01—Abstract
Summary
Summary of the 10-K filed August 31, 2004. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. (NYSE: RMD) reported its fiscal year ended June 30, 2004 in this Form 10-K filed August 31, 2004.
Net revenues rose to $339.3 milliona from $273.6 million, an increase of $65.7 million or 24%, driven by higher unit sales of flow generators, masks and accessories, with about $18.6 million of the growth attributed to currency appreciation against the U.S. dollar. Gross profit increased to $216.7 million, and gross margin edged up to 64% from 63%. Income from operations was $85.4 million versus $67.2 million a year earlier, and net income reached $57.3 million, or $1.63 per diluted share, compared with $45.7 million, or $1.33 per diluted share.
The company generated $76.5 millionb in operating cash flow and spent $57.2 million on capital expenditures, $40.9 million of which related to its new manufacturing facility at Norwest in Sydney. Total assets grew to $544.2 million and stockholders' equity to $361.5 million. Convertible subordinated notes of $113.25 million remain outstanding and mature June 20, 2006.
The company has not paid cash dividends since its IPO and does not intend to in the foreseeable future. ResMed describes itself as a developer, manufacturer and distributor of equipment for treating and diagnosing sleep-disordered breathing, centered on CPAP and related products.
The filing notes that CPAP and VPAP flow generators accounted for about 50% of net revenues in fiscal 2004, and that North and Latin America represented 49% of revenues. Research and development spending rose to $26.2 millionc, and the company reports that its patent litigation with Respironics and Fisher & Paykel Healthcare was settled in 2003.
02—Key points
Key Highlights
- Net revenues increased 24% to $339.3 million in fiscal 2004 from $273.6 million, including about $18.6 million from favorable currency movements.
- Net income rose to $57.3 million ($1.63 diluted EPS) from $45.7 million ($1.33 diluted EPS), and income from operations grew to $85.4 million from $67.2 million.
- Gross margin improved to 64% from 63%, reflecting a more favorable product mix, partly offset by higher manufacturing costs from a stronger Australian dollar.
- Operating cash flow was $76.5 million, up from $59.3 million, supported by higher profit and improved working capital management.
- Capital expenditures of $57.2 million included $40.9 million for the new Sydney manufacturing facility, and a further building for R&D and offices is expected to cost about $54 million, completing in May 2006.
- Stockholders' equity increased to $361.5 million, and the company held $113.25 million of 4% convertible subordinated notes due June 20, 2006.
- CPAP and VPAP flow generators accounted for about 50% of net revenues, and the company has no plans to pay cash dividends.
03—Questions
Frequently Asked Questions
How did ResMed's revenue and profitability trend in fiscal 2004?
Net revenues grew 24% to $339.3 million, and net income rose to $57.3 million from $45.7 million. Diluted earnings per share increased to $1.63 from $1.33. Gross profit grew to $216.7 million, and gross margin was 64% versus 63% in fiscal 2003.
What were the main drivers of the revenue increase?
The filing attributes the increase to higher unit sales of flow generators, masks and accessories, along with favorable currency effects of about $18.6 million. North and Latin America revenue rose to $166.1 million from $130.7 million, and international revenue rose to $173.2 million from $142.8 million.
How is the company funding its capital investments and debt obligations?
The company generated $76.5 million from operations and plans to fund its Norwest facility project through cash on hand and operating cash flow. It has $113.25 million of convertible notes due June 20, 2006, and a $15.0 million undrawn revolving line of credit with Union Bank of California.
Does ResMed pay dividends or have a share repurchase program?
ResMed has not paid cash dividends since its IPO and does not intend to in the foreseeable future. Its board authorized repurchases of up to 4.0 million shares in June 2002, and as of June 30, 2004 the company had repurchased a total of 886,000 shares at a cost of $30.4 million.
What are the key risks highlighted in the filing?
Key risks include intense competition from companies with greater resources, dependence on home health care dealers and sleep clinics, reliance on reimbursement by government and private insurers, currency fluctuations affecting reported results, FDA regulatory compliance, and dependence on single-source component suppliers.
04—Continue