01—Abstract
Summary
Summary of the 10-K filed August 17, 2011. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. (NYSE: RMD) reported record results for fiscal year ended June 30, 2011.
Net revenues rose to $1,243.1 milliona, an increase of $150.8 million or 14% over fiscal 2010's $1,092.4 million. Gross profit reached $741.3 million, up $85.8 million or 13%, with gross margin steady at 60%. Net income was $227.0 million, or $1.44 per diluted share, versus $190.1 million, or $1.23 per diluted share, in the prior year.
Growth was driven by higher unit sales of flow generators, masks and accessories, with newer products such as the S9 flow generators and Quattro FX and Mirage FX masks cited as contributors. Sales in North and Latin America rose to $662.2 million, and sales outside that region rose to $580.9 millionb. The balance sheet strengthened over the year.
Cash and cash equivalents were $735.3 millionc, up from $488.8 million, and total assets reached $2.07 billion. Operating cash flow was $283.2 million. The company repurchased 4,892,962 shares for $160.1 million during the year.
It also entered a $300 milliond three-year revolving credit facility, of which $100.0 million was outstanding at June 30, 2011. Management expects selling, general and administrative expense to stay broadly around 30% of revenue and research and development expense to be in the range of 8% of revenue going forward. The filing also flags material risks.
These include competitive pressure, reimbursement changes such as Medicare competitive bidding (with a 1st-round average reduction of approximately 32% for CPAP and respiratory assist devices), health care reform including a 2.3% medical device excise tax beginning in 2013, FDA 510(k) process changes, currency exposure, and dependence on single-source suppliers. The company also disclosed a 2007 worldwide recall of approximately 300,000 S8 flow generators, which cost $62.8 million.
02—Key points
Key Highlights
- Net revenues of $1,243.1 million for fiscal 2011, up 14% from $1,092.4 million in fiscal 2010.
- Gross profit of $741.3 million, with gross margin holding at 60%, and operating income of $266.9 million.
- Net income of $227.0 million, or $1.44 per diluted share, compared with $190.1 million, or $1.23 per diluted share, in fiscal 2010.
- Cash and cash equivalents of $735.3 million at June 30, 2011, up from $488.8 million, with operating cash flow of $283.2 million.
- Repurchased 4,892,962 shares for $160.1 million during fiscal 2011, and at year end 9.7 million shares remained available under the repurchase program.
- Entered a $300 million three-year revolving credit facility; $100.0 million was outstanding at June 30, 2011.
- Key risks include Medicare competitive bidding (an average reduction of approximately 32% in round 1 for CPAP and respiratory assist devices), a 2.3% medical device excise tax starting in 2013, and FDA 510(k) regulatory changes.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, ResMed kept $0.18.
- Revenue$1.24B100.0%
- Cost of revenue−$501.8M40.4%
- Gross profit$741.3M59.6%
- Operating costs−$474.4M38.2%
- Operating income$266.9M21.5%
- Interest, other & tax−$39.9M3.2%
- Net income$227.0M18.3%
Where FY2011 revenue went
$1.24B- Cost of revenue: $501.8M, 40% of revenue
- SG&A: $372.2M, 30% of revenue
- Net income: $227.0M, 18% of revenue
- R&D: $92.0M, 7.4% of revenue
- Other operating costs: $10.1M, 0.8% of revenue
- Interest, other & tax: $39.9M, 3.2% of revenue
Kept 18% as net incomeOther operating costs $10.1M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed August 17, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $1.24B$1.09B | +13.8% |
| Cost of Revenue | $501.82M$436.87M | +14.9% |
| Gross Profit | $741.33M$655.48M | +13.1% |
| R&D Expenses | $92.01M$75.20M | +22.3% |
| SG&A Expenses | $372.25M$328.86M | +13.2% |
| Operating Expenses | $474.40M$415.10M | +14.3% |
| Operating Income | $266.92M$240.38M | +11.0% |
| Interest Expense | $1.76M$2.67M | −34.1% |
| Net Income | $226.99M$190.09M | +19.4% |
| EPS (Basic) | $1.49$1.26 | +18.3% |
| EPS (Diluted) | $1.44$1.23 | +17.1% |
| Shares Outstanding (Basic) | 152.47M150.91M | +1.0% |
| Shares Outstanding (Diluted) | 157.19M155.10M | +1.4% |
05—Questions
Frequently Asked Questions
How did ResMed perform financially in fiscal 2011?
Net revenues rose 14% to $1,243.1 million, gross profit rose 13% to $741.3 million, and net income rose to $227.0 million, or $1.44 per diluted share, from $190.1 million, or $1.23 per diluted share, the prior year. Gross margin held at 60%.
What drove revenue growth?
Management attributed the increase to higher unit sales of flow generators, masks and accessories, and to recent product releases including the S9 flow generators and the Quattro FX and Mirage FX masks. Flow generator sales rose 10% to $699.3 million, and mask systems, motors and other accessories rose 19% to $543.9 million.
What are the main risks to the business highlighted in the filing?
The filing highlights competition from companies with greater resources, changes in third-party reimbursement including Medicare competitive bidding and health care reform, the 2.3% medical device excise tax beginning in 2013, FDA 510(k) process changes, foreign currency exposure, and reliance on single-source suppliers. It also cites the 2007 S8 flow generator recall, which cost $62.8 million.
How is the company managing its capital?
ResMed repurchased 4,892,962 shares for $160.1 million during fiscal 2011 and has not paid cash dividends since its IPO. It entered a $300 million three-year revolving credit facility, of which $100.0 million was outstanding at June 30, 2011, and reported cash and cash equivalents of $735.3 million.
What did management expect for future operating expenses?
Management expects selling, general and administrative expense to remain broadly in the range of 30% of net revenue. It expects research and development expense, as a percentage of revenue, to be in the range of 8%, reflecting the stronger Australian dollar.
06—Continue