rmd-20190930x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________________________________________________________________________

FORM 10-Q

______________________________________________________________________________________________

(Mark One)


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-15317

______________________________________________________________________________________________

ResMed Inc.

(Exact name of registrant as specified in its charter)

______________________________________________________________________________________________

Delaware

(State or other jurisdiction of incorporation or organization)

98-0152841

(I.R.S. Employer Identification No.)

9001 Spectrum Center Blvd.

San Diego, CA 92123

United States of America

(Address of principal executive offices)

(858) 836-5000

(Registrant’s telephone number, including area code)

______________________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.004 per share

RMD

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large Accelerated Filer	x	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	¨
Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes ¨ No ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At October 21, 2019, there were 143,786,123 shares of Common Stock ($0.004 par value) outstanding. This number excludes 41,836,234 shares held by the registrant as treasury shares.

Item 1. Financial Statements

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(In US$ and in thousands, except share and per share data)



	September 30, ‎2019		June 30, ‎2019
Assets
Current assets:
Cash and cash equivalents	$	172,154	$	147,128
Accounts receivable, net of allowance for doubtful accounts of $24,492 and $25,171 ‎ at September 30, 2019 and June 30, 2019, respectively		493,836		528,484
Inventories (note 3)		357,033		349,641
Prepaid expenses and other current assets		138,075		120,113
Total current assets		1,161,098		1,145,366
Non-current assets:
Property, plant and equipment, net (note 3)		382,970		387,460
Operating lease right-of-use assets (note 9)		81,650		-
Goodwill (note 4)		1,856,427		1,856,449
Other intangible assets, net (note 3)		496,847		521,950
Deferred income taxes		34,232		45,478
Prepaid taxes and other non-current assets		141,334		150,979
Total non-current assets		2,993,460		2,962,316
Total assets	$	4,154,558	$	4,107,682
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	109,742	$	115,725
Accrued expenses		231,253		266,359
Operating lease liabilities, current (note 9)		19,548		-
Deferred revenue		86,954		88,667
Income taxes payable (note 6)		90,968		73,248
Short-term debt, net (note 8)		11,992		11,992
Total current liabilities		550,457		555,991
Non-current liabilities:
Deferred revenue		82,668		81,143
Deferred income taxes		15,177		11,380
Operating lease liabilities, non-current (note 9)		65,838		-
Other long-term liabilities		2,047		2,058
Long-term debt, net (note 8)		1,208,210		1,258,861
Long-term income taxes payable (note 6)		112,910		126,056
Total non-current liabilities		1,486,850		1,479,498
Total liabilities		2,037,307		2,035,489
Commitments and contingencies (note 12)
Stockholders’ equity: (note 10)
Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued		-		-
Common stock, $0.004 par value, 350,000,000 shares authorized; 185,605,478 issued and 143,769,244 outstanding at September 30, 2019 and 185,491,064 issued and 143,654,830 outstanding at June 30, 2019		575		575
Additional paid-in capital		1,530,011		1,511,473
Retained earnings		2,500,506		2,436,410
Treasury stock, at cost, 41,836,234 shares at September 30, 2019 and 41,836,234 shares at June 30, 2019		(1,623,256)		(1,623,256)
Accumulated other comprehensive loss		(290,585)		(253,009)
Total stockholders’ equity		2,117,251		2,072,193
Total liabilities and stockholders’ equity	$	4,154,558	$	4,107,682

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Unaudited)

(In US$ and in thousands, except per share data)



	Three Months Ended ‎September 30,
	2019		2018
Net revenue	$	681,056	$	588,279
Cost of sales (excluding amortization of acquired intangible assets)		276,001		245,186
Gross profit		405,055		343,093
Operating expenses:
Selling, general and administrative		167,440		147,303
Research and development		48,033		38,791
Amortization of acquired intangible assets		18,480		12,867
Total operating expenses		233,953		198,961
Income from operations		171,102		144,132
Other income (loss), net:
Interest income		449		922
Interest expense		(10,992)		(3,708)
Loss attributable to equity method investments (note 5)		(6,863)		-
Other, net		(3,109)		(2,465)
Total other income (loss), net		(20,515)		(5,251)
Income before income taxes		150,587		138,881
Income taxes		30,439		33,144
Net income	$	120,148	$	105,737
Basic earnings per share (note 11)	$	0.84	$	0.74
Diluted earnings per share (note 11)	$	0.83	$	0.73
Dividend declared per share	$	0.39	$	0.37
Basic shares outstanding (000's)		143,719		142,668
Diluted shares outstanding (000's)		145,099		144,030

‎

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(In US$ and in thousands)



	Common Stock			Additional ‎Paid-in		Treasury Stock			Retained		Accumulated ‎Other ‎ Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance, June 30, 2019	185,491	$	575	$	1,511,473	(41,836)	$	(1,623,256)	$	2,436,410	$	(253,009)	$	2,072,193
Common stock issued on exercise of options	110		-		5,609	-		-		-		-		5,609
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	4		-		(327)	-		-		-		-		(327)
Stock-based compensation costs	-		-		13,256	-		-		-		-		13,256
Other comprehensive income	-		-		-	-		-		-		(37,576)		(37,576)
Net income	-		-		-	-		-		120,148		-		120,148
Dividends declared	-		-		-	-		-		(56,052)		-		(56,052)
Balance, September 30, 2019	185,605	$	575	$	1,530,011	(41,836)	$	(1,623,256)	$	2,500,506	$	(290,585)	$	2,117,251

‎

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Equity (Unaudited)

(In US$ and in thousands)


	Common Stock			Additional Paid-in		Treasury Stock			Retained		Accumulated Other Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance, June 30, 2018	184,316	$	571	$	1,450,821	(41,636)	$	(1,600,412)	$	2,432,328	$	(224,328)	$	2,058,980
Common stock issued on exercise of options	12		-		513	-		-		-		-		513
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	2		-		(141)	-		-		-		-		(141)
Treasury stock purchases	-		(1)		-	(200)		(22,844)		-		-		(22,845)
Stock-based compensation costs	-		-		12,476	-		-		-		-		12,476
Other comprehensive income	-		-		-	-		-		-		(12,872)		(12,872)
Net income	-		-		-	-		-		105,737		-		105,737
Cumulative effect of change in accounting ‎standards	-		-		-	-		-		(188,799)		-		(188,799)
Dividends declared	-		-		-	-		-		(52,793)		-		(52,793)
Balance, September 30, 2018	184,330	$	570	$	1,463,669	(41,836)	$	(1,623,256)	$	2,296,473	$	(237,200)	$	1,900,256

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In US$ and in thousands)



	Three Months Ended ‎September 30,
	2019		2018
Cash flows from operating activities:
Net income	$	120,148	$	105,737
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		37,954		30,424
Amortization of right-of-use-assets		5,963		-
Stock-based compensation costs		13,256		12,477
Loss attributable to equity method investments (note 5)		6,863		-
Impairment of equity investments (note 5)		2,590		1,711
Changes in fair value of business combination contingent consideration		(8)		(183)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		28,286		20,342
Inventories		(14,204)		(15,661)
Prepaid expenses, net deferred income taxes and other current assets		(8,407)		(7,703)
Accounts payable, accrued expenses and other		(30,078)		(99,025)
Net cash provided by operating activities		162,363		48,119
Cash flows from investing activities:
Purchases of property, plant and equipment		(22,671)		(12,994)
Patent registration costs		(2,069)		(2,611)
Business acquisitions, net of cash acquired (note 13)		-		(126,439)
Purchases of investments (note 5)		(2,741)		(2,467)
Payments on maturity of foreign currency contracts		(5,743)		(3,678)
Net cash used in investing activities		(33,224)		(148,189)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		5,609		513
Taxes paid related to net share settlement of equity awards		(326)		(124)
Purchases of treasury stock		-		(19,399)
Payments of business combination contingent consideration		(302)		(240)
Proceeds from borrowings, net of borrowing costs		565,000		303,000
Repayment of borrowings		(614,003)		(86,133)
Dividends paid		(56,052)		(52,793)
Net cash provided by (used in) financing activities		(100,074)		144,824
Effect of exchange rate changes on cash		(4,039)		(3,267)
Net increase in cash and cash equivalents		25,026		41,487
Cash and cash equivalents at beginning of period		147,128		188,701
Cash and cash equivalents at end of period	$	172,154	$	230,188
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	$	30,937	$	125,005
Interest paid	$	10,992	$	3,708
Fair value of assets acquired, excluding cash	$	-	$	42,807
Liabilities assumed		-		(41,905)
Goodwill on acquisition		-		125,037
Deferred payments		-		500
Cash paid for acquisitions	$	-	$	126,439

(b) Recently adopted accounting pronouncements

ASU No. 2016-02, “Leases”

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842). Under the new guidance, lessees are required to recognize a right-of-use asset (“ROU”) and a lease liability on the balance sheet for all leases, other than those that meet the definition of a short-term lease. This update will establish a lease asset and lease liability by lessees for those leases classified as operating under current GAAP. Leases are classified as either operating or finance under the new guidance. Operating leases result in straight-line expense in the income statement, similar to prior operating lease treatment, and finance leases result in more expense being recognized in the earlier years of the lease term, similar to prior capital lease treatment. For lessors, the update more closely aligns lease accounting to comparable guidance in the new revenue standards described.

Effective, July 1, 2019, we adopted the new standard on a modified retrospective transition basis for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In addition, we elected the package of practical expedients permitted under the transition guidance to not reassess (1) whether any expired or existing contracts are, or contain, leases, (2) the lease classification for expired or existing leases, and (3) initial direct costs for existing leases. In preparation for and upon adoption of this guidance, we have designed and operated internal controls over its implementation, which includes a system solution for lease administration, accounting and disclosures of financial information surrounding our leasing arrangements.

The adoption of the guidance on July 1, 2019 resulted in the recognition of ROU assets of $77.6 million and lease liabilities of $81.3 million, which all related to operating leases. The ROU assets were lower than the lease liabilities due to the derecognition of deferred rent balances of $3.7 million. We did not recognize any adjustment to the comparative period presented in the financial statements in accordance with our adoption method. The guidance did not have a material impact on our condensed consolidated statements of income.

In our Form 10-K for the year ended June 30, 2019, we estimated that the adoption of the guidance would result in the recognition of additional ROU assets and lease liabilities for operating leases of approximately $60.0 million to $70.0 million as of July 1, 2019. This range excluded the impact of our evaluation of lease terms, several contracts that may contain an embedded lease and the final assessment of the lease discount rates. During the quarter ended September 30, 2019, we finalized all remaining implementation work and the increase from our estimate of $60.0 million to $70.0 million to the opening balance of $77.6 million was primarily driven by our determination that we were reasonably certain to exercise extension options at some of our major sites, partially offset by our final discount rates generally being lower than the preliminary rate of 3.5% that was used when calculating our estimated balance upon adoption.

See note 9 - Leases for further disclosures related to our leases under the new guidance.

(2) Segment Information

Prior to the three months ended December 31, 2018, we had previously determined the software-as-a-service, or SaaS, line of business was not material to our global operations in terms of revenue and profit, and therefore had not been separately reported as a segment. However, following recent acquisitions, we have quantitatively and qualitatively reassessed our segment reporting and determined the SaaS segment is material to the group, and now have two operating segments, which are the Sleep and Respiratory Care segment and the SaaS segment.

We evaluate the performance of our segments based on net sales and income from operations. The accounting policies of the segments are the same as those described in note 1 of our consolidated financial statements included in our Form 10-K for the year ended June 30, 2019. Segment net sales and segment income from operations do not include inter-segment profits and revenue is allocated to a geographic area based on where the products are shipped to or where the services are performed.

Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, acquisition related expenses, interest income, interest expense and other, net. We neither discretely allocate assets to our operating segments, nor does our Chief Operating Decision Maker evaluate the operating segments using discrete asset information.

The table below presents a reconciliation of net revenues and net operating profit by reportable segments (in millions):


	Three Months Ended ‎September 30,
	2019		2018
Revenue by segment
Total Sleep and Respiratory Care	$	594.2	$	540.8

Software as a Service		88.3		47.5
Deferred revenue fair value adjustment		(1.4)		-
Total Software as a Service		86.9		47.5
Total	$	681.1	$	588.3

Net operating profit by segment
Sleep and Respiratory Care	$	198.2	$	175.3
Software as a Service		23.8		15.3
Total	$	222.0	$	190.6

Reconciling items
Corporate costs	$	30.9	$	33.6
Amortization of acquired intangible assets		18.5		12.9
Deferred revenue fair value adjustment		1.4		-
Interest income		(0.4)		(0.9)
Interest expense		11.0		3.7
Loss attributable to equity method investments		6.9		-
Other, net		3.1		2.5
Income before income taxes	$	150.6	$	138.9

(3) Supplemental Balance Sheet Information

Components of selected captions in the consolidated condensed balance sheets consisted of the following (in thousands):


Inventories	September 30, ‎2019		June 30, ‎2019
Raw materials	$	89,118	$	80,861
Work in progress		2,252		2,256
Finished goods		265,663		266,524
Total inventories	$	357,033	$	349,641


Property, Plant and Equipment	September 30, ‎2019		June 30, ‎2019
Property, plant and equipment, at cost	$	894,084	$	898,975
Accumulated depreciation and amortization		(511,114)		(511,515)
Property, plant and equipment, net	$	382,970	$	387,460


Other Intangible Assets	September 30, ‎2019		June 30, ‎2019
Developed/core product technology	$	377,854	$	401,842
Accumulated amortization		(160,151)		(157,651)
Developed/core product technology, net		217,703		244,191
Customer relationships		273,372		273,114
Accumulated amortization		(62,612)		(68,630)
Customer relationships, net		210,760		204,484
Other intangibles		171,016		176,351
Accumulated amortization		(102,632)		(103,076)
Other intangibles, net		68,384		73,275
Total other intangibles, net	$	496,847	$	521,950

Intangible assets consist of developed/core product technology, trade names, non-compete agreements, customer relationships, and patents, which we amortize over the estimated useful life of the assets, generally between two years to fifteen years. There are no expected residual values related to these intangible assets.

(4) Goodwill

A reconciliation of changes in our goodwill by reportable segment is as follows (in thousands):


	Three Months Ended September 30, 2019
	Sleep and ‎Respiratory Care		SaaS		Total
Balance at the beginning of the period	$	616,965	$	1,239,484	$	1,856,449
Adjustment to fair values of preliminary purchase price allocations		-		9,105		9,105
Foreign currency translation adjustments		(9,127)		-		(9,127)
Balance at the end of the period	$	607,838	$	1,248,589	$	1,856,427

(5) Investments

We have a number of equity investments in privately held companies that are unconsolidated entities and are recorded in the non-current balance of other assets on the consolidated condensed balance sheets. The following table shows a reconciliation of the changes in all of our investments (in thousands):


	Three Months Ended ‎September 30,
	2019		2018
Equity method investments
Balance at the beginning of the period	$	21,667	$	-
Loss attributable to equity method investments		(6,863)		-
Carrying value of equity method investments		14,804		-

Non-marketable securities
Balance at the beginning of the period	$	30,436	$	41,226
Investments		2,741		2,467
Impairment of investments		(2,590)		(1,711)
Carrying value of non-marketable securities		30,587		41,982

Total investments in unconsolidated entities	$	45,391	$	41,982

Equity investments whereby we have significant influence but not control over the investee, and are not the primary beneficiary of the investee’s activities, are accounted for under the equity method. Under this method, we record our share of gains or losses attributable to equity method investments.

Non-marketable equity securities consist of investments in privately held companies without readily determinable fair values, and are reported at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. We estimate the fair value of our equity investments using Level 3 inputs to assess whether impairment losses shall be recorded.

(6) Income Taxes

In accordance with ASC 740 Income Taxes, each interim reporting period is considered integral to the annual period, and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.

Our income tax returns are based on calculations and assumptions subject to audit by various tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes. Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results.

In connection with the audit by the Australian Taxation Office (“ATO”) for the tax years 2009 to 2013, we received Notices of Amended Assessments in March 2018. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed or $75.9 million. At September 30, 2019, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. The ATO is currently auditing tax years 2014 to 2017, and we have been notified by the ATO that they intend to audit tax year 2018. We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position.

(7) Product Warranties

Changes in the liability for warranty costs, which is included in accrued expenses in our condensed consolidated balance sheets are as follows (in thousands):



	Three Months Ended ‎September 30,
	2019		2018
Balance at the beginning of the period	$	19,625	$	19,227
Warranty accruals for the period		2,901		3,948
Warranty costs incurred for the period		(2,792)		(3,589)
Foreign currency translation adjustments		(572)		(261)
Balance at the end of the period	$	19,162	$	19,325

(8) Debt

Debt consisted of the following (in thousands):


	September 30, ‎2019		June 30, ‎2019
Short-term debt	$	12,009	$	12,012
Deferred borrowing costs		(17)		(20)
Short-term debt, net		11,992		11,992
		-
Long-term debt	$	1,213,000	$	1,262,000
Deferred borrowing costs		(4,790)		(3,139)
Long-term debt, net	$	1,208,210	$	1,258,861
Total debt	$	1,220,202	$	1,270,853

Credit Facility

On April 17, 2018, we entered into an amended and restated credit agreement (the “Revolving Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, joint book runner, swing line lender and letter of credit issuer, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner. The Amended and Restated Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $800.0 million, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million.

Additionally, on April 17, 2018, ResMed Limited entered into a Syndicated Facility Agreement (the “Term Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger and joint book runner, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner. The Term Credit Agreement, among other things, provides ResMed Limited a senior unsecured term credit facility of $200.0 million.

On November 5, 2018, we entered into a first amendment to the Revolving Credit Agreement to, among other things, increase the size of our senior unsecured revolving credit facility from $800.0 million to $1.6 billion, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million.

Our obligations under the Revolving Credit Agreement are guaranteed by certain of our direct and indirect U.S. subsidiaries, and ResMed Limited’s obligations under the Term Credit Agreement are guaranteed by us and certain of our direct and indirect U.S. subsidiaries. The Revolving Credit Agreement and Term Credit Agreement contain customary covenants, including, in each case, a financial covenant that requires that we maintain a maximum leverage ratio of funded debt to EBITDA (as defined in the Revolving Credit Agreement and Term Credit Agreement, as applicable). The entire principal amounts of the revolving credit facility and term credit facility, and, in each case, any accrued but unpaid interest may be declared immediately due and payable if an event of default occurs, as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable. Events of default under the Revolving Credit Agreement and the Term Credit Agreement include, in each case, failure to make payments when due, the occurrence of a default in the performance of any covenants in the respective agreements or related documents, or certain changes of control of us, or the respective guarantors of the obligations borrowed under the Revolving Credit Agreement and Term Credit Agreement.

The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023, when all unpaid principal and interest under the loans must be repaid. Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $6.0 million principal payment required on each such semi-annual amortization date. The outstanding principal amounts will bear interest at a rate equal to LIBOR plus 0.75% to 1.50% (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0% to 0.50% (depending on the then-applicable leverage ratio). At September 30, 2019, the interest rate that was being charged on the outstanding principal amounts was 3.2%. An applicable commitment fee of 0.100% to 0.175% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

Senior Notes

On July 10, 2019, we entered into a Note Purchase Agreement with the purchasers to that agreement, in connection with the issuance and sale of $250.0 million principal amount of our 3.24% senior notes due July 10, 2026, and $250.0 million principal amount of our 3.45% senior notes due July 10, 2029 (collectively referred to as the “Senior Notes”). Our obligations under the Note Purchase Agreement and the Senior Notes are unconditionally and irrevocably guaranteed by certain of our direct and indirect U.S. subsidiaries, including ResMed Corp., ResMed Motor Technologies Inc., Birdie Inc., Inova Labs, Inc., Brightree LLC, Brightree Home Health & Hospice LLC, Brightree Patient Collections LLC, ResMed Operations Inc., HEALTHCAREfirst Holding Company, HCF Holdco Company, HEALTHCAREfirst, Inc., CareFacts Information Systems, LLC and Lewis Computer Services, LLC, MatrixCare Holdings Inc., MatrixCare, Inc., Reciprocal Labs Corporation and ResMed SaaS Inc., under a Subsidiary Guaranty Agreement dated as of July 10, 2019. The net proceeds from this transaction were used to pay down borrowings on our Revolving Credit Agreement.

Under the terms of the Note Purchase Agreement, we agreed to customary covenants including with respect to our corporate existence, transactions with affiliates, and mergers and other extraordinary transactions. We also agreed that, subject to limited exceptions, we will maintain a ratio of consolidated funded debt to consolidated EBITDA of no more than 3.50 to 1.00 as of the last day of any fiscal quarter, and will not at any time permit the amount of all priority secured and unsecured debt of us and our subsidiaries to exceed 10% of our consolidated tangible assets, determined as of the end of our most recently ended fiscal quarter.

At September 30, 2019, we were in compliance with our debt covenants and there was $1,225.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

(9) Leases

We determine whether a contract is, or contains, a lease at inception. ROU assets represent our right to use an underlying asset during the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. We use our incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. ROU assets also include any lease payments made at or before lease commencement and any initial direct costs incurred, and exclude any lease incentives received.

We determine the lease term as the noncancellable period of the lease, and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recognized on the balance sheet. Some of our leases include variable lease payments that are based on costs incurred or actual usage, or adjusted periodically based on an index or a rate. Our leases do not contain any residual value guarantees and we do not account for lease and non-lease components as a single lease component. Operating leases are included in operating lease right-of-use assets and operating lease liabilities on our consolidated condensed balance sheets.

We lease certain office space, warehouses and distribution centers, manufacturing facilities, vehicles, and equipment with remaining lease terms ranging from less than 1 year to 14 years, some of which include options to extend or terminate the leases.

Operating lease costs for the three months ended September 30, 2019 were $6.0 million. Short-term and variable lease costs were not material for the three months ended September 30, 2019.

Supplemental balance sheet information related to operating leases was as follows (in thousands, except lease term and discount rate):


	September 30, ‎2019
Operating lease ROU assets	$	81,650

Operating lease liabilities, current portion		19,548
Operating lease liabilities, non-current portion		65,838
Total operating lease liabilities	$	85,386
		-
Future minimum lease payments under noncancelable leases as of September 30, 2019 and for the periods ending June 30:
2020	$	17,502
2021		16,900
2022		12,056
2023		9,629
2024		7,917
2025		5,913
Thereafter		24,988
Total lease payments	$	94,905
Less: imputed interest		(9,519)
Total lease liabilities	$	85,386

Weighted-average remaining lease term (years)		7.37
Weighted-average discount rate		2.9%

As of September 30, 2019, we had additional operating lease commitments of $49.9 million for manufacturing facilities and office space that have not yet commenced. These leases will commence during the year ended June 30, 2020 with lease terms of 5 years to 11 years.

Disclosures related to periods prior to adopting the new lease guidance

Certain facilities and equipment are leased under operating leases expiring at various dates. Most of the operating leases contain renewal options. Total expense for all operating leases was $23.4 million, $21.1 million, and $20.1 million for the years 2018, 2017, and 2016, respectively.

Future minimum lease payments (including interest) under non-cancelable operating leases at June 30, 2019 were as follows (in thousands):


Fiscal Years	Operating Leases
2020	$	23,500
2021		17,161
2022		12,403
2023		9,478
2024		7,916
Thereafter		27,555
Total minimum lease payments	$	98,013

(10) Stockholders’ Equity

Common Stock. Since the inception of our share repurchase programs and through September 30, 2019, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion. We have temporarily suspended our share repurchase program due to recent acquisitions. Accordingly, we did not repurchase any shares during the three months ended September 30, 2019. During the three months ended September 30, 2018, we repurchased 200,000 shares at an aggregate purchase price of $22.8 million under our share repurchase program. Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share. There is no expiration date for this program, and the program may be accelerated, suspended, reinstated, delayed or discontinued at any time at the discretion of our board of directors. At September 30, 2019, 12.9 million additional shares can be repurchased under the approved share repurchase program.

Preferred Stock. In April 1997, the board of directors designated 2.0 million shares of our $0.01 par value preferred stock as Series A Junior Participating Preferred Stock. No shares were issued or outstanding at September 30, 2019 and June 30, 2019.

Stock Options and Restricted Stock Units. We have granted stock options and restricted stock units to personnel, including officers and directors, in accordance with the amended and restated ResMed Inc. 2009 Incentive Award Plan (as amended and restated, the “2009 Plan”). The options have expiration dates of seven years from the date of grant and the options and restricted stock units vest over one year to four years.

At September 30, 2019, the maximum number of shares of our common stock authorized for issuance under the 2009 Plan was 51.1 million shares. The number of securities remaining available for future issuance under the 2009 Plan at September 30, 2019 was 16.3 million.

The following table summarizes option activity during the three months ended September 30, 2019:



	Options		Weighted ‎Average ‎Exercise ‎Price		Weighted ‎Average ‎Remaining ‎Contractual ‎Term in Years
Outstanding at beginning of period		1,260,114	$	72.91	4.4
Granted		-		-
Exercised		(110,379)		50.81
Forfeited		-		-
Outstanding at end of period		1,149,735	$	75.03	4.5
Exercise price of granted options	$	-
Options exercisable at end of period		594,087	$	60.89

The following table summarizes the activity of restricted stock units during the three months ended September 30, 2019:



	Restricted ‎Stock ‎Units		Weighted ‎Average ‎Grant-Date ‎Fair Value		Weighted ‎Average ‎Remaining ‎Contractual ‎Term in Years
Outstanding at beginning of period		1,446,170	$	77.21	1.6
Granted		3,316		129.63
Vested		(5,186)		72.33
Expired / cancelled		(13,355)		79.40
Forfeited		(6,361)		79.40
Outstanding at end of period		1,424,584	$	77.29	1.4

Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, we offer participants the right to purchase shares of our common stock at a discount during successive offering periods. During the three months ended September 30, 2019 and September 30, 2018, we did not issue any shares to our employees associated with the ESPP. At September 30, 2019, the number of shares remaining available for future issuance under the ESPP is 2.4 million shares.

(11) Earnings Per Share

Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units.

The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings per share were 693 and 10,006 for the three months ended September 30, 2019 and September 30, 2018, respectively, were not included in the computation of diluted earnings per share as the effect would have been anti-dilutive.

Basic and diluted earnings per share are calculated as follows (in thousands except per share data):



	Three Months Ended ‎September 30,
	2019		2018
Numerator:
Net income	$	120,148	$	105,737
Denominator:
Basic weighted-average common shares outstanding		143,719		142,668
Effect of dilutive securities:
Stock options and restricted stock units		1,380		1,362
Diluted weighted average shares		145,099		144,030
Basic earnings per share	$	0.84	$	0.74
Diluted earnings per share	$	0.83	$	0.73

(12) Legal Actions and Contingencies

Litigation

In the normal course of business, we are subject to routine litigation incidental to our business. While the results of this litigation cannot be predicted with certainty, we believe that their final outcome will not, individually or in aggregate, have a material adverse effect on our consolidated financial statements taken as a whole.

Taxation Matters

As described in note 6 – Income Taxes, we received Notices of Amended Assessments from the ATO for the tax years 2009 to 2013. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed, or $75.9 million. At September 30, 2018, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. We do not agree with the ATO’s assessments and we continue to believe we are more likely than not to be successful in defending our position. However, if we are not successful, we will not receive a refund of the amount paid in April 2018 and we would be required to pay the remaining additional income tax, accrued interest and penalties, which would be recorded as income tax expense. The ATO is currently auditing tax years 2014 to 2017, and we have also been notified by the ATO that they intend to audit tax year 2018.

In connection with the recent change in U.S. Tax laws and the analysis of historical tax filings, we identified an administrative oversight in our prior year tax filing relating to a gain on an internal legal entity reorganization. We have applied for relief from the U.S. Internal Revenue Service (“IRS”) and have amended the related tax returns required to correct the administrative oversight, which would indefinitely defer the recognition of this gain. We believe it is more likely than not that we will be granted this relief and therefore, have not recorded a reserve in relation to this matter during the three months ended September 30, 2019.

Contingent Obligations Under Recourse Provisions

We use independent financing institutions to offer some of our customers financing for the purchase of some of our products. Under these arrangements, if the customer qualifies under the financing institutions’ credit criteria and finances the transaction, the customers repay the financing institution on a fixed payment plan. For some of these arrangements, the customer’s receivable balance is with recourse, either limited or full, whereby we are responsible for repaying the financing company should the customer default. We record a contingent provision, which is estimated based on historical default rates. This is applied to receivables sold with recourse and is recorded in accrued expenses.

The following table summarizes the amount of receivables sold with recourse (in thousands):



	Three Months Ended September 30,
	2019		2018
Total receivables sold:
Full recourse	$	-	$	10,082
Limited recourse		33,673		18,824
Total	$	33,673	$	28,906

The following table summarizes the maximum exposure on outstanding receivables sold with recourse and provision for doubtful accounts (in thousands):



	September 30, ‎2019		June 30, ‎2019
Maximum exposure on outstanding receivables:
Full recourse	$	9,952	$	19,209
Limited recourse		13,509		10,241
Total	$	23,461	$	29,450
Contingent provision for receivables with recourse	$	(2,747)	$	(1,752)

(13) Business Combinations

We did not complete any acquisitions during the three months ended September 30, 2019.

MatrixCare

On November 13, 2018, we completed the acquisition of 100% of the shares in MatrixCare Inc. and its subsidiaries (“MatrixCare”), a provider of software solutions for skilled nursing, life plan communities, senior living and private duty, for base purchase consideration paid of $750.0 million. This acquisition has been accounted for as a business combination using purchase accounting and included in our consolidated financial statements from November 13, 2018. The acquisition was paid for using borrowings under our revolving credit facility.

We have not finalized the purchase price allocation in relation to this acquisition as certain appraisals associated with the valuation of income tax positions are not yet complete. We do not believe that the completion of this work will materially modify the preliminary purchase price allocation. We expect to complete our purchase price allocation during the quarter ending December 31, 2019. The cost of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of the acquisition is reflected in the Software as a Service segment and is not deductible for tax purposes. It mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future.

The preliminary fair values of assets acquired and liabilities assumed, and the estimated useful lives of intangible assets acquired are as follows (in thousands):


	Preliminary		Intangible ‎assets - ‎useful life
Current assets	$	50,325
Property, plant and equipment		4,401
Trade names		18,000		7 years
Developed technology		133,000		7 years
Customer relationships		116,000		15 years
Goodwill		516,482
Assets acquired	$	838,208
Current liabilities		(14,072)
Deferred revenue		(18,505)
Deferred tax liabilities		(41,570)
Debt assumed		(151,665)
Total liabilities assumed	$	(225,812)
Net assets acquired	$	612,396

A reconciliation of the base consideration to the net consideration is as follows (in thousands):


Base consideration	$	750,000
Cash acquired		15,873
Debt assumed		(151,665)
Net working capital and other adjustments		(1,812)
Net consideration	$	612,396

Other acquisitions

During the year ended June 30, 2019, we also completed the following acquisitions:

On July 6, 2018, we completed the acquisition of 100% of the shares in HEALTHCAREfirst Holding Company (“HEALTHCAREfirst”), a provider of software solutions and services for home health and hospice agencies, for a total purchase consideration of $126.3 million.

On October 15, 2018, we completed the acquisition of 100% of the shares in HB Healthcare, a homecare provider in South Korea.

On December 11, 2018, we completed the acquisition of assets in Interactive Health Network, a provider of integrated clinical and financial management software solution for long-term care companies.

On December 13, 2018, we completed the acquisition of assets in Apacheta, a provider of cloud-based SaaS software that manages the medical equipment delivery process for home medical equipment dealers.

On January 6, 2019, we completed the acquisition of Propeller Health, a digital therapeutics company providing connected health solutions for people living with chronic obstructive pulmonary disease and asthma, for a total purchase consideration of $242.9 million, which adjusts for cash acquired and debt assumed at the time of acquisition. We previously held a non-controlling interest in Propeller Health’s outstanding shares. As a result of the acquisition, we recognized a fair value gain of $1.9 million in other income during the year ended June 30, 2019 associated with the previous equity investment.

These acquisitions have been accounted for as business combinations using purchase accounting and are included in our consolidated financial statements from the acquisition dates. These acquisitions, individually and collectively, are not considered a material business combination and accordingly pro forma information is not provided. The acquisitions were funded by drawing on our existing credit facility and through cash on-hand.

Except for the purchase price allocation associated with the Propeller Health acquisition (and the acquisition of MatrixCare, as described above), we have completed the purchase price allocation in relation to all of these acquisitions. We expect to complete our purchase price allocation for Propeller Health during the quarter ending December 31, 2019. We do not believe that the completion of this work will materially modify the preliminary purchase price allocation for Propeller Health. The cost of the share acquisitions was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of these acquisitions, which is predominantly not deductible for tax purposes, mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future. Goodwill from these acquisitions has been reflected in the Software as a Service segment except for the goodwill resulting from the HB Healthcare and Propeller Health acquisitions, which have been recorded in the Sleep and Respiratory Care segment.

The fair values of assets acquired and liabilities assumed of all other acquisitions, excluding MatrixCare, and the estimated useful lives of intangible assets acquired are as follows (in thousands):


	Preliminary		Intangible ‎assets - ‎useful life
Current assets	$	31,648
Property, plant and equipment		2,290
Deferred tax assets		5,211
Trade names		7,828		10 years
Non-compete		1,000		3 years
Developed technology		48,280		5 to 6 years
Customer relationships		53,712		5 to 15 years
Goodwill		286,943
Assets acquired	$	436,912
Current liabilities		(7,122)
Deferred revenue		(3,619)
Deferred tax liabilities		(2,367)
Debt assumed		(35,104)
Total liabilities assumed	$	(48,212)
Net assets acquired	$	388,700

During the three months ended September 30, 2019 and 2018, we did not record material acquisition related expenses.

Overview

The following is an overview of our results of operations for the three months ended September 30, 2019. Management’s discussion and analysis of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of ResMed Inc. Management’s discussion and analysis is provided as a supplement to, and should be read in conjunction with, the condensed consolidated financial statements and notes included in this report.

We are a global leader in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (“SDB”), chronic obstructive pulmonary disease, neuromuscular disease and other chronic diseases. SDB includes obstructive sleep apnea and other respiratory disorders that occur during sleep. Our products and solutions are designed to improve patient quality of life, reduce the impact of chronic disease and lower healthcare costs as global healthcare systems continue to drive a shift in care from hospitals to the home and lower cost settings. Our cloud-based software digital health applications, along with our devices, are designed to provide connected care to improve patient outcomes and efficiencies for our customers.

Since the development of continuous positive airway pressure therapy, we have expanded our business by developing or acquiring a number of products and solutions for a broader range of respiratory disorders including technologies to be applied in medical and consumer products, ventilation devices, diagnostic products, mask systems for use in the hospital and home, headgear and other accessories, dental devices, portable oxygen concentrators and cloud-based software informatics solutions to manage patient outcomes and customer and provider business processes. Our growth has been fueled by geographic expansion, our research and product development efforts, acquisitions and an increasing awareness of SDB and respiratory conditions like chronic obstructive pulmonary disease as significant health concerns.

We are committed to ongoing investment in research and development and product enhancements. During the three months ended September 30, 2019, we invested $48.0 million on research and development activities with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs. Due to multiple acquisitions, including of Brightree in April 2016, HEALTHCAREfirst in July 2018 and MatrixCare in November 2018, our operations now include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice. These platforms comprise our SaaS business. These products, our cloud-based remote monitoring and therapy management system, and a robust product pipeline, should continue to provide us with a strong platform for future growth.

We have determined that we have two operating segments, which are the sleep and respiratory disorders sector of the medical device industry (“Sleep and Respiratory Care”) and the supply of business management software-as-a-service to out-of-hospital health providers (“SaaS”).

During the three months ended September 30, 2019, our net revenue increased by 16% compared to the three months ended September 30, 2018. Gross margin was 59.5% for the three months ended September 30, 2019 compared to 58.3% for the three months ended September 30, 2018. Diluted earnings per share for the three months ended September 30, 2019 was $0.83 per share, compared to $0.73 per share for the three months ended September 30, 2018.

At September 30, 2019, our cash and cash equivalents totaled $172.2 million, our total assets were $4.2 billion and our stockholders’ equity was $2.1 billion.

In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency basis”, which is in addition to the actual financial information presented. In order to calculate our constant currency information, we translate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period. However, constant currency measures should not be considered in isolation or as an alternative to U.S. dollar measures that reflect current period exchange rates, or to other financial measures calculated and presented in accordance with U.S. GAAP.

‎

Comparison of the Three Months Ended September 30, 2019 to the Three Months Ended September 30, 2018

Net Revenues

Net revenue for the three months ended September 30, 2019 increased to $681.1 million from $588.3 million for the three months ended September 30, 2018, an increase of $92.8 million or 16% (a 17% increase on a constant currency basis). The following table summarizes our net revenue disaggregated by segment, product and region for the three months ended September 30, 2019 compared to September 30, 2018 (in millions):


	Three Months Ended September 30,
	2019		2018		% Change		Constant Currency*
U.S., Canada and Latin America
Devices	$	186.9	$	172.4	8	%
Masks and other		183.4		154.0	19
Total Sleep and Respiratory Care	$	370.3	$	326.4	13
Software as a Service		86.9		47.5	83
Total	$	457.2	$	373.9	22
Combined Europe, Asia and other markets
Devices	$	151.9	$	151.7	0	%	4	%
Masks and other		72.0		62.7	15		19
Total Sleep and Respiratory Care	$	223.9	$	214.4	4		8
Global revenue
Devices	$	338.8	$	324.1	5	%	6	%
Masks and other		255.4		216.7	18		19
Total Sleep and Respiratory Care	$	594.2	$	540.8	10		11
Software as a Service		86.9		47.5	83		83
Total	$	681.1	$	588.3	16		17

*Constant currency numbers exclude the impact of movements in international currencies.

Sleep and Respiratory Care

Net revenue for the three months ended September 30, 2019 was $594.2 million, an increase of 10% compared to net revenue for the three months ended September 30, 2018. Movements in international currencies against the U.S. dollar negatively impacted net revenues by approximately $9.1 million for the three months ended September 30, 2019. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended September 30, 2019 increased by 11% compared to the three months ended September 30, 2018. The increase in net revenue was primarily attributable to an increase in unit sales of our devices and masks and other.

Net revenue in U.S., Canada and Latin America for the three months ended September 30, 2019 increased to $370.3 million from $326.4 million for the three months ended September 30, 2018, an increase of $43.9 million or 13%. The increase is primarily due to an increase in unit sales of our devices and masks and other.

Net revenue in combined Europe, Asia and other markets increased for the three months ended September 30, 2019 to $223.9 million from $214.4 million for the three months ended September 30, 2018, an increase of $9.5 million or 4% (a 8% increase on a constant currency basis). The constant currency increase in sales in combined Europe, Asia and other markets predominantly reflects an increase in unit sales of our masks.

Net revenue from devices for the three months ended September 30, 2019 increased to $338.8 million from $324.1 million for the three months ended September 30, 2018, an increase of $14.7 million or 5%, including an increase of 8% in the United States, Canada and Latin America and an increase of 0% in combined Europe, Asia and other markets (a 4% increase on a constant currency basis). Excluding the impact of foreign currency movements, device sales for the three months ended September 30, 2019 increased by 6%.

Net revenue from masks and other for the three months ended September 30, 2019 increased to $255.4 million from $216.7 million for the three months ended September 30, 2018, an increase of 18%, including an increase of 19% in the United States, Canada and Latin America and an increase of 15% in combined Europe, Asia and other markets (a 19% increase on a constant currency basis). Excluding the impact of foreign currency movements, masks and other sales increased by 19%, compared to the three months ended September 30, 2018.

Software as a Service

Net revenue from our SaaS business for the three months ended September 30, 2019 was $86.9 million, an increase of 83% compared to the three months ended September 30, 2018. The increase was predominantly due to revenue attributable to MatrixCare, which we acquired on November 13, 2018 and contributed $34.8 million in net revenue for the three months ended September 30, 2019.

Gross Profit

Gross profit increased for the three months ended September 30, 2019 to $405.1 million from $343.1 million for the three months ended September 30, 2018, an increase of $62.0 million or 18%. Gross profit as a percentage of net revenue for the three months ended September 30, 2019 was 59.5% compared to 58.3% for the three months ended September 30, 2018.

The increase in gross margins for the three months ended September 30, 2019 and 2018 was primarily due to manufacturing and procurement efficiencies, a favorable impact from our MatrixCare acquisition and a favorable product mix.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the three months ended September 30, 2019 to $167.4 million from $147.3 million for the three months ended September 30, 2018, an increase of $20.1 million or 14%. Selling, general and administrative expenses were favorably impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by approximately $3.5 million, as reported in U.S. dollars. Excluding the impact of foreign currency movements, selling, general and administrative expenses for the three months ended September 30, 2019 increased by 16% compared to the three months ended September 30, 2018. Selling, general and administrative expenses, as a percentage of net revenue, were 24.6% for the three months ended September 30, 2019, compared to 25.0% for the three months ended September 30, 2018.

The constant currency increase in selling, general and administrative expenses was primarily due to additional expenses associated with the consolidation of recent acquisitions. Excluding the incremental selling, general and administrative expenses attributed to our recent acquisitions, selling, general and administrative expenses for the three months ended September 30, 2019 increased by 6% in constant currency terms.

Research and Development Expenses

Research and development expenses increased for the three months ended September 30, 2019 to $48.0 million from $38.8 million for the three months ended September 30, 2018, an increase of $9.2 million, or 24%. Research and development expenses were favorably impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by approximately $1.2 million for the three months ended September 30, 2019, as reported in U.S. dollars. Excluding the impact of foreign currency movements, research and development expenses increased by 27% compared to the three months ended September 30, 2018. Research and development expenses, as a percentage of net revenue, were 7.1% for the three months ended September 30, 2019, compared to 6.6% for the three months ended September 30, 2018.

The increase in research and development expenses in constant currency terms was primarily due to additional expenses associated with the consolidation of recent acquisitions. Excluding the incremental research and development expenses attributed to our recent acquisitions, research and development expenses for the three months ended September 30, 2019 increased by 2% in constant currency terms.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three months ended September 30, 2019 totaled $18.5 million compared to $12.9 million for the three months ended September 30, 2018. The increase in amortization expense was attributable to our recent acquisitions, in particular MatrixCare and Propeller Health.

Total Other Income (Loss), Net

Total other income (loss), net for the three months ended September 30, 2019 was a loss of $20.5 million compared to a loss of $5.3 million for the three months ended September 30, 2018. The increase in loss was due to an increase in interest expense to $11.0 million for the three months ended September 30, 2019 compared to $3.7 million for the three months ended September 30, 2018.

We also recorded losses attributable to equity method investments for the three months ended September 30, 2019 of $6.9 million compared to $0.0 million for the three months ended September 30, 2018. The losses relate to our joint venture with Verily and is accounted for using the equity method, whereby we recognize our share of the joint venture’s losses.

Income Taxes

Our effective income tax rate for the three months ended September 30, 2019 was 20.2% as compared to 23.9% for the three months ended September 30, 2018. The decrease in our rate was primarily related to changes in the geographic mix of our earnings.

Our Singapore operations operate under certain tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2030. As a result of recent changes in U.S. Tax laws, we treated all non-U.S. historical earnings as taxable during the year ended June 30, 2018. Therefore, future repatriations of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal income tax.

Finally, in connection with the audit by the ATO for the tax years 2009 to 2013, we received Notices of Amended Assessments in March 2018. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. At September 30, 2018, we have

recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed or $75.9 million. We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position. The ATO is currently auditing tax years 2014 to 2017, and we have also been notified by the ATO that they intend to audit tax year 2018.

Net Income and Earnings per Share

As a result of the factors above, our net income for the three months ended September 30, 2019 was $120.1 million compared to net income of $105.7 million for the three months ended September 30, 2018, an increase of 14% over the three months ended September 30, 2018.

Our diluted earnings per share for the three months ended September 30, 2019 were $0.83 per diluted share compared to $0.73 for the three months ended September 30, 2018, an increase of 14% over the three months ended September 30, 2018.

Liquidity and Capital Resources

As of September 30, 2019 and June 30, 2019, we had cash and cash equivalents of $172.2 million and $147.1 million, respectively. Working capital was $610.6 million and $589.4 million, at September 30, 2019 and June 30, 2019, respectively. As of September 30, 2019, we had $1.2 billion of borrowings compared to $1.3 billion of borrowings at June 30, 2019.

As of September 30, 2019 and June 30, 2019, our cash and cash equivalent balances held within the United States amounted to $57.1 million and $33.6 million, respectively. Our remaining cash and cash equivalent balances at September 30, 2019 and June 30, 2019, were $115.1 million and $113.5 million, respectively. Our cash and cash equivalent balances are held at highly rated financial institutions.

During the year ended June 30, 2018, as a result of recent changes in U.S. tax laws, we treated all non-U.S. historical earnings as taxable, which resulted in additional tax expense of $126.9 million which was payable over the proceeding eight years. Therefore, future repatriations of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal tax. On June 14, 2019, the U.S. Treasury Department issued final and temporary regulations relating to the repatriation of non-U.S. earnings, which would subject certain amounts of non-U.S. earnings to U.S. taxation upon repatriation.

Our non-U.S. earnings are indefinitely reinvested, and therefore, we do not provide for U.S. tax on these earnings. In the event we were to provide for such taxes, we would recognize deferred taxes of approximately $201.6 million in U.S. federal deferred tax and $5.2 million in U.S. state deferred taxes in the consolidated financial statements.

Inventories at September 30, 2019 were $357.0 million, an increase of $7.4 million or 2% from the June 30, 2019 balance of $349.6 million. The increase in inventories was required to support our revenue growth.

Accounts receivable at September 30, 2019 were $493.8 million, a decrease of $34.7 million or 7% compared to the June 30, 2019, balance of $528.5 million. Accounts receivable days outstanding of 67 days at September 30, 2019, were the same as at June 30, 2019. Our allowance for doubtful accounts as a percentage of total accounts receivable at September 30, 2019, was 4.7%, compared to 4.5% at June 30, 2019.

Effective, July 1, 2019, we adopted the Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842). As of September 30, 2019 and in accordance with the new guidance, we have recognized a right-of-use asset (“ROU”) of $81.7 million and a lease liability of $85.4 million on the balance sheet for all operating leases, other than those that meet the definition of a short-term lease.

During the three months ended September 30, 2019, we generated cash of $162.4 million from operations compared to $48.1 million for the three months ended September 30, 2018. The increase in cash generated from operations during the three months ended September 30, 2019, as compared to the three months ended September 30, 2018 was primarily due to the increase in operating profit and the timing of income tax payments, which decreased to $30.9 million during the three months ended September 30, 2019 from $125.0 million during the three months ended September 30, 2018. Movements in foreign currency exchange rates during the three months ended September 30, 2019, had the effect of decreasing our cash and cash equivalents by $4.0 million, as reported in U.S. dollars.

We have temporarily suspended our share repurchase program due to recent acquisitions. Accordingly, we did not repurchase any shares during the three months ended September 30, 2019. During the three months ended September 30, 2018 we repurchased 200,000 shares of our common stock at an aggregate purchase price of $22.8 million under our share repurchase program. In addition, during the three months ended September 30, 2019 and 2018, we paid dividends to holders of our common stock totaling $56.1 million and $52.8 million, respectively.

Capital expenditures for the three months ended September 30, 2019 and 2018, amounted to $22.7 million and $13.0 million, respectively. The capital expenditures for the three months ended September 30, 2019, primarily reflected investment in production tooling, buildings, equipment and machinery, and computer hardware and software. At September 30, 2019, our balance sheet reflects net property, plant and equipment of $383.0 million compared to $387.5 million at June 30, 2019.

Contractual Obligations

Details of contractual obligations at September 30, 2019, are as follows (in thousands):



			Payments Due by September 30,
In $000’s	Total		2020		2021		2022		2023		2024		Thereafter
Debt	$	1,225,009	$	12,009	$	12,000	$	12,000	$	689,000	$	-	$	500,000
Interest on debt		222,532		40,332		39,929		39,539		26,682		16,725		59,325
Operating leases		125,515		22,208		19,425		18,261		11,451		10,248		43,922
Purchase obligations		251,871		251,210		631		27		2		1		-
Total	$	1,824,927	$	325,759	$	71,985	$	69,827	$	727,135	$	26,974	$	603,247

Details of other commercial commitments at September 30, 2019, are as follows (in thousands):



			Amount of Commitment Expiration Per Period
In $000’s	Total		2020		2021		2022		2023		2024		Thereafter
Standby letter of credit	$	10,164	$	3,661	$	11	$	-	$	46	$	-	$	6,446
Guarantees*		6,556		184		23		14		23		21		6,291
Total	$	16,720	$	3,845	$	34	$	14	$	69	$	21	$	12,737

* The above guarantees mainly relate to requirements under contractual obligations with insurance companies transacting with our German subsidiaries and guarantees provided under our facility leasing obligations.

Credit Facility

On April 17, 2018, we entered into an amended and restated credit agreement (as amended from time to time, the “Revolving Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, joint book runner, swing line lender and letter of credit issuer, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner. The Revolving Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $800.0 million, with an uncommitted option to increase the revolving credit facility by an additional $300.0 million.

The Revolving Credit Agreement and Term Credit Agreement each terminate on April 17, 2023, when all unpaid principal and interest under the loans must be repaid. Amounts borrowed under the Term Credit Agreement will also amortize on a semi-annual basis, with a $6.0 million principal payment required on each such semi-annual amortization date. The outstanding principal amounts will bear interest at a rate equal to LIBOR plus 0.75% to 1.50% (depending on the then-applicable leverage ratio) or the Base Rate (as defined in the Revolving Credit Agreement and the Term Credit Agreement, as applicable) plus 0.0% to 0.50% (depending on the then-applicable leverage ratio). On September 30, 2019, the interest rate that was being charged on the outstanding principal amounts was 3.2%. An applicable commitment fee of 0.100% to 0.175% (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

Senior Notes

On July 10, 2019, we entered into a Note Purchase Agreement with the purchasers to that agreement, in connection with the issuance and sale of $250.0 million principal amount of our 3.24% senior notes due July 10, 2026, and $250.0 million principal amount of our 3.45% senior notes due July 10, 2029 (“Senior Notes”). Our obligations under the Note Purchase Agreement and the Senior Notes are unconditionally and irrevocably guaranteed by certain of our direct and indirect U.S. subsidiaries, including ResMed Corp., ResMed Motor Technologies Inc., Birdie Inc., Inova Labs, Inc., Brightree LLC, Brightree Home Health & Hospice LLC, Brightree Patient Collections LLC, ResMed Operations Inc., HEALTHCAREfirst Holding Company, HCF Holdco Company, HEALTHCAREfirst, Inc., CareFacts Information Systems, LLC and Lewis Computer Services, LLC, MatrixCare Holdings Inc., MatrixCare, Inc., Reciprocal Labs Corporation and ResMed SaaS Inc., under a Subsidiary Guaranty Agreement dated as of July 10, 2019. The net proceeds from this transaction were used to pay down borrowings on our Revolving Credit Agreement.

On September 30, 2019, we were in compliance with our debt covenants and there was a total of $1,225.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes. We expect to satisfy all of our liquidity and long-term debt requirements through a combination of cash on hand, cash generated from operations and debt facilities.

Common Stock

Since the inception of our share repurchase programs and through September 30, 2019, we have repurchased a total of 41.8 million shares for an aggregate of $1.6 billion. We have temporarily suspended our share repurchase program due to recent acquisitions. Accordingly, we did not repurchase any shares during the three months ended September 30, 2019. During the three months ended September 30, 2018, we repurchased 200,000 shares at an aggregate purchase price of $22.8 million under our share repurchase program. Shares that are repurchased are classified as treasury stock pending future use and reduce the number of shares outstanding used in calculating earnings per share. There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors. At September 30, 2019, 12.9 million additional shares can be repurchased under the approved share repurchase program.

Critical Accounting Principles and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, including those related to allowance for doubtful accounts, inventory reserves, warranty obligations, goodwill, potentially impaired assets, intangible assets, income taxes and contingencies.

We state these accounting policies in the notes to the financial statements and at relevant sections in this discussion and analysis. The estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

Refer to the note 9 – Leases where we have outlined our new policy following the adoption of Accounting Standard Codification Topic 842 – Leases during the current year. All other critical accounting policies have remained unchanged. For a full discussion of our critical accounting policies, see our Annual Report on Form 10-K for the year ended June 30, 2019.

Recently Issued Accounting Pronouncements

See note 1 to the unaudited condensed consolidated financial statements for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial positions and cash flows.

Off-Balance Sheet Arrangements

As of September 30, 2019, we are not involved in any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.

Foreign Currency Market Risk

Our reporting currency is the U.S. dollar, although the financial statements of our non-U.S. subsidiaries are maintained in their respective local currencies. We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollar. We have significant foreign currency exposure through our Australian and Singapore manufacturing activities and our international sales operations. We have established a foreign currency hedging program using purchased currency options and forward contracts to hedge foreign-currency-denominated financial assets, liabilities and manufacturing cash flows. The goal of this hedging program is to economically manage the financial impact of foreign currency exposures predominantly denominated in euros, Australian dollars and Singapore dollars. Under this program, increases or decreases in our foreign-currency-denominated financial assets, liabilities, and firm commitments are partially offset by gains and losses on the hedging instruments. We do not enter into financial instruments for trading or speculative purposes. The foreign currency derivatives portfolio is recorded in the condensed consolidated balance sheets at fair value and included in other assets or other liabilities. All movements in the fair value of the foreign currency derivatives are recorded within other income, net, on our condensed consolidated statements of income.

The table below provides information (in U.S. dollars) on our foreign currency denominated operating assets and liabilities and after considering our foreign currency hedging activities as of September 30, 2019 (in thousands):



	U.S.		Canadian	Chinese
	Dollar	Euro	Dollar	Yuan
	(USD)	(EUR)	(CAD)	(CNY)
AUD Functional:
Assets	445,067	129,129	-	43,124
Liability	(254,069)	(98,306)	-	(2,539)
Foreign Currency Hedges	(190,000)	(27,267)	-	(22,381)
Net Total	998	3,556	-	18,204
USD Functional:
Assets	-	-	17,812	-
Liability	-	-	-	-
Foreign Currency Hedges	-	-	(15,104)	-
Net Total	-	-	2,708	-
SGD Functional:
Assets	485,367	194,928	-	(12)
Liability	(260,488)	(54,038)	-	-
Foreign Currency Hedges	(228,000)	(130,882)	-	-
Net Total	(3,121)	10,008	-	(12)

The table below provides information about our material foreign currency derivative financial instruments and presents the information in U.S. dollar equivalents. The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options, collars and forward contracts held at September 30, 2019. The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our foreign currency derivative financial instruments, including the forward contracts used to hedge our foreign currency denominated assets and liabilities. These notional amounts generally are used to calculate payments to be exchanged under the contracts (in thousands, except exchange rates).



				Fair Value Assets / (Liabilities)
Foreign Exchange Contracts	Year 1	Year 2	Total	September 30, ‎2019	June 30, ‎2019
AUD/USD
Contract amount	190,000	-	190,000	(1,461)	202
Ave. contractual exchange rate	AUD 1 = ‎USD 0.6804		AUD 1 = ‎USD 0.6804
AUD/Euro
Contract amount	70,894	10,907	81,801	164	(124)
Ave. contractual exchange rate	AUD 1 = ‎Euro 0.6336	AUD 1 = ‎Euro 0.6330	AUD 1 = ‎Euro 0.6335
SGD/Euro
Contract amount	130,882	-	130,882	1,054	40
Ave. contractual exchange rate	SGD 1 = ‎Euro 0.6566		SGD 1 = ‎Euro 0.6566
SGD/USD
Contract amount	228,000	-	228,000	390	71
Ave. contractual exchange rate	SGD 1 = ‎USD 0.7222		SGD 1 = ‎USD 0.7222
AUD/CNY
Contract amount	22,381	-	22,381	(91)	(15)
Ave. contractual exchange rate	AUD 1 = ‎CNY 4.8950		AUD 1 = ‎CNY 4.8950
USD/CAD
Contract amount	15,104	-	15,104	193	(66)
Ave. contractual exchange rate	USD 1 = ‎CAD 1.3075		USD 1 = ‎CAD 1.3075

Interest Rate Risk

We are exposed to risk associated with changes in interest rates affecting the return on our cash and cash equivalents and debt. At September 30, 2019, we held cash and cash equivalents of $172.2 million principally comprised of bank term deposits and at-call accounts and are invested at both short-term fixed interest rates and variable interest rates. At September 30, 2019, there was $725.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which are subject to variable interest rates. At September 30, 2019, there was $500.0 million outstanding under the Senior Notes, of which $250.0 million was subject to a fixed interest rate of 3.24% and $250.0 million was subject to a fixed interest rate of 3.45%. A hypothetical 10% change in interest rates during the three months ended September 30, 2019, would not have had a material impact on pretax income. We have no interest rate hedging agreements.

Item 1 Legal Proceedings

We are involved in various legal proceedings, claims, investigations and litigation that arise in the ordinary course of our business. We investigate these matters as they arise, and accrue estimates for resolution of legal and other contingencies in accordance with Statement of Financial Accounting Standard No. 5. See note 12 to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Litigation is inherently uncertain. Accordingly, we cannot predict with certainty the outcome of these matters. But we do not expect the outcome of these matters to have a material adverse effect on our consolidated financial statements when taken as a whole.

Administrative subpoenas. In 2016, we received federal administrative subpoenas from the Office of Inspector General of the U.S. Department of Health and Human Services. The subpoenas requested documents and other materials related primarily to industry offerings of patient resupply software to home medical equipment providers, discounted sales and leasing to sleep labs, samples, and other promotional programs. In addition, the Department of Justice has informally requested information about our leasing arrangements with customers. In August 2018, we received a third subpoena, requesting documents and other materials relating to diagnostic devices and masks provided to medical providers, and diagnostic auto-scoring functions. In February 2019, the Department of Justice provided us with a Civil Investigative Demand seeking further information concerning the industry offerings described above. We are cooperating with the government’s requests for documents and information, including additional subpoenas on these same issues. Responding to these investigations can consume substantial time and resources and can divert management’s attention from the business. Additionally, as a result of these investigations, we may face litigation or have to agree to settlements that can include monetary penalties and onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. If our operations are found to violate federal law or regulations, or if we settle these investigations, we may be subject to civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could materially adversely affect our financial results and our ability to operate our business.

We have tentatively agreed with the government to civilly resolve these matters for a payment of $39.5 million and we expect to also incur additional fees and administrative costs that typically accompany such a resolution. As a result, in the year ended June 30, 2019 we reserved $41.2 million for the expenses we expect to incur in connection with this settlement. A resolution may also include ongoing obligations, such as any imposed under a corporate integrity agreement. However, we have not yet completed negotiations, and there can be no assurance as to whether or when the parties will finalize any such negotiated resolution or what the final terms of such a resolution will be.

Item 1A Risk Factors

The discussion of our business and operations should be read together with the risk factors and contained in our annual report on Form 10-K for the fiscal year ended June 30, 2019, which was filed with the SEC and describe the various risks and uncertainties to which we are or may become subject. As of September 30, 2019, there have been no further material changes to such risk factors.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of equity securities. On February 21, 2014, our board of directors approved our current share repurchase program, authorizing us to acquire up to an aggregate of 20.0 million shares of our common stock. The program allows us to repurchase shares of our common stock from time to time for cash in the open market, or in negotiated or block transactions, as market and business conditions warrant and subject to applicable legal requirements. There is no expiration date for this program, and the program may be accelerated, suspended, delayed or discontinued at any time at the discretion of our board of directors. All share repurchases after February 21, 2014 have been executed under this program.

We temporarily suspended our share repurchase program due to recent acquisitions. As a result, we did not repurchase any shares during the three months ended September 30, 2019. However, there is no expiration date for this program, and we may, at any time, elect to resume the share repurchase program as the circumstances allow. Since the inception of the share buyback programs, we have repurchased 41.8 million shares at a total cost of $1.6 billion.


	September 30, 2019		June 30, 2019		Balance sheet caption
Contract assets
Accounts receivable, net	$	493,836	$	528,484	Accounts receivable, net
Unbilled revenue, current		8,572		9,834	Prepaid expenses and other current assets
Unbilled revenue, non-current		4,709		4,592	Prepaid taxes and other non-current assets

Contract liabilities
Deferred revenue, current		(86,954)		(88,667)	Deferred revenue (current liabilities)
Deferred revenue, non-current		(82,668)		(81,143)	Deferred revenue (non-current liabilities)


	3.1		First Restated Certificate of Incorporation of ResMed Inc., as amended. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2013)
	3.2		Fifth Amended and Restated Bylaws of ResMed Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K/A filed on September 17, 2012)
	31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101		The following financial statements from ResMed Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed on October 24, 2019, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows, (v) the Notes to the Condensed Consolidated Financial Statements.


/s/ MICHAEL J. FARRELL
Michael J. Farrell
Chief executive officer
(Principal Executive Officer)


/s/ BRETT A. SANDERCOCK
Brett A. Sandercock
Chief financial officer
(Principal Financial Officer)


Part I	Financial Information	3

Item 1	Financial Statements	3

	Condensed Consolidated Balance Sheets (Unaudited)	3

	Condensed Consolidated Statements of Income (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5

	Condensed Consolidated Statements of Changes in Equity (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows (Unaudited)	8

	Notes to the Condensed Consolidated Financial Statements (Unaudited)	9

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4	Controls and Procedures	30

Part II	Other Information	31

Item 1	Legal Proceedings	31

Item 1A	Risk Factors	31

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3	Defaults Upon Senior Securities	32

Item 4	Mine Safety Disclosures	32

Item 5	Other Information	32

Item 6	Exhibits	33

	Signatures	34



PART I – FINANCIAL INFORMATION	Item 1
RESMED INC. AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements (Unaudited)