31, 2018 and 41,636,234 shares at June 30, 2018

 

(1,623,256)

 

 

(1,600,412)

Accumulated other comprehensive loss

 

(250,317)

 

 

(224,328)

Total stockholders’ equity

 

1,956,044 

 

 

2,058,980 

Total liabilities and stockholders’ equity

$

3,859,816 

 

$

3,063,923 

 



See the accompanying notes to the unaudited condensed consolidated financial statements.

3


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

(In US$ thousands, except per share data)





 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 



 

2018

 

2017

 

2018

 

2017

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

651,100 

 

$

601,273 

 

$

1,239,380 

 

$

1,124,932 

 

Cost of sales (excluding amortization of acquired intangible assets)

 

 

267,369 

 

 

251,481 

 

 

512,556 

 

 

469,535 

 

Gross profit

 

 

383,731 

 

 

349,792 

 

 

726,824 

 

 

655,397 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

161,579 

 

 

151,816 

 

 

308,881 

 

 

295,666 

 

Research and development

 

 

43,111 

 

 

40,643 

 

 

81,902 

 

 

78,058 

 

Amortization of acquired intangible assets

 

 

15,840 

 

 

11,317 

 

 

28,707 

 

 

23,099 

 

Acquisition related expenses

 

 

6,123 

 

 

 -

 

 

6,123 

 

 

 -

 

Total operating expenses

 

 

226,653 

 

 

203,776 

 

 

425,613 

 

 

396,823 

 

Income from operations

 

 

157,078 

 

 

146,016 

 

 

301,211 

 

 

258,574 

 

Other income (loss), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

678 

 

 

4,579 

 

 

1,600 

 

 

9,449 

 

Interest expense

 

 

(7,487)

 

 

(7,370)

 

 

(11,195)

 

 

(15,155)

 

Loss attributable to equity method investments (note 6)

 

 

(3,375)

 

 

 -

 

 

(3,375)

 

 

 -

 

Other, net

 

 

(621)

 

 

(1,460)

 

 

(3,086)

 

 

(2,618)

 

Total other income (loss), net

 

 

(10,805)

 

 

(4,251)

 

 

(16,056)

 

 

(8,324)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

146,273 

 

 

141,765 

 

 

285,155 

 

 

250,250 

 

Income taxes

 

 

21,634 

 

 

132,238 

 

 

54,778 

 

 

154,599 

 

Net income

 

$

124,639 

 

$

9,527 

 

$

230,377 

 

$

95,651 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (note 11)

 

$

0.87 

 

$

0.07 

 

$

1.61 

 

$

0.67 

 

Diluted earnings per share (note 11)

 

$

0.86 

 

$

0.07 

 

$

1.60 

 

$

0.67 

 

Dividend declared per share

 

$

0.37 

 

$

0.35 

 

$

0.74 

 

$

0.70 

 

Basic shares outstanding (000's)

 

 

142,923 

 

 

142,715 

 

 

142,796 

 

 

142,511 

 

Diluted shares outstanding (000's)

 

 

144,349 

 

 

143,855 

 

 

144,418 

 

 

143,757 

 

 



See the accompanying notes to the unaudited condensed consolidated financial statements.

4


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

 

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In US$ thousands)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended
December 31,

 

Six Months Ended
December 31,



 

2018

 

2017

 

2018

 

2017

Net income

 

$

124,639 

 

$

9,527 

 

$

230,377 

 

$

95,651 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) gain adjustments

 

 

(13,117)

 

 

4,450 

 

 

(25,989)

 

 

40,839 

Comprehensive income (loss)

 

$

111,522 

 

$

13,977 

 

$

204,388 

 

$

136,490 

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

5


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In US$ thousands)



 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended
December 31,



 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

230,377 

 

$

95,651 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

66,453 

 

 

58,945 

Stock-based compensation costs

 

 

25,011 

 

 

23,958 

Loss attributable to equity method investments (note 6)

 

 

3,375 

 

 

 -

Impairment of equity investments (note 6)

 

 

2,959 

 

 

2,254 

Changes in fair value of business combination contingent consideration (note 12)

 

 

(272)

 

 

 -

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

 

 

 

 

 

 

Accounts receivable

 

 

32,366 

 

 

(26,145)

Inventories

 

 

(30,570)

 

 

(20,760)

Prepaid expenses, net deferred income taxes and other current assets

 

 

(26,922)

 

 

(2,858)

Accounts payable, accrued expenses and other

 

 

(125,190)

 

 

95,489 

Net cash provided by operating activities

 

 

177,587 

 

 

226,534 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(31,425)

 

 

(32,000)

Patent registration costs

 

 

(4,643)

 

 

(4,624)

Business acquisitions, net of cash acquired

 

 

(739,249)

 

 

 -

Purchases of investments (note 6)

 

 

(27,967)

 

 

(3,725)

Proceeds (payments) on maturity of foreign currency contracts

 

 

(3,127)

 

 

(3,330)

Net cash used in investing activities

 

 

(806,411)

 

 

(43,679)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

12,784 

 

 

20,440 

Taxes paid related to net share settlement of equity awards

 

 

(27,340)

 

 

(13,853)

Purchases of treasury stock

 

 

(22,844)

 

 

(8,541)

Payments of business combination contingent consideration (note 12)

 

 

(430)

 

 

 -

Proceeds from borrowings, net of borrowing costs

 

 

1,091,230 

 

 

50,000 

Repayment of borrowings

 

 

(352,798)

 

 

(110,000)

Dividend paid

 

 

(105,567)

 

 

(99,553)

Net cash provided by (used in) financing activities

 

 

595,035 

 

 

(161,507)

Effect of exchange rate changes on cash

 

 

(5,444)

 

 

15,616 

Net increase (decrease) in cash and cash equivalents

 

 

(39,233)

 

 

36,964 

Cash and cash equivalents at beginning of period

 

 

188,701 

 

 

821,935 

Cash and cash equivalents at end of period

 

$

149,468 

 

$

858,899 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Income taxes paid, net of refunds

 

$

192,497 

 

$

51,456 

Interest paid

 

$

11,195 

 

$

15,155 



 

 

 

 

 

 

Fair value of assets acquired, excluding cash

 

$

343,470 

 

$

 -

Liabilities assumed

 

 

(298,554)

 

 

 -

Goodwill on acquisition

 

 

695,353 

 

 

 -

Deferred payments

 

 

(852)

 

 

 -

Fair value of contingent consideration

 

 

(168)

 

 

 -

Cash paid for acquisition

 

$

739,249 

 

$

 -



 



 

See the accompanying notes to the unaudited condensed consolidated financial statements.

6


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(1)      Summary of Significant Accounting Policies



Organization and Basis of Presentation



ResMed Inc. (referred to herein as “we”, “us”, “our” or the “Company”) is a Delaware corporation formed in March 1994 as a holding company for the ResMed Group.  Through our subsidiaries, we design, manufacture and market equipment for the diagnosis and treatment of sleep-disordered breathing and other respiratory disorders, including obstructive sleep apnea.  Our manufacturing operations are located in Australia, Singapore, Malaysia, France, China and the United States.  Major distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia, Japan, China, Norway and Sweden.



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and the rules of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending June 30, 2019.



The condensed consolidated financial statements for the three and six months ended December 31, 2018 and December 31, 2017 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, 2018.



Revenue Recognition



We adopted Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” on July 1, 2018. We account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. Our revenue relates primarily to the sale of our products that are therapy-based equipment. Some contracts include additional performance obligations such as the provision of extended warranties and data for patient monitoring. Our software as a service (“SaaS”) business offers software access with ongoing support and maintenance services as well as professional services such as training and consulting.



Disaggregation of revenue

The following table summarizes our net revenue disaggregated by product and region for the three and six months ended December 31, 2018 compared to December 31, 2017 (in millions):









 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended
December 31,

 

Six Months Ended
December 31,



 

2018

 

2017

 

2018

 

2017

U.S., Canada and Latin America

 

 

 

 

 

 

 

 

 

 

 

 

Devices

 

$

186.5 

 

$

173.7 

 

$

358.9 

 

$

331.6 

Masks and other

 

 

172.0 

 

 

155.5 

 

 

326.1 

 

 

294.2 

Total Sleep and Respiratory Care

 

$

358.5 

 

$

329.2 

 

$

685.0 

 

$

625.8 

Software as a Service

 

 

63.2 

 

 

38.7 

 

 

110.7 

 

 

76.8 

Total

 

$

421.7 

 

$

367.9 

 

$

795.7 

 

$

702.6 

 

 

 

  

 

 

 

 

 

  

 

 

 

Combined Europe, Asia and other markets

 

 

 

 

 

 

 

 

 

 

 

 

Devices

 

$

156.2 

 

$

163.3 

 

$

307.9 

 

$

291.6 

Masks and other

 

 

73.2 

 

 

70.1 

 

 

135.8 

 

 

130.7 

Total Sleep and Respiratory Care

 

$

229.4 

 

$

233.4 

 

$

443.7 

 

$

422.3 

 

 

 

   

 

 

 

 

 

   

 

 

 

Global revenue

 

 

 

 

 

 

 

 

 

 

 

 

Devices

 

$

342.7 

 

$

337.0 

 

$

666.8 

 

$

623.2 

Masks and other

 

 

245.2 

 

 

225.6 

 

 

461.9 

 

 

424.9 

Total Sleep and Respiratory Care

 

$

587.9 

 

$

562.6 

 

$

1,128.7 

 

$

1,048.1 

Software as a Service

 

 

63.2 

 

 

38.7 

 

 

110.7 

 

 

76.8 

Total

 

$

651.1 

 

$

601.3 

 

$

1,239.4 

 

$

1,124.9 









7


 

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PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Performance obligations and contract balances

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; generally this occurs with the transfer of risk and/or control of our products are provided at a point in time. For most products, we transfer control and recognize a sale when products are shipped to the customer in accordance with the contractual shipping terms. For our SaaS business, revenue associated with professional services are recognized as they are provided. We defer the recognition of a portion of the consideration received when performance obligations are not yet satisfied. Consideration received from customers in advance of revenue recognition is classified as deferred revenue. Performance obligations resulting in deferred revenue relate primarily to extended warranties on our devices, the provision of data for patient monitoring, the provision of software access with maintenance and support over an agreed term and material rights associated with future discounts upon renewal of some SaaS contracts. Generally, deferred revenue will be recognized over a period of one to five years. The following table summarizes our contract balances at December 31, 2018 and June 30, 2018 (in thousands):













 

 

 

 

 

 

 

 



 

December 31,
2018

 

June 30,
2018

 

Balance sheet caption

Contract assets

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

477,191 

 

$

483,681 

 

Accounts receivable, net

Unbilled revenue, current

 

 

13,624 

 

 

13,342 

 

Prepaid expenses and other current assets

Unbilled revenue, non-current

 

 

3,715 

 

 

2,973 

 

Prepaid taxes and other non-current assets

 

 

 

  

 

 

 

 

 

Contract liabilities

 

 

 

 

 

 

 

 

Deferred revenue, current

 

 

(72,685)

 

 

(60,828)

 

Deferred revenue (current liabilities)

Deferred revenue, non-current

 

 

(76,773)

 

 

(71,596)

 

Deferred revenue (non-current liabilities)



Transaction price determination

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The amount of consideration received and revenue recognized varies with changes in marketing incentives (e.g., rebates, discounts, free goods) and returns offered to customers and their customers. When we give customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience. However, returns of products, excluding warranty related returns, are infrequent and insignificant. We adjust the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed.



We offer our customers cash or product rebates based on volume or sales targets measured over quarterly or annual periods. We estimate rebates based on each customer’s expected achievement of its targets. In accounting for these rebate programs, we reduce revenue ratably as sales occur over the rebate period by the expected value of the rebates to be returned to the customer. Rebates measured over a quarterly period are updated based on actual sales results and, therefore, no estimation is required to determine the reduction to revenue. For rebates measured over annual periods, we update our estimates on a quarterly basis based on actual sales results and updated forecasts for the remaining rebate periods. We also offer discounts to customers as part of normal business practice and these are deducted from revenue when the sale occurs.



Many of our contracts have a single performance obligation which is the shipment of our therapy-based equipment. However, when the contract has multiple performance obligations, we generally use an observable price to determine the stand-alone selling price by reference to pricing and discounting practices for the specific product or service when sold separately to similar customers. Revenue is then allocated proportionately, based on the determined stand-alone selling price, to the performance obligation.



Accounting and practical expedient elections

We have elected to account for shipping and handling activities as a fulfillment cost within cost of sales, and record shipping and handling costs collected from customers in net revenue. We have also elected for all taxes assessed by government authorities that are imposed on and concurrent with revenue-producing transactions, such as sales and value added taxes, to be excluded from revenue.  We have adopted two practical expedients including the “right to invoice” practical expedient, which allows us to recognize revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date and which is relevant for some of our SaaS contracts. The second practical expedient adopted permits relief from considering a significant financing component when the payment for the good or service is expected to be one year or less.



8


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Provision for Warranty



We provide for the estimated cost of product warranties at the time the related revenue is recognized. We determine the amount of this provision by using a financial model, which takes into consideration actual historical expenses and potential risks associated with our different products. We use this financial model to calculate the future probable expenses related to warranty and the required level of the warranty provision. Although we engage in product improvement programs and processes, our warranty obligation is affected by product failure rates and costs incurred to correct those product failures. Should actual product failure rates or estimated costs to repair those product failures differ from our estimates, we would be required to revise our estimated warranty provision.



New Accounting Pronouncements



(a)  Recently issued accounting standards not yet adopted



ASU No. 2016-02, “Leases”

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842). Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability on the balance sheet for all leases, other than those that meet the definition of a short-term lease. This update will establish a lease asset and lease liability by lessees for those leases classified as operating under current GAAP. Leases will be classified as either operating or finance under the new guidance. Operating leases will result in straight-line expense in the income statement, similar to current operating leases, and finance leases will result in more expense being recognized in the earlier years of the lease term, similar to current capital leases.  For lessors, the update will more closely align lease accounting to comparable guidance in the new revenue standards described.



The new standard is effective for us beginning in the first quarter of the year ending June 30, 2020 and early application is permitted. ASU 2016-02 will be adopted on a modified retrospective transition basis. There is a practical expedient available that would permit any leases that existed at the date of adoption to continue to be accounted for in accordance with the previous GAAP, ASC 840. We are still evaluating whether we will adopt this practical expedient.



We formed an implementation team during the year ended June 30, 2018 to oversee adoption of the new standard. The implementation team has established a project plan, collected copies of our lease agreements and implemented procedures to identify embedded leases. There are a number of steps in the team’s project plan that remain to be completed including: executing global education program, reviewing system outputs from lease data entry and balance calculations, evaluating the impact, and working through required changes to systems, business processes and controls to support the adoption of the new leases standard. While the formal impact assessment is ongoing, we expect this amendment will affect the way we account for operating leases where we are the lessee (as described above), require reassessment of how we account for revenue where we are the lessor and will result in increased disclosures for all lease arrangements. We are still evaluating the impact the standard will have on our financial statements.



(b)  Recently adopted accounting pronouncements



ASU No. 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Since its initial release, the FASB has issued several amendments to the standard, which include clarification of accounting guidance related to identification of performance obligations, intellectual property licenses, and principal vs. agent considerations. ASU 2014-09 and all subsequent amendments (collectively, the “new revenue recognition standards”) replaced most existing revenue recognition guidance in U.S. GAAP during the current quarter when it became effective. The guidance also requires improved disclosures on the nature, amount, timing, and uncertainty of revenue that is recognized.



Effective July 1, 2018, we adopted the new revenue recognition standards and applied its provisions to all contracts using the modified retrospective method. Application of the new provisions did not have a material impact on our financial statements and no cumulative-effect adjustment was calculated or recognized. The comparative information has not been restated; however, if it were there would be no change in the accounting treatment. Refer to the “Revenue Recognition” section above for further details about our revenue recognition following adoption of the new revenue recognition standards.



9


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

ASU No. 2016-01, "Financial Instruments - Overall"

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall" (Topic 825-10). The amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments, and require equity investments, other than equity-method investments, to be measured at fair value with changes in fair value recognized through net income. The amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment for impairment quarterly at each reporting period. We adopted ASU 2016-01 during the quarter ended September 30, 2018 and elected to apply the practical expedient for measuring equity investments that do not have readily determinable fair market.  Based on our elections, our strategic equity investments that do not have readily determinable fair values are measured at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identifiable or similar investments of the same issuer. The measurement alternative was applied prospectively and the adoption of ASU 2016-01 did not result in an adjustment to retained earnings.



ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory”

In October 2016, the FASB issued Accounting Standard Update ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory” (Topic 740). Under the new guidance, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 became effective during the three months ended September 30, 2018 and is required to be adopted on a modified retrospective basis, with a cumulative-effect adjustment recorded directly to retained earnings for intra-entity transfers that occur before the adoption date. Accordingly, we recognized the following reclassifications upon adoption (in thousands):





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

Balance Sheet Caption

 

As reported balance
June 30, 2018

 

Adoption of
ASU 2016-16 Increase/(Decrease)

 

Revised balance
July 1, 2018

Assets

 

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

$

124,634 

 

$

(28,947)

 

$

95,687 

Prepaid taxes and other non-current assets

 

 

273,710 

 

 

(156,406)

 

 

117,304 

Deferred income taxes

 

 

53,818 

 

 

(3,445)

 

 

50,373 

Equity

 

 

 

 

 

 

 

 

 

Retained Earnings

 

 

2,432,328 

 

 

(188,798)

 

 

2,243,530 

 



(2)      Inventories



Inventories were comprised of the following at December 31, 2018 and June 30, 2018 (in thousands):



 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,

2018

 

June 30,
2018

Raw materials

 

$

73,260 

 

$

75,415 

Work in progress

 

 

2,789 

 

 

2,453 

Finished goods

 

 

220,462 

 

 

190,833 

Total inventories

 

$

296,511 

 

$

268,701 

 

(3)      Property, Plant and Equipment



Property, plant and equipment were comprised of the following as of December 31, 2018 and June 30, 2018 (in thousands): 



 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,

2018

 

June 30,
2018

Machinery and equipment

 

$

247,576 

 

$

239,671 

Computer equipment

 

 

164,433 

 

 

155,069 

Furniture and fixtures

 

 

51,246 

 

 

51,045 

Vehicles

 

 

7,360 

 

 

7,399 

Clinical, demonstration and rental equipment

 

 

90,647 

 

 

92,229 

Leasehold improvements

 

 

33,228 

 

 

32,169 

Land

 

 

52,508 

 

 

54,089 

Buildings

 

 

223,490 

 

 

229,193 



 

 

870,488 

 

 

860,864 

Accumulated depreciation and amortization

 

 

(488,983)

 

 

(474,314)

Property, plant and equipment, net

 

$

381,505 

 

$

386,550 

 

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PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(4)      Goodwill

A reconciliation of changes in our goodwill by reportable segment is as follows (in thousands):



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Six Months Ended December 31, 2018



 

Sleep and
Respiratory Care

 

SaaS

 

Total

Balance at the beginning of the period

 

$

464,157 

 

$

604,787 

 

$

1,068,944 

Business acquisition

 

 

1,306 

 

 

694,047 

 

 

695,353 

Foreign currency translation adjustments

 

 

(5,252)

 

 

 -

 

 

(5,252)

Balance at the end of the period

 

$

460,211 

 

$

1,298,834 

 

$

1,759,045 

 

(5)      Other Intangible Assets 

Other intangible assets were comprised of the following as of December 31, 2018 and June 30, 2018 (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,
2018

 

June 30,
2018

Developed/core product technology

 

$

315,220 

 

$

205,149 

Accumulated amortization

 

 

(131,704)

 

 

(115,237)

Developed/core product technology, net

 

 

183,516 

 

 

89,912 

Trade names

 

 

72,623 

 

 

48,832 

Accumulated amortization

 

 

(20,397)

 

 

(16,868)

Trade names, net

 

 

52,226 

 

 

31,964 

Non-compete agreements

 

 

4,222 

 

 

3,288 

Accumulated amortization

 

 

(2,449)

 

 

(2,283)

Non-compete agreements, net

 

 

1,773 

 

 

1,005 

Customer relationships

 

 

280,068 

 

 

118,084 

Accumulated amortization

 

 

(54,192)

 

 

(48,157)

Customer relationships, net

 

 

225,876 

 

 

69,927 

Patents

 

 

92,089 

 

 

91,708 

Accumulated amortization

 

 

(70,554)

 

 

(69,332)

Patents, net

 

 

21,535 

 

 

22,376 

Total other intangibles, net

 

$

484,926 

 

$

215,184 



Intangible assets consist of developed/core product technology, trade names, non-compete agreements, customer relationships, and patents, which we amortize over the estimated useful life of the assets, generally between two and fifteen years. There are no expected residual values related to these intangible assets.

 

(6)      Investments



Investments whereby we do not have significant influence or control over the investee are accounted for initially at cost. These investments include our holdings in privately held service and research companies that are not exchange traded and therefore not supported with observable market prices. We have determined that these investments do not have readily determinable fair values and are therefore revalued only when there are observable price changes in orderly transactions for identifiable or similar investments of the same issuer. We also estimate the fair value of our equity investments to assess whether impairment losses shall be recorded using Level 3 inputs. However, these investments are valued by reference to their net asset values that can be market supported and unobservable inputs including future cash flows. During the six months ended December 31, 2018 and 2017, we recognized $3.0 million and $2.3 million, respectively, of impairment losses related to our equity investments. The carrying amount of all investments at December 31, 2018 and June 30, 2018, was $62.9 million and $41.2 million, respectively



Equity investments whereby we have significant influence but not control over the investee, and are not the primary beneficiary of the investee’s activities, are accounted for under the equity method. Under this method, we record our share of gains or losses attributable to equity method investments. The carrying amount of these investments at December 31, 2018 and December 31, 2017 was $21.6 million and $0.0, respectively, and is included in the non-current balance of other assets on the condensed consolidated balance sheets.



11


 

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PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

We have determined that the fair value of our investments exceed their carrying values. Investments are included in the non-current balance of other assets on the condensed consolidated balance sheets. The following table shows a reconciliation of the changes in all of our investments during the six months ended December 31, 2018 and December 31, 2017 (in thousands):





 

 

 

 

 

 



 

Six Months Ended
December 31,

Investments

 

2018

 

2017

Balance at the beginning of the period

 

$

41,226 

 

$

38,324 

Investments

 

 

27,967 

 

 

3,725 

Impairment of investments

 

 

(2,959)

 

 

(2,254)

Loss attributable to equity method investments

 

 

(3,375)

 

 

 -

Balance at the end of the period

 

$

62,859 

 

$

39,795 

 

(7)      Income Taxes



In accordance with ASC 740 Income Taxes, each interim reporting period is considered integral to the annual period, and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.



Our income tax returns are based on calculations and assumptions subject to audit by various tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws.  We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes. Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results. 



In connection with the audit by the Australian Taxation Office (“ATO”) for the tax years 2009 to 2013, we received Notices of Amended Assessments in March 2018. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed or $75.9 million. We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position. At December 31, 2018, we have recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. We are also currently under audit by the ATO for the tax years 2014 to 2017.



On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118 (“SAB 118”), Income Tax Accounting Implications of the Tax Cuts and Jobs Act directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. In accordance with SAB 118, we recognized estimated income tax expense of $138.0 million during the year ended June 30, 2018 based on our best estimate and interpretation of the U.S. legislation.  During the six months ended December 31, 2018, we recorded an additional $1.2 million of tax expense relating to the transition tax.  Effective December 31, 2018, the accounting relating to the impact of U.S. legislation is no longer considered provisional.  However, further adjustments could be made to this calculation as a result of future legislation, amended tax returns, or tax examinations of the years impacted by the calculation.

 

(8)      Product Warranties



Changes in the liability for warranty costs, which is included in accrued expenses in our condensed consolidated balance sheets, for the six months ended December 31, 2018 and December 31, 2017, are as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended
December 31,



 

2018

 

2017

Balance at the beginning of the period

 

$

19,227 

 

$

19,558 

Warranty accruals for the period

 

 

7,832 

 

 

8,375 

Warranty costs incurred for the period

 

 

(7,253)

 

 

(7,493)

Foreign currency translation adjustments

 

 

(431)

 

 

423 

Balance at the end of the period

 

$

19,375 

 

$

20,863 

 

12


 

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PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(9)      Debt

Debt at December 31, 2018 and June 30, 2018 consisted of the following (in thousands):



 

 

 

 

 

 



 

 

 

 

 

 



 

December 31,
2018

 

June 30,
2018

Short-term debt

 

$

12,000 

 

$

12,000 

Deferred borrowing costs

 

 

(22)

 

 

(534)

Short-term debt, net

 

 

11,978 

 

 

11,466 



 

 

 -

 

 

 

Long-term debt

 

$

1,189,404 

 

$

272,000 

Deferred borrowing costs

 

 

(3,904)

 

 

(2,012)

Long-term debt, net

 

$

1,185,500 

 

$

269,988 

Total debt

 

$

1,197,478 

 

$

281,454 



Credit Facility



On April 17, 2018, we entered into an amended and restated credit agreement (the “Revolving Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, joint book runner, swing line lender and letter of credit issuer, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner. The Amended and Restated Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $800.0 million, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million.



Additionally, on April 17, 2018, ResMed Limited entered into a Syndicated Facility Agreement (the “Term Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger and joint book runner, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner. The Term Credit Agreement, among other things, provides ResMed Limited a senior unsecured term credit facility of $200.0 million. 



On November 5, 2018, we entered into a first amendment to the Revolving Credit Agreement to, among other things, increase the size of our senior unsecured revolving credit facility from $800.0 million to $1.6 billion, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million.



Our obligations under the Revolving Credit Agreement are guaranteed by certain of our direct and indirect U.S. subsidiaries, and ResMed Limited’s obligations under the Term Credit Agreement are guaranteed by us and certain of our direct and indirect U.S. subsidiaries. The Revolving Credit Agreement and Term Credit Agreement contain customary covenants, including, in each case, a financial covenant that requires that we maintain a maximum leverage ratio of funded debt to EBITDA (as defined in the Revolving Credit Agreement and Term Credit Agreement, as applicable). The entire principal amounts of the revolving credit facility and term credit facility, and, in each case, any accrued but unpaid interest may be declared immediately due and payable if an event of default occurs, as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable. Events of default under the Revolving Credit Agreement and the Term Credit Agreement include, in each case, failure to make payments when due, the occurrence of a default in the performance of any covenants in the respective agreements or related documents, or certain changes of control of us,  or the respective guarantors of the obligations borrowed under the Revolving Credit Agreement and Term Credit Agreement. 



The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023, when all unpaid principal and interest under the loans must be repaid. Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $6.0 million principal payment required on each such semi-annual amortization date. The outstanding principal amounts will bear interest at a rate equal to LIBOR plus 0.75% to 1.50% (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0% to 0.50% (depending on the then-applicable leverage ratio). At December 31, 2018, the interest rate that was being charged on the outstanding principal amounts was 3.3%.  An applicable commitment fee of 0.100% to 0.175% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility. At December 31, 2018, we were in compliance with our debt covenants and there was $1,197.5 million outstanding under the Revolving Credit Agreement and Term Credit Agreement.

 

13


 

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Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(10)      Stockholders’ Equity



Common Stock. Since the inception of our share repurchase programs and through December 31, 2018, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion. During the six months ended December 31, 2018, we repurchased 200,000 shares at an aggregate purchase price of $22.8 million under our share repurchase program. During the three months ended December 31, 2018 we suspended our share repurchase program due to recent acquisitions. Accordingly, we did not repurchase any shares during this period. Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share. There is no expiration date for this program, and the program may be accelerated, suspended, reinstated, delayed or discontinued at any time at the discretion of our board of directors. At December 31, 2018,  12.9 million additional shares can be repurchased under the approved share repurchase program.



Preferred Stock.    In April 1997, the board of directors designated 2.0 million shares of our $0.01 par value preferred stock as Series A Junior Participating Preferred Stock. No shares were issued or outstanding at December 31, 2018 and June 30, 2018.



Stock Options and Restricted Stock Units.    We have granted stock options and restricted stock units to personnel, including officers and directors, in accordance with the amended and restated ResMed Inc. 2009 Incentive Award Plan (as amended and restated, the “2009 Plan”).  The options have expiration dates of seven years from the date of grant and the options and restricted stock units vest over one to four years. 



At December 31, 2018, the maximum number of shares of our common stock authorized for issuance under the 2009 Plan was 51.1 million shares. The number of securities remaining available for future issuance under the 2009 Plan at December 31, 2018 was 16.4 million.

The following table summarizes option activity during the six months ended December 31, 2018:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Options

 

Weighted
Average
Exercise
Price

 

Weighted
Average
Remaining
Contractual
Term in Years

Outstanding at beginning of period

 

 

1,205,826 

 

$

60.48 

 

4.4

Granted

 

 

289,474 

 

 

101.64 

 

 

Exercised

 

 

(47,744)

 

 

46.26 

 

 

Forfeited

 

 

(183)

 

 

52.02 

 

 

Outstanding at end of period

 

 

1,447,373 

 

$

69.18 

 

4.5

Exercise price of granted options

 

$

101.64 

 

 

 

 

 

Options exercisable at end of period

 

 

895,846 

 

$

56.92 

 

 



The following table summarizes the activity of restricted stock units during the six months ended December 31, 2018:



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

Restricted
Stock
Units

 

Weighted
Average
Grant-Date
Fair Value

 

Weighted
Average
Remaining
Contractual
Term in Years

Outstanding at beginning of period

 

 

1,644,754 

 

$

62.90 

 

1.6

Granted

 

 

705,538 

 

 

98.42 

 

 

Vested

 

 

(886,655)

 

 

57.32 

 

 

Expired / cancelled

 

 

(22,459)

 

 

63.60 

 

 

Forfeited

 

 

(898)

 

 

63.60 

 

 

Outstanding at end of period

 

 

1,440,280 

 

$

75.80 

 

2.1



Employee Stock Purchase Plan (the “ESPP”).    Under the ESPP, we offer participants the right to purchase shares of our common stock at a discount during successive offering periods. During the six months ended December 31, 2018 and December 31, 2017, we issued 129,000 and 148,000 shares to our employees associated with the ESPP, respectively. At December 31, 2018, the number of shares remaining available for future issuance under the ESPP is 2.4 million shares.



At the annual meeting of our stockholders in November 2018, our stockholders approved an amendment and restatement to the 2009 Plan to increase the number of shares of common stock that may be issued or transferred pursuant to awards under the 2009 Plan by 2.0 million shares, from 4.2 million to 6.2 million shares. The amendment also renamed the plan as “the ResMed Inc. 2018 Employee Stock Purchase

Plan,” and extended the term by ten years, so that the plan expires on November 15, 2028. The amendment became effective August 17, 2018, the date it was adopted by our board of directors.

 

14


 

Table of Contents

 

 

 

PART I – FINANCIAL INFORMATION

Item 1

 

RESMED INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

(11)      Earnings Per Share



Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.



Stock options and restricted units of 161,036 and 126,390 for the three months ended December 31, 2018 and December 31, 2017 and stock options and restricted units of 85,521 and 159,603 for the six months ended December 31, 2018 and December 31, 2017, respectively, were not included in the computation of diluted earnings per share as the effect would have been anti-dilutive.



Basic and diluted earnings per share for the three and six months ended December 31, 2018 and December 31, 2017 are calculated as follows (in thousands except per share data):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended
December 31,

 

Six Months Ended
December 31,



 

2018

 

2017

 

2018

 

2017

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

124,639 

 

$

9,527 

 

$

230,377 

 

$

95,651 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares outstanding

 

 

142,923 

 

 

142,715 

 

 

142,796 

 

 

142,511 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted stock units

 

 

1,426 

 

 

1,140 

 

 

1,622 

 

 

1,246 

Diluted weighted average shares

 

 

144,349 

 

 

143,855 

 

 

144,418 

 

 

143,757 

Basic earnings per share

 

$

0.87 

 

$

0.07 

 

$

1.61 

 

$

0.67 

Diluted earnings per share

 

$

0.86 

 

$

0.07 

 

$

1.60 

 

$

0.67 

 



(12)      Fair Value Measurements



In determining the fair value measurements of our financial assets and liabilities, we consider the principal and most advantageous market in which we transact and consider assumptions that market participants would use when pricing the financial asset or liability. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.



The hierarchies of inputs are as follows:





 

 

 



Level 1:

Input prices quoted in an active market for identical financial assets or liabilities;



Level 2:

Inputs other than prices quoted in Level 1, such as prices quoted for similar financial assets and liabilities in active markets, prices for identical assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data; and



Level 3

Input prices quoted that are significant to the fair value of the financial assets or liabilities which are not observable nor supported by an active market.



The following table summarizes our financial assets and liabilities at December 31, 2018 and June 30, 2018, using the valuation input hierarchy (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Level 1

 

Level 2

 

Level 3

 

Total

Balances at December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency hedging instruments, net

 

$

 -

 

$

(560)

 

$

 -

 

$

(560)

Business acquisition contingent consideration

 

$

 -

 

$

 -

 

$

(971)

 

$

(971)

Balances at June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency hedging instruments, net

 

$

 -

 

$

(2,699)

 

$

 -

 

$

(2,699)

Business acquisition contingent consideration

 

$

 -

 

$

 -

 

$

(1,505)

 

$

(1,505)



We determine the fair value of our financial assets and liabilities as follows: