How did ResMed perform financially in fiscal 2005?

Net revenues rose 25% to $425.5 million and net income increased to $64.8 million, or $1.82 per diluted share, from $57.3 million, or $1.63 per diluted share, in fiscal 2004. Gross profit grew to $274.9 million, and the filing notes that restructuring, the in-process research and development charge and amortization of acquired intangibles reduced diluted earnings by $0.24 per share on an after-tax basis.

What acquisitions did ResMed complete during the year?

ResMed acquired Saime SA on May 19, 2005 for net cash consideration of $40.5 million, plus assumed and repaid debt of $65.8 million. It also acquired Hoefner Medizintechnick GmbH on February 14, 2005 for net cash consideration of $8.2 million and substantially all the assets of Resprecare BV on December 1, 2004 for initial consideration of $5.9 million in cash. The filing states these acquisitions contributed incremental revenue of $11.5 million in fiscal 2005.

What debt obligations do investors need to watch?

The $113.3 million of 4% convertible subordinated notes are due to mature June 20, 2006 and are classified as a current liability. The company says it may refinance them if they do not convert to common stock before maturity. A five-year 50 million Euro loan from HSBC Bank Australia Limited, equivalent to $62.7 million, funded the Saime acquisition, with $60.4 million outstanding at June 30, 2005.

What regulatory milestone did ResMed achieve after year end?

On August 16, 2005, the U.S. Food and Drug Administration authorized ResMed to market its VPAP Adapt SV device in the United States for adult patients with obstructive sleep apnea and respiratory insufficiency caused by central and/or mixed apneas and periodic breathing. ResMed does not expect to sell material quantities until the third quarter of fiscal year 2006 or later.

Why did accounts receivable and inventory grow faster than revenue?

Inventories rose 60% to $89.1 million, and the filing says management chose to build raw material levels to support increasing production and the recently launched S8 flow generator. Accounts receivable rose 55% to $104.0 million, which the company attributes largely to higher than normal balances relative to sales in Germany and delays in invoice processing. Days outstanding increased to 71 from 64.

RMD/RSMDF 10-K FY2005 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed September 13, 2005. Cited figures are marked; the original filing is the authoritative source.

ResMed Inc. filed its Form 10-K for the fiscal year ended June 30, 2005, reporting net revenues of $425.5 million^a, up from $339.3 million, an increase of $86.2 million or 25%.

Gross profit rose to $274.9 million^b from $216.7 million, with gross margin improving to 65% from 64%. Net income was $64.8 million, or $1.82 per diluted share, compared with $57.3 million, or $1.63 per diluted share, in fiscal 2004. Results include a $5.3 million in-process research and development charge and $5.2 million in restructuring expenses tied to integrating ResMed Germany and MAP.

Selling, general and administrative expenses rose to 32% of net revenue from 31%. The company made several acquisitions during the year, most notably Saime SA, acquired May 19, 2005 for net cash consideration of $40.5 million^c, along with Hoefner and Resprecare. Goodwill increased to $181.1 million from $106.1 million, and total assets grew to $774.1 million from $549.2 million.

Inventories rose 60% to $89.1 million^d and accounts receivable rose 55% to $104.0 million, with the filing attributing receivable growth partly to slower collections in Germany. Operating cash flow was $71.1 million, down from $76.5 million. Balance sheet liquidity shifted because the $113.3 million of 4% convertible subordinated notes mature June 20, 2006 and are now classified as current.

Working capital fell to $141.7 million from $222.2 million. The company also financed Saime with a five-year 50 million Euro loan from HSBC Bank Australia Limited, and on August 10, 2005 declared a two-for-one stock split. The filing notes that FDA authorized the VPAP Adapt SV on August 16, 2005, with material sales not expected until the third quarter of fiscal 2006 or later.

02—Key points

Key Highlights

Net revenues of $425.5 million, up 25% from $339.3 million in fiscal 2004.
Net income of $64.8 million, or $1.82 per diluted share, versus $1.63 per diluted share in fiscal 2004.
Gross margin improved to 65% from 64%, driven by higher-margin mask products and new product introductions.
Acquisitions of Saime SA ($40.5 million net cash), Hoefner and Resprecare added goodwill, bringing goodwill to $181.1 million.
Convertible subordinated notes of $113.3 million due June 20, 2006 moved to current liabilities, reducing working capital to $141.7 million from $222.2 million.
Research and development expense rose to $30.0 million, or 7% of revenue, and the company expects 5% to 7% of revenue going forward.
Two-for-one stock split declared August 10, 2005, payable as a 100% stock dividend to holders of record on September 15, 2005.

03—Questions

Frequently Asked Questions

How did ResMed perform financially in fiscal 2005?
Net revenues rose 25% to $425.5 million and net income increased to $64.8 million, or $1.82 per diluted share, from $57.3 million, or $1.63 per diluted share, in fiscal 2004. Gross profit grew to $274.9 million, and the filing notes that restructuring, the in-process research and development charge and amortization of acquired intangibles reduced diluted earnings by $0.24 per share on an after-tax basis.
What acquisitions did ResMed complete during the year?
ResMed acquired Saime SA on May 19, 2005 for net cash consideration of $40.5 million, plus assumed and repaid debt of $65.8 million. It also acquired Hoefner Medizintechnick GmbH on February 14, 2005 for net cash consideration of $8.2 million and substantially all the assets of Resprecare BV on December 1, 2004 for initial consideration of $5.9 million in cash. The filing states these acquisitions contributed incremental revenue of $11.5 million in fiscal 2005.
What debt obligations do investors need to watch?
The $113.3 million of 4% convertible subordinated notes are due to mature June 20, 2006 and are classified as a current liability. The company says it may refinance them if they do not convert to common stock before maturity. A five-year 50 million Euro loan from HSBC Bank Australia Limited, equivalent to $62.7 million, funded the Saime acquisition, with $60.4 million outstanding at June 30, 2005.
What regulatory milestone did ResMed achieve after year end?
On August 16, 2005, the U.S. Food and Drug Administration authorized ResMed to market its VPAP Adapt SV device in the United States for adult patients with obstructive sleep apnea and respiratory insufficiency caused by central and/or mixed apneas and periodic breathing. ResMed does not expect to sell material quantities until the third quarter of fiscal year 2006 or later.
Why did accounts receivable and inventory grow faster than revenue?
Inventories rose 60% to $89.1 million, and the filing says management chose to build raw material levels to support increasing production and the recently launched S8 flow generator. Accounts receivable rose 55% to $104.0 million, which the company attributes largely to higher than normal balances relative to sales in Germany and delays in invoice processing. Days outstanding increased to 71 from 64.

04—Continue

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