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ResMed Annual Report, Year Ended Jun 30, 2007

Filing Date
Filed August 28, 2007
Period End
June 30, 2007
Securities
RMDRSMDF
In the record · 2016–202610-K1410-Q338-K85

RMD filed 14 annual reports (10-K), 33 quarterly reports (10-Q) and 85 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jan ’17Jan ’17
  2. Material agreement8-K · Jul ’19Jul ’19
  3. Leadership change8-K · Oct ’21Oct ’21
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed August 28, 2007. Cited figures are marked; the original filing is the authoritative source.

ResMed Inc. (NYSE: RMD) reported its fiscal 2007 Form 10-K for the year ended June 30, 2007.

Net revenues rose to $716.3 milliona from $607.0 million, an increase of $109.3 million or 18%, driven by higher unit sales of flow generators, masks and accessories, with favorable currency movements adding approximately $20.5 million. Net income fell to $66.3 million, or $0.85 per diluted share, from $88.2 million, or $1.16 per diluted share, in fiscal 2006. The decline reflects a $59.7 million voluntary product recall charge tied to approximately 300,000 early-production S8 flow generators, which reduced diluted earnings per share by $0.53 on an after-tax basis.

Excluding the recall, diluted earnings per share was $1.38b, an increase of 19% over the prior year, according to the filing. Gross margin fell to 54% from 62%, primarily because of the recall charge; excluding it, gross margin was 62%, consistent with the prior year. Operating expenses rose, with selling, general and administrative expenses up $37.1 million to $237.3 million and research and development up 35% to $50.1 million.

The company ended the year with cash and cash equivalents of $257.8 millionc, working capital of $466.4 million, and stockholders' equity of $931.2 million. Long-term debt less current maturities was $87.6 million, and the company had no amounts outstanding under its $75 million revolving loan. Operating cash flow was $91.1 million, down from $99.0 million, while capital expenditures were $77.6 million, including construction of a new corporate headquarters in San Diego, expected to be completed in March 2009.

The filing also notes that the company faces ongoing risks, including the remaining recall costs, which management expects to continue through fiscal 2008, along with an ongoing German tax audit and an Australian university's royalty claim pending in the Federal Court of Australia. Management stated that these matters are not expected to have a material adverse effect on the consolidated financial statements.

02—Key points

Key Highlights

  1. Net revenues increased 18% to $716.3 million in fiscal 2007 from $607.0 million in fiscal 2006, with the filing attributing growth to higher unit sales of flow generators, masks and accessories.
  2. Net income declined to $66.3 million ($0.85 diluted EPS) from $88.2 million ($1.16 diluted EPS), reflecting a $59.7 million voluntary product recall charge for approximately 300,000 S8 flow generators.
  3. Excluding the recall expense, diluted EPS was $1.38, an increase of 19% over fiscal 2006, according to the filing.
  4. Gross profit as a percentage of net revenue fell to 54% from 62%; excluding the recall, it was 62%, consistent with the prior year.
  5. Research and development expenses rose 35% to $50.1 million, or 7% of revenue, and the company invested in new products including the Mirage Quattro, Mirage Liberty and VPAP Malibu.
  6. Balance sheet remained strong, with cash and cash equivalents of $257.8 million, working capital of $466.4 million, and stockholders' equity of $931.2 million, while the $75 million revolving loan was undrawn at June 30, 2007.
  7. Operating cash flow was $91.1 million, down from $99.0 million, and capital expenditures of $77.6 million included construction of a new San Diego corporate headquarters expected to be completed in March 2009.

03—Questions

Frequently Asked Questions

  1. What caused the drop in net income in fiscal 2007?

    The main cause was a $59.7 million voluntary product recall expense for approximately 300,000 early-production S8 flow generators, recognized as a charge to cost of sales. The filing states the after-tax impact of this expense was $41.8 million, or $0.53 per diluted share. Net income was $66.3 million, compared with $88.2 million in fiscal 2006.

  2. How large is the remaining cost of the S8 product recall?

    At June 30, 2007, the company reported a remaining recall liability of $45.1 million in accrued expenses, after cash payments of $16.3 million. The filing expects the recall to continue throughout fiscal 2008 and states that actual costs could differ from the estimate.

  3. Is ResMed's sales growth coming from the Americas or internationally?

    Growth was strong in both regions. Net revenue in North and Latin America rose 17% to $376.7 million, and revenue in markets outside the Americas rose 19% to $339.6 million. The company attributed growth to rising awareness of sleep-disordered breathing, its sales force investments, and new products such as Adapt SV, Swift II and Mirage Quattro. Currency movements also contributed to international growth.

  4. What are the company's main debt and liquidity positions at fiscal year-end?

    At June 30, 2007, long-term debt less current maturities was $87.6 million, and total long-term debt including current portion was $116.0 million, all at variable interest rates. The company had cash and cash equivalents and marketable securities of $277.7 million. Its $75 million revolving loan with Union Bank of California had no amounts outstanding, and the company was in compliance with its debt covenants.

04—Continue

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