01—Abstract
Summary
Summary of the 10-K filed August 7, 2015. Cited figures are marked; the original filing is the authoritative source.
ResMed Inc. reported fiscal 2015 (year ended June 30, 2015) net revenue of $1,678.9 milliona, up $123.9 million or 8% from $1,555.0 million, or 13% on a constant currency basis.
Flow generators grew 15% to $975.9 millionb, while masks and other accessories declined 1% to $703.0 million. Gross margin fell to 60.2% from 63.7%, mainly due to lower average selling prices, unfavorable product and geographic mix, and exchange rate effects. Net income rose to $352.9 million, or $2.47 per diluted share, compared with $345.3 million, or $2.39 per diluted share, in fiscal 2014.
Cash generated from operations was $383.2 millionc, and cash and cash equivalents were $717.2 million at year end. Inventories increased $81.4 million, or 49%, to $246.9 million, which the company attributed mainly to new product introductions and higher unit sales. The company repurchased 2.7 million shares for $152.6 million and paid dividends of $157.3 million.
It announced a quarterly dividend increase from $0.28 to $0.30d per share. Long-term debt was $300.0 million under a $700 million revolving credit facility. The filing highlights risk items for investors.
It discloses preliminary SERVE-HF trial results showing a statistically significant 2.5 percent absolute increased risk of cardiovascular mortality for patients receiving ASV therapy, with the company working with regulators to revise labels and informing providers. It also cites Medicare competitive bidding, where the second round produced an average reduction of approximately 47% for CPAP and respiratory devices on a weighted average basis, and ongoing patent litigation with BMC Medical and an antitrust suit filed by its distributor 3B Medical.
02—Key points
Key Highlights
- Net revenue rose 8% to $1,678.9 million (13% on a constant currency basis), led by flow generators, which grew 15% to $975.9 million.
- Gross margin declined to 60.2% from 63.7%, driven by lower average selling prices, unfavorable product and geographic mix, and currency effects.
- Net income increased to $352.9 million, and diluted EPS rose to $2.47 from $2.39.
- Net cash from operations was $383.2 million; cash and cash equivalents ended the year at $717.2 million.
- Inventories rose 49% to $246.9 million, mainly due to new product introductions and higher unit sales.
- Capital returns totaled $152.6 million in share repurchases and $157.3 million in dividends; the quarterly dividend was raised to $0.30 per share from $0.28.
- SERVE-HF trial data showed a statistically significant 2.5 percent absolute increase in cardiovascular mortality for patients on ASV therapy, leading to label revisions and a $5.0 million cost of sales charge.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, ResMed kept $0.21.
- Revenue$1.68B100.0%
- Cost of revenue−$667.5M39.8%
- Gross profit$1.01B60.2%
- Operating costs−$602.2M35.9%
- Operating income$409.2M24.4%
- Interest, other & tax−$56.4M3.4%
- Net income$352.9M21.0%
Where FY2015 revenue went
$1.68B- Cost of revenue: $667.5M, 40% of revenue
- SG&A: $478.6M, 29% of revenue
- Net income: $352.9M, 21% of revenue
- R&D: $114.9M, 6.8% of revenue
- Other operating costs: $8.7M, 0.5% of revenue
- Interest, other & tax: $56.4M, 3.4% of revenue
Kept 21% as net incomeOther operating costs $8.7M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed August 7, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.68B$1.55B | +8.0% |
| Cost of Revenue | $667.52M$565.19M | +18.1% |
| Gross Profit | $1.01B$989.79M | +2.2% |
| R&D Expenses | $114.86M$118.23M | −2.8% |
| SG&A Expenses | $478.63M$450.41M | +6.3% |
| Operating Expenses | $602.16M$584.70M | +3.0% |
| Operating Income | $409.24M$405.09M | +1.0% |
| Interest Expense | $5.78M$6.13M | −5.7% |
| Net Income | $352.89M$345.27M | +2.2% |
| EPS (Basic) | $2.51$2.44 | +2.9% |
| EPS (Diluted) | $2.47$2.39 | +3.3% |
| Shares Outstanding (Basic) | 140.47M141.47M | −0.7% |
| Shares Outstanding (Diluted) | 142.69M144.36M | −1.2% |
05—Questions
Frequently Asked Questions
How did ResMed's revenue and profitability perform in fiscal 2015?
Net revenue increased 8% to $1,678.9 million, or 13% on a constant currency basis. Net income was $352.9 million, or $2.47 per diluted share, up from $2.39 a year earlier. Gross margin declined to 60.2% from 63.7%, reflecting lower average selling prices and unfavorable mix and currency effects, while operating expenses grew more slowly than gross profit.
What is the regulatory risk from the SERVE-HF trial?
Preliminary analysis of the SERVE-HF trial found no significant difference in all-cause mortality or hospitalization, but identified a statistically significant 2.5 percent absolute increased risk of cardiovascular mortality for patients receiving ASV therapy with moderate to severe predominant central sleep apnea and symptomatic chronic heart failure with reduced ejection fraction. ResMed is working with global regulators to revise device labels and instructions for use and is informing providers and patients. It recognized $5.0 million in related expenses in cost of sales during the year.
How is Medicare competitive bidding affecting pricing?
CMS's first round of competitive bidding reduced Medicare payment rates by an average of approximately 34% for CPAP and respiratory devices. In the second round, the average reduction for CPAP and respiratory devices was approximately 47% on a weighted average basis. CMS will use these single payment amounts to set rates in non-bidding areas, with new rates phased in beginning January 1, 2016, and fully effective July 1, 2016.
How strong is the balance sheet and what is the capital return policy?
At June 30, 2015, cash and cash equivalents were $717.2 million and long-term debt was $300.6 million, including $300.0 million outstanding under a $700 million revolving credit facility. The company repurchased 2.7 million shares for $152.6 million during the year, with 15.5 million shares remaining under its authorization. Dividends paid totaled $157.3 million, and the quarterly dividend increased to $0.30 per share from $0.28.
What are the main litigation matters disclosed?
ResMed has patent litigation against Chinese manufacturer BMC Medical Co., Ltd. and its U.S. distributor 3B Medical, Inc. In December 2014, the U.S. International Trade Commission ruled that certain BMC masks infringed ResMed patents and should be excluded, though BMC discontinued U.S. sales of those masks. In 2015, 3B Medical filed a federal antitrust suit against ResMed Inc. and ResMed Corp. ResMed Inc. has been dismissed from the case, and ResMed Corp. has denied the allegations.
06—Continue