ResMed Inc. Announces Results for the Fourth Quarter of Fiscal Year 2016
"We finished the year with double-digit constant currency revenue growth, fueled by solid performance in masks, devices, and our first quarter of software-as-a-service revenue from Brightree. Our board of directors has declared a 10 percent increase in our dividend this quarter, reflecting confidence in our long-term strategy and outlook," said
Mick Farrell,
"We are the world's largest provider of remote connected care solutions with over 2 million patients using
Farrell concluded, "Our global team ended fiscal year 2016 with
Analysis of fourth quarter results
Fourth quarter revenue in the
Gross margin in the fourth quarter was 58.1 percent. Non-GAAP gross margin in the fourth quarter was 58.2 percent. This excludes a one-time purchase accounting adjustment of
Income from operations for the quarter was
Selling, general and administrative expenses were
Research and development expenses were
Amortization of acquired intangible assets was
Net income for the quarter was
Cash flow from operations for the quarter was
Impact to income tax expense with the adoption of ASU 2016-09
During the quarter we adopted ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting", and in accordance with this standard we recognized additional income tax benefits of
Analysis of fiscal year 2016 results
Revenue for the year increased 10 percent over the prior year to
Income from operations for the year was
Net income for the year was
Cash flow from operations for the year was
Share repurchase program
As previously announced, we have temporarily suspended our share repurchase program due to recent acquisitions. We did not repurchase any shares during the fourth quarter, however we may, at any time, elect to reinitiate the share repurchase program.
Dividend program
The
Webcast details
About
The global team at
Safe harbor statement
Statements contained in this release that are not historical facts are "forward-looking" statements as contemplated by the Private Securities Litigation Reform Act of 1995. These forward-looking statements—including statements regarding
RESMED INC AND SUBSIDIARIES | ||||
Condensed Consolidated Statements of Income (Unaudited) | ||||
(In thousands, except per share data) | ||||
Three Months Ended |
Twelve Months Ended | |||
2016 |
2015 |
2016 |
2015 | |
Net revenue |
\\$518,647 |
\\$453,064 |
\\$1,838,713 |
\\$1,678,912 |
Cost of sales |
217,560 |
188,605 |
775,020 |
662,487 |
SERVE-HF field safety notice expenses (1) |
(402) |
5,029 |
(2,804) |
5,029 |
Gross profit |
301,489 |
259,430 |
1,066,497 |
1,011,396 |
Operating expenses: |
||||
Selling, general and administrative |
133,929 |
123,250 |
482,593 |
472,627 |
Research and development |
34,380 |
28,523 |
118,651 |
114,865 |
Restructuring expenses (1) |
- |
- |
6,914 |
- |
Acquisition and integration expenses (1) |
1,914 |
- |
5,464 |
- |
Donations (1) |
- |
6,000 |
- |
6,000 |
Amortization of acquired intangible assets |
12,629 |
2,110 |
23,923 |
8,668 |
Total operating expenses |
182,852 |
159,883 |
637,545 |
602,160 |
Income from operations (1) |
118,637 |
99,547 |
428,952 |
409,236 |
Other income (expenses), net: |
||||
Interest income (expense), net |
(2,374) |
4,666 |
5,654 |
20,430 |
Other, net |
1,168 |
(97) |
4,959 |
6,250 |
Total other income (expenses), net |
(1,206) |
4,569 |
10,613 |
26,680 |
Income before income taxes |
117,431 |
104,116 |
439,565 |
435,916 |
Income taxes |
34,305 |
16,654 |
87,157 |
83,030 |
Net income (1) |
\\$83,126 |
\\$87,462 |
\\$352,408 |
\\$352,886 |
Basic earnings per share |
\\$0.59 |
\\$0.62 |
\\$2.51 |
\\$2.51 |
Diluted earnings per share (1) |
\\$0.59 |
\\$0.61 |
\\$2.49 |
\\$2.47 |
Non-GAAP diluted earnings per share (1) |
\\$0.74 |
\\$0.68 |
\\$2.68 |
\\$2.57 |
Basic shares outstanding |
140,551 |
140,819 |
140,242 |
140,468 |
Diluted shares outstanding |
141,654 |
142,702 |
141,669 |
142,687 |
(1) |
See the reconciliation of non-GAAP financial measures in the table at the end of the press release. |
RESMED INC AND SUBSIDIARIES | ||
Condensed Consolidated Balance Sheets (Unaudited - In thousands) | ||
June 30, |
June 30, | |
2016 |
2015 | |
Assets |
||
Current assets: |
||
Cash and cash equivalents |
\\$731,434 |
\\$717,249 |
Accounts receivable, net |
382,086 |
362,568 |
Inventories |
224,456 |
246,859 |
Prepayments and other current assets |
81,743 |
81,168 |
Total current assets |
1,419,719 |
1,407,844 |
Property, plant and equipment, net |
384,276 |
387,758 |
Goodwill |
1,059,245 |
264,261 |
Other intangibles, net |
299,808 |
47,142 |
Deferred income taxes and other non-current assets |
95,887 |
74,769 |
Total non-current assets |
1,839,216 |
773,930 |
Total assets |
\\$3,258,935 |
\\$2,181,774 |
Liabilities and Stockholders' Equity |
||
Current liabilities: |
||
Accounts payable |
\\$92,571 |
\\$81,112 |
Accrued expenses |
156,805 |
132,976 |
Deferred revenue |
50,009 |
36,097 |
Income taxes payable |
39,166 |
16,278 |
Short-term debt |
300,000 |
- |
Total current liabilities |
638,551 |
266,463 |
Non-current liabilities: |
||
Deferred income taxes |
9,061 |
6,372 |
Deferred revenue |
40,281 |
19,284 |
Income taxes payable |
- |
1,754 |
Other long term liabilities |
1,211 |
- |
Long-term debt |
875,000 |
300,594 |
Total non-current liabilities |
925,553 |
328,004 |
Total liabilities |
1,564,104 |
594,467 |
Stockholders' Equity: |
||
Common stock |
563 |
562 |
Additional paid-in capital |
1,303,238 |
1,228,795 |
Retained earnings |
2,160,299 |
1,976,020 |
Treasury stock |
(1,546,611) |
(1,444,554) |
Accumulated other comprehensive income |
(222,658) |
(173,516) |
Total stockholders' equity |
\\$1,694,831 |
\\$1,587,307 |
Total liabilities and stockholders' equity |
\\$3,258,935 |
\\$2,181,774 |
RESMED INC AND SUBSIDIARIES | ||
Condensed Consolidated Statements of Cash Flows (Unaudited - In thousands) | ||
Twelve Months Ended | ||
2016 |
2015 | |
Cash flows from operating activities: |
||
Net income |
\\$352,408 |
\\$352,886 |
Adjustment to reconcile net income to cash provided by operating activities: |
||
Depreciation and amortization |
86,849 |
73,056 |
Impairment of long-lived asset |
2,815 |
- |
Gain on disposal of business |
- |
(709) |
Stock-based compensation costs |
46,408 |
47,855 |
Excess tax benefit from stock-based compensation arrangements (A) |
- |
(24,959) |
Impairment of cost method investment |
750 |
- |
Changes in fair value of business combination contingent consideration |
(2,986) |
|
Changes in operating assets and liabilities, net of effect of acquisitions: |
||
Accounts receivable, net |
(27,307) |
(28,259) |
Inventories, net |
30,492 |
(99,524) |
Prepaid expenses, net deferred income taxes and other current assets |
12,121 |
(22,849) |
Accounts payable, accrued expenses and other liabilities |
46,382 |
85,683 |
Net cash provided by operating activities |
547,932 |
383,180 |
Cash flows from investing activities: |
||
Purchases of property, plant and equipment |
(58,534) |
(62,502) |
Patent registration costs |
(9,295) |
(9,442) |
Business acquisitions, net of cash acquired |
(1,041,864) |
(29,407) |
Investments in cost-method investments |
(8,965) |
(10,750) |
Proceeds from sale of business |
468 |
937 |
Purchases of foreign currency contracts |
- |
(700) |
Payments on maturity of foreign currency contracts |
(7,564) |
(31,207) |
Net cash used in investing activities |
(1,125,754) |
(143,071) |
Cash flows from financing activities: |
||
Proceeds from issuance of common stock, net |
27,694 |
38,806 |
Excess tax benefit from stock-based compensation arrangements (A) |
- |
24,959 |
Purchases of treasury stock |
(102,058) |
(160,300) |
Payment of business combination contingent consideration |
(1,228) |
(458) |
Proceeds from borrowings, net of borrowing costs |
1,140,000 |
160,000 |
Repayment of borrowings |
(283,694) |
(161,536) |
Dividends paid |
(168,130) |
(157,262) |
Net cash (used in) / provided by financing activities |
612,584 |
(255,791) |
Effect of exchange rate changes on cash |
(20,577) |
(172,799) |
Net increase / (decrease) in cash and cash equivalents |
14,185 |
(188,481) |
Cash and cash equivalents at beginning of period |
717,249 |
905,730 |
Cash and cash equivalents at end of period |
\\$731,434 |
\\$717,249 |
(A) |
During the quarter we adopted ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting", which included a requirement to reclassify the excess tax benefits from stock-based compensation arrangements from financing activities to operating activities. This reclassification increased the cash flow from operating activities for the quarter and year ended June 30, 2016, by \\$1 million and \\$14 million, respectively. |
Reconciliation of Non-GAAP Financial Measures (Unaudited) | ||||
(In US\\$ thousands, except share and per share data) | ||||
The measure, "non-GAAP income from operations" is reconciled with GAAP income from operations below: | ||||
Three Months Ended |
Twelve Months Ended | |||
2016 |
2015 |
2016 |
2015 | |
GAAP income from operations |
\\$118,637 |
\\$99,547 |
\\$428,952 |
\\$409,236 |
Deferred revenue fair value adjustment (A) |
2,332 |
- |
2,332 |
- |
SERVE-HF accrual (release) (A) |
(402) |
5,029 |
(2,804) |
5,029 |
Restructuring expenses (A) |
- |
- |
6,914 |
- |
Acquisition and integration expenses (A) |
1,914 |
- |
5,464 |
- |
Donations (A) |
- |
6,000 |
- |
6,000 |
Amortization of acquired intangible assets (A) |
12,629 |
2,110 |
23,923 |
8,668 |
Non-GAAP income from operations |
\\$135,110 |
\\$112,686 |
\\$464,781 |
\\$428,933 |
The measures "non-GAAP net income" and "non-GAAP diluted earnings per share" are reconciled with GAAP net income and GAAP diluted earnings per share in the table below: | ||||
Three Months Ended |
Twelve Months Ended | |||
2016 |
2015 |
2016 |
2015 | |
GAAP net income |
\\$83,126 |
\\$87,462 |
\\$352,408 |
\\$352,886 |
Deferred revenue fair value adjustment (A) |
1,478 |
- |
1,478 |
- |
SERVE-HF accrual (release), net of tax (A) |
(281) |
3,521 |
(1,963) |
3,521 |
Restructuring expenses, net of tax (A) |
- |
- |
5,204 |
- |
Acquisition and integration expenses, net of tax (A) |
1,393 |
- |
4,943 |
- |
Donations, net of tax (A) |
- |
3,796 |
- |
3,796 |
Amortization of acquired intangible assets, net of tax (A) |
8,794 |
1,600 |
17,366 |
6,551 |
Cumulative ASU 2016-09 income tax benefit not reflected in the quarter ended June 30, 2016 (A) |
9,905 |
- |
- |
- |
Non-GAAP net income (A) |
\\$104,415 |
\\$96,379 |
\\$379,436 |
\\$366,754 |
Diluted shares outstanding |
141,654 |
142,702 |
141,669 |
142,687 |
GAAP diluted earnings per share |
\\$0.59 |
\\$0.61 |
\\$2.49 |
\\$2.47 |
Non-GAAP diluted earnings per share (A) |
\\$0.74 |
\\$0.68 |
\\$2.68 |
\\$2.57 |
(A) |
ResMed adjusts for the impact of the deferred revenue fair value adjustment, movements in the SERVE-HF accrual, restructuring expenses, acquisition and integration related expenses, donations, amortization of acquired intangible assets and the cumulative income tax benefit associated with the adoption of ASU 2016-09 from their evaluation of ongoing operations and believes investors benefit from adjusting these items to facilitate a more meaningful evaluation of current operating performance. |
ResMed believes that non-GAAP diluted earnings per share is an additional measure of performance investors can use to compare operating results between reporting periods. ResMed uses non-GAAP information internally in planning, forecasting, and evaluating the results of operations in the current period and in comparing it to past periods. ResMed believes this information provides investors better insight in evaluating ResMed's performance from core operations and provides consistent financial reporting. Our use of non-GAAP measures is intended to supplement, and not to replace, our presentation of net income and other GAAP measures. Like all non-GAAP measures, non-GAAP earnings are subject to inherent limitations because they do not include all the expenses that must be included under GAAP. |
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