SAN DIEGO, May 4 /PRNewswire-FirstCall/ -- ResMed Inc. today announced record revenue and income results for the quarter ended March 31, 2006. Revenue for the quarter was $162.3 million, a 50% increase over the quarter ended March 31, 2005. For the current quarter, pro forma income from operations and pro forma net income were $42.0 million and $30.1 million, an increase of 47% and 59% 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 March 31, 2006 were $0.39, an increase of 50%, compared to the March 2005 quarter. GAAP operating income was $36.7 million for the current quarter, while net income was $26.4 million or $0.34 per diluted share. Gross margin was 62% for the quarter ended March 31, 2006.
Pro forma selling, general and administration (SG&A) costs for the quarter were $50.1 million, an increase of $15.6 million, or 45%, over the same period in fiscal 2005. GAAP SG&A costs were $52.9 million for the quarter, an increase of $18.5 million, or 54%. The increase in SG&A was primarily due to recent acquisitions, the addition of selling and administration personnel, and infrastructure investment in Europe. Pro forma SG&A costs were 31% of revenue in the March quarter, compared to 32% in the same period in fiscal 2005. During the quarter, ResMed also donated $505,000 to the ResMed Foundations, which promote research and awareness of the serious medical consequences of untreated sleep-disordered breathing.
Research & development expenditure was $8.7 million for the quarter, excluding stock-based compensation costs. GAAP R&D expense during the quarter was $9.1 million or approximately 6% of revenue. GAAP R&D expenses increased 26% year over year and are expected to remain at about 6% of net revenue through the end of this fiscal year.
For the nine months ended March 31, 2006, revenue was $435.8 million, an increase of 45% over the $300.1 million for the nine months ended March 31, 2005. For the nine months ended March 31, 2006, pro forma income from operations and pro forma net income were $110.7 million and $77.6 million, an increase of 42% and 49% respectively. On a GAAP basis, income from operations was $93.5 million, while net income for the nine months ended March 31, 2006 was $65.1 million or $0.87 per diluted share.
Amortization of acquired intangibles of $1.6 million ($1.0 million net of tax), incurred during the quarter ended March 31, 2006 consisted of amortization of acquired intangible assets associated with our acquisitions of Resprecare, Hoefner, Saime, Pulmomed and PolarMed. Stock-based compensation costs incurred during the quarter ended March 31, 2006, of $3.7 million ($2.7 million net of tax), consisted of expenses associated with stock options granted to employees and the employee stock purchase plan. The recognition of these stock-based compensation expenses is in accordance with SFAS No. 123(R), which was adopted for the first time in the quarter ended September 30, 2005. No restructuring expenses were incurred during the quarter ended March 31, 2006.
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 intangibles, for the three month and nine month periods ended March 31, 2006 and March 31, 2005.
Inventory at $108.7 million, increased by $1.2 million compared to December 2005 levels. Accounts receivable days sales outstanding, at 68 days, decreased compared to the December 2005 quarter of 70 days.
Peter C. Farrell PhD, Chairman and Chief Executive Officer, commented, “In the third quarter of fiscal 2006, sales in the Americas increased by a record 49 percent over the year ago quarter to $86.2 million, reflecting continued strong demand for both our nasal and full face masks, and our S8(TM) flow generator platform. International sales, including incremental revenue contributions from the acquisitions of Resprecare, Hoefner, Saime, Pulmomed and PolarMed, totaled $76.1 million, a 51 percent increase over last year. Net income for the March quarter, excluding stock-based compensation costs, restructuring, and amortization of intangibles, was $30.1 million, an increase of 59 percent over the same period in 2005, driven primarily by strong sales growth. Our operating cash flow for the March quarter was a robust $32.8 million.”
Dr. Farrell continued, “We also remain encouraged with the progress we continue to make in targeting sleep-disordered breathing in heart failure, as well as in other co-morbidities. It is particularly encouraging for us to note that various affected medical specialties are gradually waking up to sleep and the impact that untreated sleep-disordered breathing is having on specific illnesses.”
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 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) 314-5232 (domestic) or +1 (617) 213-8052 (international) and entering participant passcode 90672494. 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 one hour 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 passcode 40216735.
Further information can be obtained by contacting Matthew Borer at ResMed Inc. San Diego (858) 746-2280; Brett Sandercock at ResMed Limited Sydney on (+61 2) 9886-5406; 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.
RESMED INC. & SUBSIDIARIES Consolidated Statements of Income (Unaudited) (In US$ thousands, except per share data) Three months ended Nine months ended March 31, March 31, 2006 2005 2006 2005 Net revenue $162,280 $108,454 $435,824 $300,080 Cost of sales (A) 61,414 38,159 163,113 104,996 Gross profit 100,866 70,295 272,711 195,084 Operating expenses: Selling, general and administrative (A) 52,903 34,449 146,478 94,582 Donations to foundations 505 -- 760 500 Research and development (A) 9,143 7,240 26,155 21,901 Amortization of acquired intangible assets 1,570 -- 4,661 -- Restructuring expenses -- 1,579 1,124 4,505 Total operating expenses 64,121 43,268 179,178 121,488 Income from operations 36,745 27,027 93,533 73,596 Other income (expenses), net Interest income (expense), net 1,220 9 (471) (471) Other, net 153 (340) 1,471 370 Total other income (expenses), net 1,373 (331) 1,000 (101) Income before income taxes 38,118 26,696 94,533 73,495 Income taxes 11,756 8,819 29,415 24,288 Net income $26,362 $17,877 $65,118 $49,207 Basic earnings per share $0.36 $0.26 $0.91 $0.72 Diluted earnings per share(1) $0.34 $0.25 $0.87 $0.69 Pro forma diluted earnings $0.39 $0.26 $1.02 $0.73 per share excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangibles (1) & (2) Basic shares outstanding 72,549 68,964 71,242 68,254 Diluted shares outstanding (1) 77,403 75,490 76,922 74,649 (A) Includes stock-based compensation costs as follows: Cost of sales $348 $ -- $560 $ -- Selling, general and administrative 2,833 -- 9,285 -- Research and development 486 -- 1,535 -- Total stock-based compensation costs $3,667 $ -- $11,380 $ -- (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. RESMED INC. & SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (In US$ thousands except share and per share data) March 31, June 30, 2006 2005 Assets Current assets: Cash and cash equivalents $166,161 $142,185 Marketable securities - available for sale 2,002 -- Accounts receivable, net 127,179 103,951 Inventories 108,744 89,107 Deferred income taxes 18,861 15,230 Prepaid expenses and other current assets 9,676 9,737 Total current assets 432,623 360,210 Property, plant and equipment, net 222,918 174,168 Goodwill 188,717 181,106 Other intangibles 47,934 49,371 Other assets 6,928 9,291 Total Non current assets 466,497 413,936 Total assets $899,120 $774,146 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $35,333 $34,416 Accrued expenses 38,339 34,414 Deferred revenue 13,984 12,327 Income taxes payable 20,723 21,959 Current portion of long-term debt 2,148 115,435 Total current liabilities 110,527 218,551 Non Current Liabilities: Deferred income taxes 9,337 11,695 Deferred revenue 10,638 10,901 Long-term debt 94,283 58,934 Total Non-current liabilities 114,258 81,530 Total liabilities $224,785 $300,081 Stockholders’ Equity: Common Stock 301 280 Additional paid-in capital 334,802 179,865 Retained earnings 347,559 282,441 Treasury stock (41,405) (41,405) Accumulated other comprehensive income 33,078 52,884 Total stockholders’ equity 674,335 474,065 Total liabilities and stockholders’ equity $899,120 $774,146 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 Nine Months Ended Ended March 31, March 31, 2006 2005 2006 2005 GAAP operating income 36,745 27,027 93,533 73,596 Stock-based compensation costs 3,667 -- 11,380 -- Restructuring expenses -- 1,579 1,124 4,505 Amortization of acquired intangible assets 1,570 -- 4,661 -- Pro forma operating income (excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets) 41,982 28,606 110,698 78,101 The measure, “pro forma net income” is reconciled with GAAP net income in the table below: Three Months Nine Months Ended Ended March 31, March 31, 2006 2005 2006 2005 GAAP net income 26,362 17,877 65,118 49,207 Stock-based compensation costs, net of tax 2,653 -- 8,694 -- Restructuring expenses, net of tax -- 1,011 718 2,816 Amortization of acquired intangible assets, net of tax 1,037 -- 3,072 -- Pro forma net income (excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets) 30,052 18,888 77,602 52,023
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. 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.
The Company initially adopted SFAS No. 123(R) on July 1, 2005 using the modified prospective method, which resulted in stock-based compensation expenses being recognized during the three months and nine months ended March 31, 2006 without corresponding expenses in the same periods in fiscal 2005. 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 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.
Reconciliation of Basic and Diluted Earnings per Share (Unaudited) (Dollars in thousands except per share amounts) Three Months Nine Months Ended Ended March 31, March 31, 2006 2005 2006 2005 Numerator: Net Income $26,362 $17,877 $65,118 $49,207 Adjustment for interest and deferred borrowing costs, net of income tax effect (1) -- 821 1,660 2,464 Net income, used in calculating diluted earnings per share $26,362 $18,698 $66,778 $51,671 Adjustment for stock-based compensation costs 2,653 -- 8,694 -- Adjustment for restructuring expenses -- 1,011 718 2,816 Adjustment for Amortization of acquired intangible assets 1,037 -- 3,072 -- 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 30,052 19,709 79,262 54,487 Denominator: Basic weighted-average common shares outstanding 72,549 68,964 71,242 68,254 Effect of dilutive securities: Stock options 2,307 2,788 2,339 2,657 Convertible subordinated notes (1) 2,547 3,738 3,341 3,738 Diluted potential common shares 4,854 6,526 5,680 6,395 Diluted weighted average shares 77,403 75,490 76,922 74,649 Increase in diluted weighted average shares: Stock option adjustment due to the impact of SFAS 123(R) 412 -- 414 -- Pro forma diluted weighted average shares, excluding the impact of SFAS 123(R) 77,815 75,490 77,336 74,649 Basic earnings per share $0.36 $0.26 $0.91 $0.72 Diluted earnings per share $0.34 $0.25 $0.87 $0.69 Pro forma diluted earnings per share, excluding the impact of stock-based compensation costs, restructuring expenses and amortization of acquired intangible assets $0.39 $0.26 $1.02 $0.73 (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 March 31, 2006 by $NIL (2005: $821,000) and for the nine months ended March 31 2006, by $1,660,000 (2005: $2,464,000).
ResMed Inc.
CONTACT: Matthew Borer of ResMed Inc., +1-858-746-2280; or BrettSandercock of ResMed Limited Sydney, +61 2 9886-5406
Web site: http://www.resmed.com//
