01—Abstract
Summary
Summary of the 10-K filed August 13, 2013. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported record fiscal 2013 results for the year ended June 30, 2013, with net revenues of $1,514.5 milliona, up from $1,368.5 million in fiscal 2012, an increase of $145.9 million or 11%.
Gross profit rose to $940.7 millionb, a gross margin of 62.1% compared with 60.0% a year earlier, driven by manufacturing and supply chain cost savings and a favorable product mix. Net income was $307.1 million, or $2.10 per diluted share, versus $254.9 million, or $1.71 per diluted share, in fiscal 2012. Operating cash flow was $402.8 million, and cash and cash equivalents totaled $876.0 million at June 30, 2013.
The company reports that the sleep-disordered breathing market continues to grow, citing rising awareness of obstructive sleep apnea and its links to cardiac disease, diabetes and hypertension. Fiscal 2013 product launches included the VPAP COPD, Quattro Air, Swift FX Bella, Swift FX Nano and SleepSeeker, and R&D spending was $120.1 millionc, about 8% of net revenues. Flow generators accounted for approximately 54% of net revenues in fiscal 2013, and North and Latin America contributed 56%.
The filing also flags several risks. The Medicare competitive bidding program's second round set an average reduction of approximately 47%d for CPAP and respiratory devices, effective July 1, 2013. The PPACA imposes a 2.3% excise tax on certain medical devices beginning in 2013.
A $24.8 million education, research and settlement charge related to the University of Sydney was expensed in fiscal 2013. The $300.0 million credit facility terminates on February 10, 2014, and management has begun negotiating a replacement. The board also declared an increased quarterly dividend of $0.25 per share, up from $0.17.
02—Key points
Key Highlights
- Net revenues rose 11% to $1,514.5 million in fiscal 2013, with growth in both flow generators and masks and accessories.
- Gross margin improved to 62.1% from 60.0%, supported by manufacturing and supply chain savings and a favorable product mix.
- Diluted EPS increased to $2.10 from $1.71, with net income of $307.1 million.
- Cash and cash equivalents of $876.0 million, with operating cash flow of $402.8 million; repurchased 4.3 million shares for $188.0 million and paid $97.2 million in dividends.
- Quarterly dividend increased from $0.17 to $0.25 per share, declared August 1, 2013.
- Medicare competitive bidding round two reduces average CPAP reimbursement by approximately 47%, effective July 1, 2013.
- A $24.8 million education, research and settlement charge was recorded for the University of Sydney agreement, and the $300.0 million credit facility expires February 10, 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, ResMed kept $0.20.
- Revenue$1.51B100.0%
- Cost of revenue−$573.8M37.9%
- Gross profit$940.7M62.1%
- Operating costs−$585.8M38.7%
- Operating income$354.8M23.4%
- Interest, other & tax−$47.7M3.1%
- Net income$307.1M20.3%
Where FY2013 revenue went
$1.51B- Cost of revenue: $573.8M, 38% of revenue
- SG&A: $430.8M, 28% of revenue
- Net income: $307.1M, 20% of revenue
- R&D: $120.1M, 7.9% of revenue
- Other operating costs: $34.9M, 2.3% of revenue
- Interest, other & tax: $47.7M, 3.1% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed August 13, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $1.51B$1.37B | +10.7% |
| Cost of Revenue | $573.80M$547.78M | +4.8% |
| Gross Profit | $940.66M$820.74M | +14.6% |
| R&D Expenses | $120.12M$109.73M | +9.5% |
| SG&A Expenses | $430.80M$402.62M | +7.0% |
| Operating Expenses | $585.83M$526.33M | +11.3% |
| Operating Income | $354.82M$294.41M | +20.5% |
| Interest Expense | $6.39M$4.79M | +33.5% |
| Net Income | $307.13M$254.85M | +20.5% |
| EPS (Basic) | $2.15$1.75 | +22.9% |
| EPS (Diluted) | $2.10$1.71 | +22.8% |
| Shares Outstanding (Basic) | 142.95M145.90M | −2.0% |
| Shares Outstanding (Diluted) | 146.41M149.32M | −1.9% |
05—Questions
Frequently Asked Questions
How much of ResMed's revenue came from outside North and Latin America in fiscal 2013?
Sales in Europe were 33% of net revenues, and Asia Pacific was 11%, so markets outside North and Latin America together accounted for approximately 44% of fiscal 2013 net revenues. Net revenue in markets outside North and Latin America was $662.8 million.
What is the impact of Medicare competitive bidding on ResMed?
CMS announced single payment amounts for a second round covering 91 competitive bidding areas. For CPAP and respiratory devices, the average reduction from current Medicare payment rates is approximately 47% on a weighted average basis, effective July 1, 2013. The company states it cannot predict the full impact on its business and financial condition.
Why did gross margin improve in fiscal 2013?
Gross profit as a percentage of net revenue rose to 62.1% from 60.0%. The filing attributes the improvement to cost savings from manufacturing and supply chain improvements and a favorable change in product mix toward higher-margin products, partially offset by declines in average selling prices.
What is the status of ResMed's debt and financing?
At June 30, 2013, there was $300.0 million outstanding under the credit agreement, which bears interest at a rate of 1.7% and terminates on February 10, 2014. Management has begun negotiating a new financing facility and expects it will have similar terms and be in place before the existing facility expires.
06—Continue