01—Abstract
Summary
Summary of the 10-K filed August 8, 2014. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported net revenue of $1,554,973 thousanda ($1.55 billion) for the fiscal year ended June 30, 2014, an increase of 3% from $1,514.5 million in fiscal 2013.
Gross profit rose to $989.8 millionb, and gross margin improved to 63.7% from 62.1%, driven mainly by manufacturing and supply chain cost savings, favorable product mix, currency effects and geographic mix, partly offset by lower average selling prices. Net income increased to $345.3 million, or $2.39 per diluted share, compared with $307.1 million, or $2.10 per diluted share, a year earlier. Net income grew 12% and diluted EPS grew 14%.
Operating cash flow was $391.3 millionc, and cash and cash equivalents ended the year at $905.7 million. The company repurchased 4.4 million shares for $208.1 million and paid dividends of $141.5 million. Long-term debt rose to $300.8 million under a $700 million revolving credit facility entered into on October 31, 2013.
In the filing, management noted that the North and Latin America segment declined 1%d amid increased competitor activity and lower average selling prices, while international revenue grew 8%. The filing also highlights regulatory and reimbursement exposure. CMS competitive bidding reduced Medicare payment rates for CPAP and respiratory devices by an average of approximately 47% in the second round, and CMS announced a Round 2 Recompete.
Management stated it cannot predict the full impact of the Patient Protection and Affordable Care Act. Intellectual property litigation against APEX and BMC Medical Co. is ongoing, and management does not expect these matters to have a material adverse effect on the consolidated financial statements.
02—Key points
Key Highlights
- Net revenue of $1,554,973 thousand, up 3% from $1,514.5 million in fiscal 2013
- Gross profit of $989.8 million, with gross margin of 63.7% versus 62.1% in fiscal 2013
- Net income of $345.3 million, or $2.39 per diluted share, versus $2.10 per diluted share in fiscal 2013
- Operating cash flow of $391.3 million and cash and cash equivalents of $905.7 million at June 30, 2014
- Quarterly dividend increased from $0.25 to $0.28 per share, announced July 31, 2014; $141.5 million in dividends paid during fiscal 2014
- Share repurchases of $208.1 million (4.4 million shares) in fiscal 2014 under a new 20.0 million share program authorized February 21, 2014
- Medicare competitive bidding cut CPAP and respiratory device payment rates by an average of approximately 47% in the second round, with a Round 2 Recompete announced July 15, 2014
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, ResMed kept $0.22.
- Revenue$1.55B100.0%
- Cost of revenue−$565.2M36.3%
- Gross profit$989.8M63.7%
- Operating costs−$584.7M37.6%
- Operating income$405.1M26.1%
- Interest, other & tax−$59.8M3.8%
- Net income$345.3M22.2%
Where FY2014 revenue went
$1.55B- Cost of revenue: $565.2M, 36% of revenue
- SG&A: $450.4M, 29% of revenue
- Net income: $345.3M, 22% of revenue
- R&D: $118.2M, 7.6% of revenue
- Other operating costs: $16.1M, 1.0% of revenue
- Interest, other & tax: $59.8M, 3.8% of revenue
Kept 22% as net incomeOther operating costs $16.1M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed August 8, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $1.55B$1.51B | +2.7% |
| Cost of Revenue | $565.19M$573.80M | −1.5% |
| Gross Profit | $989.79M$940.66M | +5.2% |
| R&D Expenses | $118.23M$120.12M | −1.6% |
| SG&A Expenses | $450.41M$430.80M | +4.6% |
| Operating Expenses | $584.70M$585.83M | −0.2% |
| Operating Income | $405.09M$354.82M | +14.2% |
| Interest Expense | $6.13M$6.39M | −4.0% |
| Net Income | $345.27M$307.13M | +12.4% |
| EPS (Basic) | $2.44$2.15 | +13.5% |
| EPS (Diluted) | $2.39$2.10 | +13.8% |
| Shares Outstanding (Basic) | 141.47M142.95M | −1.0% |
| Shares Outstanding (Diluted) | 144.36M146.41M | −1.4% |
05—Questions
Frequently Asked Questions
How did ResMed's revenue and profitability perform in fiscal 2014?
Net revenue increased 3% to $1,555.0 million. Gross profit rose 5% to $989.8 million, and gross margin improved to 63.7% from 62.1%. Net income rose 12% to $345.3 million, and diluted EPS rose 14% to $2.39.
What drove the change in gross margin?
The filing attributes the improvement to manufacturing and supply chain cost savings, a favorable product mix toward higher-margin products, a favorable impact from the depreciation of the Australian dollar against the U.S. dollar and the euro, and a favorable geographic mix. These benefits were partly offset by declines in average selling prices.
How did North and Latin America compare with international markets?
North and Latin America net revenue decreased 1% to $839.1 million, due to increased competitor activity and lower average selling prices. Revenue outside North and Latin America rose 8% to $715.8 million, and rose 5% excluding currency movements.
What are the main reimbursement risks disclosed?
CMS competitive bidding reduced Medicare payment rates for CPAP and respiratory devices by an average of approximately 47% on a weighted average basis in the second round, effective July 1, 2013. CMS announced a Round 2 Recompete on July 15, 2014, with the bidding schedule expected in Fall 2014. The filing states management cannot predict the full impact on its business.
How is ResMed funding its capital returns and debt?
The company funded dividends of $141.5 million and share repurchases of $208.1 million in fiscal 2014, and expects to fund dividend commitments with operating cash flows and existing loan facilities. Long-term debt was $300.8 million at June 30, 2014, with $300.0 million outstanding under a $700 million revolving credit facility maturing October 31, 2018.
06—Continue