01—Abstract
Summary
Summary of the 10-K filed September 11, 2002. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. (filed under this name in its June 30, 2002 fiscal-year 10-K) is a developer, manufacturer and distributor of medical equipment for treating, diagnosing and managing sleep disordered breathing (SDB), primarily obstructive sleep apnea (OSA).
Its core products are nasal CPAP, VPAP and AutoSet flow generators, mask systems, diagnostic products and accessories, sold in over 60 countries through subsidiaries and independent distributors. For fiscal 2002, net revenues rose to $204.1 milliona from $155.2 million, a 32% increase, while gross margin declined to 65% from 68% and net income reached $37.5 million, or $1.10 diluted earnings per share, compared with $11.6 million in fiscal 2001, which included a $17.7 million in-process R&D write-off. The company expanded through acquisitions during the year, including Servo Magnetics Inc. (about $32.6 million, partly paid in 853,448 shares) and Labhardt AG, and it recorded a $6.5 million gain on extinguishment of debt after repurchasing $56.8 million face value of its 4% convertible subordinated notes.
Convertible notes outstanding fell to $123.3 million, and total stockholders' equity rose to $192.9 millionb from $100.4 million. Cash from operations was $35.6 million, and capital expenditures were $28.2 million, largely for land in Sydney for a new manufacturing and R&D site. Key risks cited in the filing include intense competition from Respironics, DeVilbiss and Nellcor Puritan Bennett, dependence on home health care dealers and sleep clinics, foreign currency exposure, reimbursement uncertainty, FDA regulation, and ongoing patent litigation, including a lawsuit filed against Fisher & Paykel Healthcare on August 26, 2002.
02—Key points
Key Highlights
- Net revenues increased 32% to $204.1 million in fiscal 2002 from $155.2 million in fiscal 2001.
- Net income was $37.5 million ($1.10 diluted EPS), up from $11.6 million in fiscal 2001, which was reduced by a $17.7 million in-process R&D write-off.
- Gross profit margin declined to 65% from 68%, reflecting a higher share of lower-margin domestic sales and lower-margin MAP sales.
- A $6.5 million gain on extinguishment of debt followed the repurchase of $56.8 million face value of 4% convertible subordinated notes; $123.3 million remained outstanding at June 30, 2002.
- Acquisitions in fiscal 2002 included Servo Magnetics Inc. for $32.6 million and Labhardt AG for $5.5 million, adding goodwill of $92.5 million in total.
- Cash from operations was $35.6 million, and the company bought land in Sydney for $23.6 million to build new facilities.
- Stockholders' equity rose to $192.9 million, and the board authorized repurchase of up to 4 million shares in June 2002.
03—Questions
Frequently Asked Questions
What does ResMed sell and to whom?
ResMed sells flow generators (nasal CPAP, VPAP and AutoSet systems), mask systems, diagnostic sleep recorders and accessories for treating and diagnosing sleep disordered breathing. Products are typically purchased by home health care dealers who sell them to patients, and sleep clinics and hospitals buy diagnostic products. The company sells in over 60 countries.
How did fiscal 2002 results compare with fiscal 2001?
Net revenues grew to $204.1 million from $155.2 million, and income from operations rose to $51.2 million from $26.0 million. Net income was $37.5 million versus $11.6 million, with fiscal 2001 reduced by the $17.7 million in-process R&D write-off for the MAP acquisition.
What are the main competitive and legal risks?
Principal U.S. competitors for CPAP products are Respironics, DeVilbiss (Sunrise Medical) and Nellcor Puritan Bennett, and some competitors have greater resources. ResMed is in long-running patent litigation with Respironics, and on August 26, 2002 it sued Fisher & Paykel Healthcare over ACLAIM mask products. The filing says there can be no assurance of success in these actions.
How is the company financed and how much debt does it carry?
Long-term debt consists of 4% convertible subordinated notes due June 20, 2006, with a conversion price of $60.60 per share. Outstanding notes were $123.3 million at June 30, 2002, down from $180.0 million after the company repurchased $56.8 million face value during fiscal 2002. The company says it expects to meet liquidity needs from cash on hand and operating cash flow.
Does ResMed pay dividends?
No. The company has not paid cash dividends since before its initial public offering and does not currently intend to pay dividends in the foreseeable future, retaining earnings for operations and expansion.
04—Continue