Item 1. Financial Statements

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

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



	March 31, 2019		June 30, 2018		September 30, ‎2019		June 30, ‎2019
Assets
Current assets:
Cash and cash equivalents	$	146,513	$	188,701	$	172,154	$	147,128
Accounts receivable, net of allowance for doubtful accounts of $25,543 and $19,258 at March 31, 2019 and June 30, 2018, respectively		511,403		483,681
Inventories (note 2)		319,930		268,701
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		124,850		124,634		138,075		120,113
Total current assets		1,102,696		1,065,717		1,161,098		1,145,366
Non-current assets:
Property, plant and equipment, net (note 3)		382,496		386,550		382,970		387,460
Operating lease right-of-use assets (note 9)						81,650		-
Goodwill (note 4)		1,939,136		1,068,944		1,856,427		1,856,449
Other intangible assets, net (note 5)		516,450		215,184
Other intangible assets, net (note 3)						496,847		521,950
Deferred income taxes		32,015		53,818		34,232		45,478
Prepaid taxes and other non-current assets		125,733		273,710		141,334		150,979
Total non-current assets		2,995,830		1,998,206		2,993,460		2,962,316
Total assets	$	4,098,526	$	3,063,923	$	4,154,558	$	4,107,682
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	124,466	$	92,723	$	109,742	$	115,725
Accrued expenses		191,130		185,805		231,253		266,359
Operating lease liabilities, current (note 9)						19,548		-
Deferred revenue		82,288		60,828		86,954		88,667
Income taxes payable (note 7)		52,739		160,427
Short-term debt, net (note 9)		12,346		11,466
Income taxes payable (note 6)						90,968		73,248
Short-term debt, net (note 8)						11,992		11,992
Total current liabilities		462,969		511,249		550,457		555,991
Non-current liabilities:
Deferred revenue		76,703		71,596		82,668		81,143
Deferred income taxes		87,312		13,084		15,177		11,380
Operating lease liabilities, non-current (note 9)						65,838		-
Other long-term liabilities		865		924		2,047		2,058
Long-term debt, net (note 9)		1,323,349		269,988
Long-term income taxes payable (note 7)		125,999		138,102
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		1,614,228		493,694		1,486,850		1,479,498
Total liabilities		2,077,197		1,004,943		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; 185,182,206 issued and 143,345,972 outstanding at March 31, 2019 and 184,315,866 issued and 142,679,632 outstanding at June 30, 2018		573		571
Preferred stock, $0.01 par value, 2,000,000 shares authorized; NaN 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		1,476,099		1,450,821		1,530,011		1,511,473
Retained earnings		2,420,731		2,432,328		2,500,506		2,436,410
Treasury stock, at cost, 41,836,234 shares at March 31, 2019 and 41,636,234 shares at June 30, 2018		(1,623,256)		(1,600,412)
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		(252,818)		(224,328)		(290,585)		(253,009)
Total stockholders’ equity		2,021,329		2,058,980		2,117,251		2,072,193
Total liabilities and stockholders’ equity	$	4,098,526	$	3,063,923	$	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 March 31,				Nine Months Ended March 31,				Three Months Ended ‎September 30,
	2019		2018		2019		2018		2019		2018
Net revenue	$	662,228	$	591,634	$	1,901,608	$	1,716,566	$	681,056	$	588,279
Cost of sales (excluding amortization of acquired intangible assets)		270,318		247,339		782,874		716,874		276,001		245,186
Gross profit		391,910		344,295		1,118,734		999,692		405,055		343,093
Operating expenses:
Selling, general and administrative		164,529		147,893		473,410		443,559		167,440		147,303
Research and development		47,610		37,434		129,513		115,492		48,033		38,791
Amortization of acquired intangible assets		22,794		11,673		51,501		34,772		18,480		12,867
Restructuring expenses		-		10,922		-		10,922
Acquisition related expenses		-		-		6,123		-
Total operating expenses		234,933		207,922		660,547		604,745		233,953		198,961
Income from operations		156,977		136,373		458,187		394,947		171,102		144,132
Other income (loss), net:
Interest income		415		4,228		2,014		13,677		449		922
Interest expense		(12,413)		(7,719)		(23,608)		(22,873)		(10,992)		(3,708)
Loss attributable to equity method investments (note 6)		(5,996)		-		(9,371)		-
Loss attributable to equity method investments (note 5)										(6,863)		-
Other, net		(1,054)		(2,739)		(4,140)		(5,357)		(3,109)		(2,465)
Total other income (loss), net		(19,048)		(6,230)		(35,105)		(14,553)		(20,515)		(5,251)
Income before income taxes		137,929		130,143		423,082		380,394		150,587		138,881
Income taxes		32,513		20,018		87,291		174,617		30,439		33,144
Net income	$	105,416	$	110,125	$	335,791	$	205,777	$	120,148	$	105,737
Basic earnings per share (note 11)	$	0.74	$	0.77	$	2.35	$	1.44	$	0.84	$	0.74
Diluted earnings per share (note 11)	$	0.73	$	0.76	$	2.33	$	1.43	$	0.83	$	0.73
Dividend declared per share	$	0.37	$	0.35	$	0.74	$	1.05	$	0.39	$	0.37
Basic shares outstanding (000's)		143,316		142,898		142,907		142,688		143,719		142,668
Diluted shares outstanding (000's)		144,333		143,985		144,344		143,895		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				Common Stock			Additional ‎Paid-in		Treasury Stock			Retained		Accumulated ‎Other ‎ Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total		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
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	12		-		513	-		-		-		-		513	110		-		5,609	-		-		-		-		5,609
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	2		-		(141)	-		-		-		-		(141)	4		-		(327)	-		-		-		-		(327)
Common stock issued on employee stock purchase plan	-		-		-	-		-		-		-		-
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	-		-		-	-		-		(188,798)		-		(188,798)
Dividends declared	-		-		-	-		-		(52,794)		-		(52,794)
Balance, September 30, 2018	184,330	$	570	$	1,463,669	(41,836)	$	(1,623,256)	$	2,296,473	$	(237,200)	$	1,900,256
Common stock issued on exercise of options	36		-		1,263	-		-		-		-		1,263
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	623		2		(27,343)	-		-		-		-		(27,341)
Common stock issued on employee stock purchase plan	129		1		10,575	-		-		-		-		10,576
Treasury stock purchases	-		-		-	-		-		-		-		-
Stock-based compensation costs	-		-		12,541	-		-		-		-		12,541	-		-		13,256	-		-		-		-		13,256
Other comprehensive income	-		-		-	-		-		-		(13,117)		(13,117)	-		-		-	-		-		-		(37,576)		(37,576)
Net income	-		-		-	-		-		124,639		-		124,639	-		-		-	-		-		120,148		-		120,148
Dividends declared	-		-		-	-		-		(52,773)		-		(52,773)	-		-		-	-		-		(56,052)		-		(56,052)
Balance, December 31, 2018	185,118	$	573	$	1,460,705	(41,836)	$	(1,623,256)	$	2,368,339	$	(250,317)	$	1,956,044
Common stock issued on exercise of options	55		-		2,896	-		-		-		-		2,896
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	9		-		(330)	-		-		-		-		(330)
Common stock issued on employee stock purchase plan	-		-		-	-		-		-		-		-
Treasury stock purchases	-		-		-	-		-		-		-		-
Stock-based compensation costs	-		-		12,828	-		-		-		-		12,828
Other comprehensive income	-		-		-	-		-		-		(2,501)		(2,501)
Net income	-		-		-	-		-		105,416		-		105,416
Dividends declared	-		-		-	-		-		(53,024)		-		(53,024)
Balance, March 31, 2019	185,182	$	573	$	1,476,099	(41,836)	$	(1,623,256)	$	2,420,731	$	(252,818)	$	2,021,329
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				Common Stock			Additional Paid-in		Treasury Stock			Retained		Accumulated Other Comprehensive
	Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total		Shares	Amount		Capital		Shares	Amount		Earnings		Income (Loss)		Total
Balance, June 30, 2017	183,261	$	569	$	1,379,130	(41,086)	$	(1,546,611)	$	2,316,237	$	(189,059)	$	1,960,266
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	78		-		4,682	-		-		-		-		4,682	12		-		513	-		-		-		-		513
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	11		-		(195)	-		-		-		-		(195)	2		-		(141)	-		-		-		-		(141)
Common stock issued on employee stock purchase plan	-		-			-		-		-		-		-
Treasury stock purchases	-		-			-		-		-		-		-	-		(1)		-	(200)		(22,844)		-		-		(22,845)
Stock-based compensation costs	-		-		11,959	-		-		-		-		11,959	-		-		12,476	-		-		-		-		12,476
Other comprehensive income	-		-			-		-		-		36,389		36,389	-		-		-	-		-		-		(12,872)		(12,872)
Net income	-		-			-		-		86,125		-		86,125	-		-		-	-		-		105,737		-		105,737
Cumulative effect of change in accounting ‎standards															-		-		-	-		-		(188,799)		-		(188,799)
Dividends declared	-		-			-		-		(49,698)		-		(49,698)	-		-		-	-		-		(52,793)		-		(52,793)
Balance, September 30, 2017	183,350	$	569	$	1,395,576	(41,086)	$	(1,546,611)	$	2,352,664	$	(152,670)	$	2,049,528
Common stock issued on exercise of options	394		1		7,427	-		-		-		-		7,428
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	186		1		(13,659)	-		-		-		-		(13,658)
Common stock issued on employee stock purchase plan	148		1		8,652	-		-		-		-		8,653
Treasury stock purchases	-		-		-	(100)		(8,541)		-		-		(8,541)
Stock-based compensation costs	-		-		11,997			-		-		-		11,997
Other comprehensive income	-		-		-	-		-		-		4,450		4,450
Net income	-		-		-	-		-		9,527		-		9,527
Dividends declared	-		-		-	-		-		(49,856)		-		(49,856)
Balance, December 31, 2017	184,078	$	572	$	1,409,993	(41,186)	$	(1,555,152)	$	2,312,335	$	(148,220)	$	2,019,528
Common stock issued on exercise of options	19		-		3,006	-		-		-		-		3,006
Common stock issued on vesting of restricted stock units, net of shares withheld for tax	13		-		(862)	-		-		-		-		(862)
Common stock issued on employee stock purchase plan	-		-		-	-		-		-		-		-
Treasury stock purchases	-		(1)		-	(200)		(19,356)		-		-		(19,357)
Stock-based compensation costs	-		-		11,890	-		-		-		-		11,890
Other comprehensive income	-		-		-	-		-		-		(7,393)		(7,393)
Net income	-		-		-	-		-		110,125		-		110,125
Dividends declared	-		-		-	-		-		(49,973)		-		(49,973)
Balance, March 31, 2018	184,110	$	571	$	1,424,027	(41,386)	$	(1,574,508)	$	2,372,487	$	(155,613)	$	2,066,964
Balance, September 30, 2018															184,330	$	570	$	1,463,669	(41,836)	$	(1,623,256)	$	2,296,473	$	(237,200)	$	1,900,256

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents


PART I – FINANCIAL INFORMATION	Item 1

RESMED INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In US$ and in thousands)



	Nine Months Ended March 31,				Three Months Ended ‎September 30,
	2019		2018		2019		2018
Cash flows from operating activities:
Net income	$	335,791	$	205,777	$	120,148	$	105,737
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		108,203		88,256		37,954		30,424
Amortization of right-of-use-assets						5,963		-
Stock-based compensation costs		37,856		35,933		13,256		12,477
Loss attributable to equity method investments (note 6)		9,371		-
Impairment of equity investments (note 6)		8,801		3,620
Gain on previously held equity interest		(1,909)		-
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		(272)		383		(8)		(183)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(1,482)		(39,421)		28,286		20,342
Inventories		(55,002)		(11,146)		(14,204)		(15,661)
Prepaid expenses, net deferred income taxes and other current assets		(17,453)		(72,332)		(8,407)		(7,703)
Accounts payable, accrued expenses and other		(106,671)		164,540		(30,078)		(99,025)
Net cash provided by operating activities		317,233		375,610		162,363		48,119
Cash flows from investing activities:
Purchases of property, plant and equipment		(46,507)		(44,961)		(22,671)		(12,994)
Patent registration costs		(6,556)		(6,743)		(2,069)		(2,611)
Business acquisitions, net of cash acquired		(951,565)		(482)
Purchases of investments (note 6)		(31,092)		(6,445)
Proceeds (payments) on maturity of foreign currency contracts		3,902		(4,667)
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		(1,031,818)		(63,298)		(33,224)		(148,189)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		15,346		24,074		5,609		513
Taxes paid related to net share settlement of equity awards		(27,880)		(14,471)		(326)		(124)
Purchases of treasury stock		(22,844)		(27,897)		-		(19,399)
Payments of business combination contingent consideration		(648)		(205)		(302)		(240)
Proceeds from borrowings, net of borrowing costs		1,414,230		120,000		565,000		303,000
Repayment of borrowings		(541,394)		(390,000)		(614,003)		(86,133)
Dividends paid		(158,592)		(149,527)		(56,052)		(52,793)
Net cash provided by (used in) financing activities		678,218		(438,026)		(100,074)		144,824
Effect of exchange rate changes on cash		(5,821)		8,060		(4,039)		(3,267)
Net increase (decrease) in cash and cash equivalents		(42,188)		(117,654)
Net increase in cash and cash equivalents						25,026		41,487
Cash and cash equivalents at beginning of period		188,701		821,935		147,128		188,701
Cash and cash equivalents at end of period	$	146,513	$	704,281	$	172,154	$	230,188
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	$	211,816	$	75,119	$	30,937	$	125,005
Interest paid	$	23,608	$	22,873	$	10,992	$	3,708
Fair value of assets acquired, excluding cash	$	400,804	$	290	$	-	$	42,807
Liabilities assumed		(320,923)		-		-		(41,905)
Goodwill on acquisition		879,419		247		-		125,037
Deferred payments		(7,568)		(55)		-		500
Fair value of contingent consideration		(167)		-
Cash paid for acquisition	$	951,565	$	482
Cash paid for acquisitions					$	-	$	126,439

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents



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

(1) Summary of Significant Accounting Policies

Organization and Basis of Presentation

ResMed Inc. (referred to herein as “we”, “us”, “our” or the “Company”) is a Delaware corporation formed in March 1994 as a holding company for the ResMed Group. Through our subsidiaries, we design, manufacture and market equipment for the diagnosis and treatment of sleep-disordered breathing and other respiratory disorders, including obstructive sleep apnea. Our manufacturing operations are located in Australia, Singapore, Malaysia, France, China and the United States. Major distribution and sales sites are located in the United States, Germany, France, the United Kingdom, Switzerland, Australia, Japan, China, Norway and Sweden.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and the rules of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending June 30, ~~2019.~~2020.

The condensed consolidated financial statements for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended June 30, ~~2018.~~2019.

Revenue Recognition

We adopted Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” on July 1, 2018. We account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. 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”). Our Sleep and Respiratory Care revenue relates primarily to the sale of our products that are therapy-based equipment. Some contracts include additional performance obligations such as the provision of extended warranties and data for patient monitoring. Our SaaS revenue relates to the provision of software access with ongoing support and maintenance services as well as professional services such as training and consulting.

Disaggregation of revenue

~~The following table summarizes~~See note 2 – Segment Information for our net revenue disaggregated by segment, product and region for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 ~~compared to March 31, 2018 (in millions):~~and 2018.

Three Months Ended
March 31,

Nine Months Ended
March 31,

2019

2018

2019

2018
U.S., Canada and Latin America

Devices

$
181.3

$
168.1

$
540.2

$
499.7
Masks and other

168.7

149.4

494.8

443.7
Total Sleep and Respiratory Care

$
350.0

$
317.5

$
1,035.0

$
943.4
Software as a Service

79.9

39.9

190.6

116.6
Total

$
429.9

$
357.4

$
1,225.6

$
1,060.0





Combined Europe, Asia and other markets

Devices

$
155.2

$
160.1

$
463.0

$
451.8
Masks and other

77.1

74.1

213.0

204.8
Total Sleep and Respiratory Care

$
232.3

$
234.2

$
676.0

$
656.6





Global revenue

Devices

$
336.5

$
328.2

$
1,003.2

$
951.5
Masks and other

245.8

223.5

707.8

648.5
Total Sleep and Respiratory Care

$
582.3

$
551.7

$
1,711.0

$
1,600.0
Software as a Service

79.9

39.9

190.6

116.6
Total

$
662.2

$
591.6

$
1,901.6

$
1,716.6

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~Item 1~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Performance obligations and contract balances

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied; generally, this occurs with the transfer of risk and/or control of our products are provided at a point in time. For products in our Sleep and Respiratory Care business, we transfer control and recognize a sale when products are shipped to the customer in accordance with the contractual shipping terms. For our SaaS business, revenue associated with professional services are recognized as they are provided. We defer the recognition of a portion of the consideration received when performance obligations are not yet satisfied. Consideration received from customers in advance of revenue recognition is classified as deferred revenue. Performance obligations resulting in deferred revenue in our Sleep and Respiratory Care business relate primarily to extended warranties on our devices and the provision of data for patient monitoring. Performance obligations resulting in deferred revenue in our SaaS business relate primarily to the provision of software access with maintenance and support over an agreed term and material rights associated with future discounts upon renewal of some SaaS contracts. Generally, deferred revenue will be recognized over a period of one year to five years. The following table summarizes our contract balances ~~at March 31, 2019 and June 30, 2018~~ (in thousands):


	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)

Table of Contents

March 31,
2019

June 30,
2018

Balance sheet caption
Contract assets

Accounts receivable, net

$
511,403

$
483,681

Accounts receivable, net
Unbilled revenue, current

10,443

13,342

Prepaid expenses and other current assets
Unbilled revenue, non-current

3,825

2,973

Prepaid taxes and other non-current assets

Contract liabilities

Deferred revenue, current

(82,288)

(60,828)

Deferred revenue (current liabilities)
Deferred revenue, non-current

(76,703)

(71,596)

Deferred revenue (non-current liabilities)



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

Transaction price determination

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. In our Sleep and Respiratory Care segment, the amount of consideration received and revenue recognized varies with changes in marketing incentives (e.g., rebates, discounts, free goods) and returns offered to customers and their customers. When we give customers the right to return eligible products and receive credit, returns are estimated based on an analysis of historical experience. However, returns of products, excluding warranty-related returns, are infrequent and insignificant. We adjust the estimate of revenue at the earlier of when the most likely amount of consideration can be estimated, the amount expected to be received changes, or when the consideration becomes fixed.

We offer our Sleep and Respiratory Care customers cash or product rebates based on volume or sales targets measured over quarterly or annual periods. We estimate rebates based on each customer’s expected achievement of its targets. In accounting for these rebate programs, we reduce revenue ratably as sales occur over the rebate period by the expected value of the rebates to be returned to the customer. Rebates measured over a quarterly period are updated based on actual sales results and, therefore, no estimation is required to determine the reduction to revenue. For rebates measured over annual periods, we update our estimates on a quarterly basis based on actual sales results and updated forecasts for the remaining rebate periods. We also offer discounts to both our Sleep and Respiratory Care as well as our SaaS customers as part of normal business practice and these are deducted from revenue when the sale occurs.

Many of our Sleep and Respiratory Care contracts have a single performance obligation which is the shipment of our therapy-based equipment. However, when the Sleep and Respiratory Care or SaaS contract has multiple performance obligations, we generally use an observable price to determine the stand-alone selling price by reference to pricing and discounting practices for the specific product or service when sold separately to similar customers. Revenue is then allocated proportionately, based on the determined stand-alone selling price, to the performance obligation.

Accounting and practical expedient elections

We have elected to account for shipping and handling activities associated with our Sleep and Respiratory Care segment as a fulfillment cost within cost of sales, and record shipping and handling costs collected from customers in net revenue. We have also elected for all taxes assessed by government authorities that are imposed on and concurrent with revenue-producing transactions, such as sales and value added taxes, to be excluded from revenue. We have adopted two practical expedients including the “right to invoice” practical expedient, which allows us to recognize revenue in the amount of the invoice when it corresponds directly with the value of performance completed to date and which is relevant for some of our SaaS contracts. The second practical expedient adopted permits relief from considering a significant financing component when the payment for the good or service is expected to be one year or less.

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~Item 1~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Provision for Warranty

We provide for the estimated cost of product warranties on our Sleep and Respiratory Care products at the time the related revenue is recognized. We determine the amount of this provision by using a financial model, which takes into consideration actual historical expenses and potential risks associated with our different products. We use this financial model to calculate the future probable expenses related to warranty and the required level of the warranty provision. Although we engage in product improvement programs and processes, our warranty obligation is affected by product failure rates and costs incurred to correct those product failures. Should actual product failure rates or estimated costs to repair those product failures differ from our estimates, we would be required to revise our estimated warranty provision.

New Accounting Pronouncements

(a) Recently issued accounting standards not yet adopted

ASU No. 2017-04 “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”

In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. This guidance is effective for us beginning in the fourth quarter of fiscal year June 30, 2020 and early adoption is permitted. We currently perform a Step 0, or qualitative impairment, assessment for our Reporting Units, which we expect to continue and, therefore, anticipate that the adoption of ASU 2017-04 will not have a material impact on our consolidated financial statements.

Table of Contents



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

(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 ~~will be~~are classified as either operating or finance under the new guidance. Operating leases ~~will~~ result in straight-line expense in the income statement, similar to ~~current~~prior operating ~~leases,~~lease treatment, and finance leases ~~will~~ result in more expense being recognized in the earlier years of the lease term, similar to ~~current~~prior capital ~~leases.~~lease treatment. For lessors, the update ~~will~~ more closely ~~align~~aligns lease accounting to comparable guidance in the new revenue standards described.

~~The~~Effective, July 1, 2019, we adopted the new standard ~~is effective for us beginning in the first quarter of the year ending June 30, 2020 and early application is permitted. ASU 2016-02 will be adopted~~ on a modified retrospective transition ~~basis. There is~~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 ~~practical expedient available that would permit~~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 ~~leases that existed at~~adjustment to the ~~date of adoption to continue to be accounted for~~comparative period presented in the financial statements in accordance with ~~the previous GAAP, ASC 840. We are still evaluating whether we will adopt this practical expedient.~~

~~We formed an implementation team during the year ended June 30, 2018 to oversee~~our adoption ~~of the new standard.~~method. The implementation team has established a project plan, collected copies of our lease agreements, implemented procedures to identify embedded leases and commenced a global education program regarding the new standard. There are a number of steps in the team’s project plan that remain to be completed including: reviewing system outputs from lease data entry and balance calculations, evaluating the impact, and working through required changes to systems, business processes and controls to support the adoption of the new leases standard. While the formal impact assessment is ongoing, we expect this amendment will affect the way we account for operating leases where we are the lessee (as described above), require reassessment of how we account for revenue where we are the lessor and will result in increased disclosures for all lease arrangements. We are still evaluating the impact the standard will have on our financial statements.

~~(b) Recently adopted accounting pronouncements~~

~~ASU No. 2014-09, “Revenue from Contracts with Customers”~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Since its initial release, the FASB has issued several amendments to the standard, which include clarification of accounting guidance related to identification of performance obligations, intellectual property licenses, and principal vs. agent considerations. ASU 2014-09 and all subsequent amendments (collectively, the “new revenue recognition standards”) replaced most existing revenue recognition guidance in U.S. GAAP during the current quarter when it became effective. The guidance also requires improved disclosures on the nature, amount, timing, and uncertainty of revenue that is recognized.

~~Effective July 1, 2018, we adopted the new revenue recognition standards and applied its provisions to all contracts using the modified retrospective method. Application of the new provisions~~ did not have a material impact on our ~~financial~~condensed consolidated statements ~~and no cumulative-effect adjustment was calculated or recognized. The comparative information has not been restated; however, if it were there would be no change in~~of income.

In our Form 10-K for the ~~accounting treatment. Refer to~~year ended June 30, 2019, we estimated that the ~~“Revenue Recognition” section above for further details about our revenue recognition following~~ 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 ~~recognition standards.~~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.

Table of Contents



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

~~ASU No. 2016-01, "Financial Instruments - Overall"~~

~~In January 2016,~~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 FASB issued ASU No. 2016-01, "Financial Instruments - Overall" (Topic 825-10). The amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments, and require equity investments, other than equity-method investments, to be measured at fair value with changes in fair value recognized through net income. The amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment for impairment quarterly at each reporting period. We adopted ASU 2016-01 during the quarter ended September 30, 2018 and elected to apply the practical expedient for measuring equity investments that do not have readily determinable fair market. Based on our elections, our strategic equity investments that do not have readily determinable fair values are measured at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identifiable or similar investments of the same issuer. The measurement alternative was applied prospectively and the adoption of ASU 2016-01 did not result in an adjustment to retained earnings.

~~ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory”~~

In October 2016, the FASB issued Accounting Standard Update ASU No. 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory” (Topic 740). Under the new guidance, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 became effective during the three months ended September 30, 2018 and is required to be adopted on a modified retrospective basis, with a cumulative-effect adjustment recorded directly to retained earnings for intra-entity transfers that occur before the adoption date. Accordingly, we recognized the following reclassifications upon adoption (in thousands):

Balance Sheet Caption

As reported balance
June 30, 2018

Adoption of
ASU 2016-16 Increase/(Decrease)

Revised balance
July 1, 2018
Assets

Prepaid expenses and other current assets

$
124,634

$
(28,947)

$
95,687
Prepaid taxes and other non-current assets

273,710

(156,406)

117,304
Deferred income taxes

53,818

(3,445)

50,373
Equity

Retained Earnings

2,432,328

(188,798)

2,243,530

~~(2) Inventories~~

~~Inventories were comprised~~consolidated condensed balance sheets consisted of the following ~~at March 31, 2019 and June 30, 2018~~ (in thousands):



	March 31, 2019		June 30, 2018
Inventories					September 30, ‎2019		June 30, ‎2019
Raw materials	$	79,944	$	75,415	$	89,118	$	80,861
Work in progress		2,479		2,453		2,252		2,256
Finished goods		237,507		190,833		265,663		266,524
Total inventories	$	319,930	$	268,701	$	357,033	$	349,641

~~(3) Property, Plant and Equipment~~


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

~~Property, plant and equipment were comprised of the following as of March 31, 2019 and June 30, 2018 (in thousands):~~

March 31,
2019
��
June 30,
2018
Machinery and equipment

$
256,797

$
239,671
Computer equipment

170,620

155,069
Furniture and fixtures

51,510

51,045
Vehicles

7,390

7,399
Clinical, demonstration and rental equipment

91,133

92,229
Leasehold improvements

33,677

32,169
Land

52,735

54,089
Buildings

224,482

229,193

888,344

860,864
Accumulated depreciation and amortization

(505,848)

(474,314)
Property, plant and equipment, net

$
382,496

$
386,550

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~Item 1~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~(4) Goodwill~~

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

Nine Months Ended March 31, 2019

Sleep and
Respiratory Care

SaaS

Total
Balance at the beginning of the period

$
464,157

$
604,787

$
1,068,944
Business acquisition

182,159

697,260

879,419
Foreign currency translation adjustments

(9,227)

-

(9,227)
Balance at the end of the period

$
637,089

$
1,302,047

$
1,939,136

~~(5) Other Intangible Assets~~

~~Other intangible assets were comprised of the following as of March 31, 2019 and June 30, 2018 (in thousands):~~

March 31,
2019

June 30,
2018
Developed/core product technology

$
334,366

$
205,149
Accumulated amortization

(141,780)

(115,237)
Developed/core product technology, net

192,586

89,912
Trade names

77,596

48,832
Accumulated amortization

(23,512)

(16,868)
Trade names, net

54,084

31,964
Non-compete agreements

4,232

3,288
Accumulated amortization

(2,632)

(2,283)
Non-compete agreements, net

1,600

1,005
Customer relationships

309,618

118,084
Accumulated amortization

(62,626)

(48,157)
Customer relationships, net

246,992

69,927
Patents

94,359

91,708
Accumulated amortization

(73,171)

(69,332)
Patents, net

21,188

22,376
Total other intangibles, net

$
516,450

$
215,184

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 ~~and~~years to fifteen years. There are no expected residual values related to these intangible assets.

~~(6)~~

~~Debt at March 31, 2019 and June 30, 2018~~ consisted of the following (in thousands):

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 ~~March 31,~~September 30, 2019, the interest rate that was being charged on the outstanding principal amounts was ~~3.6%~~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.

The following table summarizes the activity of restricted stock units during the ~~nine~~three months ended ~~March 31,~~September 30, 2019:

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 ~~nine~~three months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~September 30, 2018, we ~~issued 129,000 and 148,000~~did not issue any shares to our employees associated with the ~~ESPP, respectively.~~ESPP. At ~~March 31,~~September 30, 2019, the number of shares remaining available for future issuance under the ESPP is 2.4 million shares.

At the annual meeting of our stockholders in November 2018, our stockholders approved an amendment and restatement to the 2009 Plan to increase the number of shares of common stock that may be issued or transferred pursuant to awards under the 2009 Plan by 2.0 million shares, from 4.2 million to 6.2 million shares. The amendment also renamed the plan as “the ResMed Inc. 2018 Employee Stock Purchase

~~Plan,” and extended the term by ten years, so that the plan expires on November 15, 2028. The amendment became effective August 17, 2018, the date it was adopted by our board of directors.~~

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.

~~Stock options and restricted stock units~~The weighted average number of ~~356,583 and 239,020 for the three months ended March 31, 2019 and March 31, 2018 and~~outstanding stock options and restricted stock units not included in the computation of ~~161,314~~diluted earnings per share were 693 and ~~125,995~~10,006 for the ~~nine~~three months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~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 ~~for the three and nine months ended March 31, 2019 and March 31, 2018~~ are calculated as follows (in thousands except per share data):

The following table summarizes the maximum exposure on outstanding receivables sold with recourse and provision for doubtful accounts ~~at March 31, 2019 and June 30, 2018~~ (in thousands):

~~During the three and nine months ended March 31,~~

On January 6, 2019, revenues of $30.2 million and $45.6 million, respectively, and losses from operations of $1.5 million and $2.6 million, respectively, related to MatrixCare were included in the unaudited condensed consolidated statement of comprehensive income. The loss from operations for the three and nine months ended March 31, 2019 was negatively impacted by $6.1 million and $9.1 million, respectively, of amortization of acquired intangible assets and fair value purchase price adjustments relating to deferred revenue of $2.2 million and $4.3 million, respectively, to deferred revenue. Excluding the impact of these items, revenue for the three and nine months ended March 31, 2019 was $32.4 million and $49.9 million, respectively, and income from operations was $6.7 million and $10.8 million, respectively.

The acquisition is considered a material business combination and accordingly unaudited pro forma information presented below for the three and nine months ended March 31, 2019 and March 31, 2018, include the effects of pro forma adjustments as ifwe completed the acquisition of ~~MatrixCare occurred on July 1, 2017. MatrixCare results are reflected~~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 ~~our consolidated results for the three months ended March 31, 2019 and as such, no adjustment is required for this period. The pro forma results were prepared using~~Propeller Health’s outstanding shares. As a result of the acquisition, method of accounting and combine our historical results and MatrixCare’s for the three and nine months ended March 31, 2019 and 2018, including the effects of the business combination, primarily amortization expense related to thewe recognized a fair value gain of ~~identifiable intangible assets acquired, interest expense~~$1.9 million in other income during the year ended June 30, 2019 associated with the ~~financing obtained by us in connection with the acquisition, and the elimination of incurred acquisition-related costs.~~previous equity investment.

The pro forma financial information presented below is not necessarily indicative of the results of operations that would have been achieved if the acquisition occurred at the beginning of the earliest period presented, nor is it intended to be a projection of future results.

Unaudited Proforma Consolidated Results

(In thousands, except per share information)

Three Months Ended
March 31,

Nine Months Ended
March 31,

2019

2018

2019

2018
Revenue

$
662,228

$
620,933

$
1,947,096

$
1,803,685
Net income

$
105,416

$
106,583

$
334,302

$
192,445
Basic earnings per share

$
0.74

$
0.75

$
2.34

$
1.35
Diluted earnings per share

$
0.73

$
0.74

$
2.32

$
1.34

~~The unaudited pro forma consolidated results for the three and nine months ended March 31, 2019 and March 31, 2018 reflect primarily the following pro forma pre-tax adjustments:~~

Net amortization expense related to the fair value of identifiable intangible assets acquired of $0.0 million and $3.1 million for the three months ended March 31, 2019 and 2018, respectively, and $1.3 million and $10.6 million for the nine months ended March 31, 2019 and 2018, respectively.

Net interest expense associated with debt that was issued to finance the acquisition of $0.0 million and $3.1 million for the three months ended March 31, 2019 and 2018, respectively, and $2.6 million and $9.7 million for the nine months ended March 31, 2019 and 2018, respectively.

~~Elimination of pre-tax acquisition-related costs incurred by ResMed and MatrixCare of $0.0 million and $16.7 million for the three and nine months ended March 31, 2019, respectively.~~

Net income tax expense of $0.0 million and $1.5 million for the three months ended March 31, 2019 and 2018, respectively, and $1.4 million and $5.9 million for the nine months ended March 31, 2019 and 2018, respectively.

~~Other acquisitions~~

~~During the nine months ended March 31, 2019 we have 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.

~~Table of Contents~~

~~PART I – FINANCIAL INFORMATION~~

~~Item 1~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

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.

WeExcept for the purchase price allocation associated with the Propeller Health acquisition (and the acquisition of MatrixCare, as described above), we have ~~not~~ completed the purchase price allocation in relation to all of these ~~acquisitions and~~acquisitions. We expect to complete ~~this~~our purchase price allocation for Propeller Health during the quarter ending ~~June 30,~~December 31, 2019. We do not believe that the completion of this work will materially modify the preliminary purchase price allocation for ~~these acquisitions.~~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~~	31,648
Property, plant and equipment		~~2,289~~	2,290
~~Trade names~~Deferred tax assets		~~10,838~~	5,211	~~10 years~~
~~Non-compete~~Trade names		~~1,000~~	7,828	3	10 years
~~Developed technology~~Non-compete		~~49,600~~	1,000		3 years
Developed technology		48,280		5 to 6 years
Customer relationships		~~48,052~~	53,712		5 to 15 years
Goodwill		~~312,246~~	286,943
Assets acquired	$	~~455,673~~	436,912
Current liabilities		~~(6,310)~~	(7,122)
Deferred revenue		~~(3,619)~~	(3,619)
Deferred tax liabilities		~~(21,774)~~	(2,367)
Debt assumed		~~(35,104)~~	(35,104)
Total liabilities assumed	$	~~(66,807)~~	(48,212)
Net assets acquired	$	~~388,866~~	388,700

During the ~~nine~~three months ended ~~March 31,~~September 30, 2019 and 2018, we ~~recorded $6.1 million in acquisition related expenses and~~ did not ~~have~~record material acquisition related ~~expenses during the nine months ended March 31, 2018.~~expenses.

2221

Table of Contents


PART I – FINANCIAL INFORMATION	Item 2

RESMED INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following is an overview of our results of operations for the three ~~and nine~~ months ended ~~March 31,~~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 ~~March 31,~~September 30, 2019, we invested ~~$47.6~~$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 ~~March 31,~~September 30, 2019, our net revenue increased by ~~12%~~16% compared to the three months ended ~~March 31,~~September 30, 2018. Gross margin was ~~59.2%~~59.5% for the three months ended ~~March 31,~~September 30, 2019 compared to ~~58.2%~~58.3% for the three months ended ~~March 31,~~September 30, 2018. Diluted earnings per share for the three months ended ~~March 31,~~September 30, 2019 was ~~$0.73~~$0.83 per share, compared to ~~$0.76~~$0.73 per share for the three months ended ~~March 31,~~September 30, 2018.

At ~~March 31,~~September 30, 2019, our cash and cash equivalents totaled ~~$146.5~~$172.2 million, our total assets were ~~$4.1~~$4.2 billion and our stockholders’ equity was ~~$2.0~~$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.

‎

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PART I – FINANCIAL INFORMATION	Item 2

RESMED INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Net Revenue for~~Comparison of the Three Months Ended ~~March 31,~~September 30, 2019 to the Three Months Ended September 30, 2018

Net Revenues

Net revenue for the three months ended ~~March 31,~~September 30, 2019 increased to ~~$662.2~~$681.1 million from ~~$591.6~~$588.3 million for the three months ended ~~March 31,~~September 30, 2018, an increase of ~~$70.6~~$92.8 million or ~~12%~~16% (a ~~15%~~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 ~~March 31,~~September 30, 2019 compared to ~~March 31,~~September 30, 2018 (in millions):


	Three Months Ended March 31,								Three Months Ended September 30,
	2019		2018		% Change		Constant Currency*		2019		2018		% Change		Constant Currency*
U.S., Canada and Latin America
Devices	$	181.3	$	168.1	8	%			$	186.9	$	172.4	8	%
Masks and other		168.7		149.4	13					183.4		154.0	19
Total Sleep and Respiratory Care	$	350.0	$	317.5	10				$	370.3	$	326.4	13
Software as a Service		79.9		39.9	101					86.9		47.5	83
Total	$	429.9	$	357.4	20				$	457.2	$	373.9	22
Combined Europe, Asia and other markets
Devices	$	155.2	$	160.1	(3)	%	3	%	$	151.9	$	151.7	0	%	4	%
Masks and other		77.1		74.1	4		12			72.0		62.7	15		19
Total Sleep and Respiratory Care	$	232.3	$	234.2	(1)		6		$	223.9	$	214.4	4		8
Global revenue
Devices	$	336.5	$	328.2	3	%	6	%	$	338.8	$	324.1	5	%	6	%
Masks and other		245.8		223.5	10		13			255.4		216.7	18		19
Total Sleep and Respiratory Care	$	582.3	$	551.7	6		9		$	594.2	$	540.8	10		11
Software as a Service		79.9		39.9	101		101			86.9		47.5	83		83
Total	$	662.2	$	591.6	12		15		$	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 ~~March 31,~~September 30, 2019 was ~~$582.3~~$594.2 million, an increase of ~~6% over~~10% compared to net revenue for the ~~prior year quarter.~~three months ended September 30, 2018. Movements in international currencies against the U.S. dollar negatively impacted net revenues by approximately ~~$17.1~~$9.1 million for the three months ended ~~March 31,~~September 30, 2019. Excluding the impact of currency movements, total Sleep and Respiratory Care net revenue for the three months ended ~~March 31,~~September 30, 2019 increased by 9%11% compared to the three months ended ~~March 31,~~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 ~~March 31,~~September 30, 2019 increased to ~~$350.0~~$370.3 million from ~~$317.5~~$326.4 million for the three months ended ~~March 31,~~September 30, 2018, an increase of ~~$32.5~~$43.9 million or ~~10%~~13%. The increase is primarily due to an increase in unit sales of our devices and masks and ~~accessories, partially offset by a decline in average selling prices.~~other.

Net revenue in combined Europe, Asia and other markets ~~decreased~~increased for the three months ended ~~March 31,~~September 30, 2019 to ~~$232.3~~$223.9 million from ~~$234.2~~$214.4 million for the three months ended ~~March 31,~~September 30, 2018, ~~a decrease~~an increase of ~~$1.9~~$9.5 million or 1%4% (a 6%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 ~~accessories, partially offset~~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 ~~a decline in unit sales of devices and average selling prices.~~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 ~~March 31,~~September 30, 2019 was ~~$79.9~~$86.9 million, an increase of ~~101%~~83% compared to the three months ended ~~March 31,~~September 30, 2018. The increase was predominantly due to ~~our acquisitions of~~revenue attributable to MatrixCare, ~~and HealthcareFirst,~~ which ~~were~~we acquired on November 13, 2018 and ~~July 6, 2018, respectively, and MatrixCare~~ contributed ~~$37.3~~$34.8 million in net revenue for the three months ended ~~March 31,~~September 30, 2019.

~~Table of Contents~~


~~PART I – FINANCIAL INFORMATION~~	~~Item 2~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Net Revenue for Nine Months Ended March 31, 2019~~

Net revenue for the nine months ended March 31, 2019 increased to $1,901.6 million from $1,716.6 million for the nine months ended March 31, 2018, an increase of $185.0 million or 11% (a 12% increase on a constant currency basis). The following table summarizes our net revenue disaggregated by segment, product and region for the nine months ended March 31, 2019 compared to March 31, 2018 (in millions):

Nine Months Ended March 31,

2019

2018

% Change

Constant Currency*
U.S., Canada and Latin America

Devices

$
540.2

$
499.7

8
%

Masks and other

494.8

443.7

12

Total Sleep and Respiratory Care

$
1,035.0

$
943.4

10

Software as a Service

190.6

116.6

63

Total

$
1,225.6

$
1,060.0

16

Combined Europe, Asia and other markets

Devices

$
463.0

$
451.8

2
%

6
%
Masks and other

213.0

204.8

4

9

Total Sleep and Respiratory Care

$
676.0

$
656.6

3

7

Global revenue

Devices

$
1,003.2

$
951.5

5
%

7
%
Masks and other

707.8

648.5

9

11

Total Sleep and Respiratory Care

$
1,711.0

$
1,600.0

7

9

Software as a Service

190.6

116.6

63

63

Total

$
1,901.6

$
1,716.6

11

12

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

~~Sleep and Respiratory Care~~

Net revenue for the nine months ended March 31, 2019 was $1,711.0 million, an increase of 7% over the prior year. Movements in international currencies against the U.S. dollar negatively impacted net revenue by approximately $28.8 million during the nine months ended March 31, 2019. Excluding the impact of currency movements, Sleep and Respiratory Care revenue for the nine months ended March 31, 2019, increased 9% compared to the nine months ended March 31, 2018.

For the nine months ended March 31, 2019, net revenue from sales of devices increased by 5% compared to the nine months ended March 31, 2018, driven by an increase of 8% in North and Latin America and an increase of 2% in combined Europe, Asia and other markets (a 6% increase in constant currency terms). For the nine months ended March 31, 2019, net revenue from masks and other accessories increased by 9% compared to the nine months ended March 31, 2018, driven by an increase of 12% in North and Latin America and a 4% increase in combined Europe, Asia and other markets (a 9% increase in constant currency terms).

~~Software as a Service~~

Net revenue from our SaaS business for the nine months ended March 31, 2019 was $190.6 million, an increase of 63% compared to the nine months ended March 31, 2018. The increase was predominantly due to our acquisitions of MatrixCare and HealthcareFirst, which were acquired on November 13, 2018 and July 6, 2018, respectively, and contributed $66.7 million for the nine months ended March 31, 2019.

Gross Profit

Gross profit increased for the three months ended ~~March 31,~~September 30, 2019 to ~~$391.9~~$405.1 million from ~~$344.3~~$343.1 million for the three months ended ~~March 31,~~September 30, 2018, an increase of ~~$47.6~~$62.0 million or ~~14%~~18%. Gross profit as a percentage of net revenue for the three months ended ~~March 31,~~September 30, 2019 was ~~59.2%~~59.5% compared to ~~58.2%~~58.3% for the three months ended ~~March 31,~~September 30, 2018.

Table of Contents

~~Gross profit increased for the nine months ended March 31, 2019 to $1,118.7 million from $999.7 million for the nine months ended March 31, 2018, an increase~~


PART I – FINANCIAL INFORMATION	Item 2

RESMED INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of ~~$119.0 million or 12%. Gross profit as a percentage~~Financial Condition and Results of ~~net revenue for the nine months ended March 31, 2019 was 58.8% compared to 58.2% for the nine months ended March 31, 2018.~~Operations

The increase in gross margins for the three ~~and nine~~ months ended ~~March 31,~~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, partially offset by declines in average selling prices.~~mix.

~~Table of Contents~~


~~PART I – FINANCIAL INFORMATION~~	~~Item 2~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the three months ended ~~March 31,~~September 30, 2019 to ~~$164.5~~$167.4 million from ~~$147.9~~$147.3 million for the three months ended ~~March 31,~~September 30, 2018, an increase of ~~$16.6~~$20.1 million or ~~11%~~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 ~~$7.9~~$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 ~~March 31,~~September 30, 2019 increased by ~~17%~~16% compared to the three months ended ~~March 31,~~September 30, 2018. Selling, general and administrative expenses, as a percentage of net revenue, were ~~24.8%~~24.6% for the three months ended ~~March 31,~~September 30, 2019, compared to 25.0% for the three months ended ~~March 31,~~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 ~~March 31,~~September 30, 2019 increased by 6% in constant currency terms.

Selling, general and administrative expenses increased for the nine months ended March 31, 2019 to $473.4 million from $443.6 million for the nine months ended March 31, 2018 an increase of $29.9 million or 7%. The 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 $13.2 million, as reported in U.S. dollars. Excluding the impact of foreign currency movements, selling, general and administrative expenses for the nine months ended March 31, 2019 increased by 10% compared to the nine months ended March 31, 2018. Selling, general and administrative expenses, as a percentage of net revenue, were 24.9% for the nine months ended March 31, 2019, compared to 25.8% for the nine months ended March 31, 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 nine months ended March 31, 2019 increased by 5% in constant currency terms.

Research and Development Expenses

Research and development expenses increased for the three months ended ~~March 31,~~September 30, 2019 to ~~$47.6~~$48.0 million from ~~$37.4~~$38.8 million for the three months ended ~~March 31,~~September 30, 2018, an increase of ~~$10.2~~$9.2 million, or ~~27%~~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 ~~$1.8~~$1.2 million for the three months ended ~~March 31,~~September 30, 2019, as reported in U.S. dollars. Excluding the impact of foreign currency movements, research and development expenses increased by ~~32%~~27% compared to the three months ended ~~March 31,~~September 30, 2018. Research and development expenses, as a percentage of net revenue, were ~~7.2%~~7.1% for the three months ended ~~March 31,~~September 30, 2019, compared to ~~6.3%~~6.6% for the three months ended ~~March 31,~~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 ~~March 31,~~September 30, 2019 increased by 6%2% in constant currency terms.

Research and development expenses increased for the nine months ended March 31, 2019 to $129.5 million from $115.5 million for the nine months ended March 31, 2018, an increase of $14.0 million or 12%. The research and development expenses were favorably impacted by the movement of international currencies against the U.S. dollar, which decreased our expenses by approximately $4.7 million for the nine months ended March 31, 2019, as reported in U.S. dollars. Excluding the impact of foreign currency movements, our research and development expenses increased by 16% compared to the nine months ended March 31, 2018. Research and development expenses, as a percentage of net revenue, were 6.8% for the nine months ended March 31, 2019 months ended March 31, 2018, compared to 6.7% for the nine months ended March 31, 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 nine months ended March 31, 2019 increased by 4% in constant currency terms.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three months ended ~~March 31,~~September 30, 2019 totaled ~~$22.8~~$18.5 million compared to ~~$11.7~~$12.9 million for the three months ended ~~March 31, 2018. Amortization of acquired intangible assets for the nine months ended March 31, 2019 totaled $51.5 million compared to $34.8 million for the nine months ended March 31,~~September 30, 2018. The increase in amortization expense was attributable to our recent acquisitions, in particular MatrixCare ~~HealthcareFirst~~ and Propeller Health.

~~Table of Contents~~


~~PART I – FINANCIAL INFORMATION~~	~~Item 2~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Total Other Income (Loss), Net

Total other income (loss) ~~income,~~, net for the three months ended ~~March 31,~~September 30, 2019 was a loss of ~~$19.0~~$20.5 million compared to a loss of ~~$6.2~~$5.3 million for the three months ended ~~March 31,~~September 30, 2018. The increase in loss was due ~~primarily~~ to an increase in interest expense to ~~$12.4 million and a decrease in interest income to $0.5~~$11.0 million for the three months ended ~~March 31,~~September 30, 2019 compared to ~~interest expense of $7.7 million and interest income of $4.2~~$3.7 million for the three months ended ~~March 31,~~September 30, 2018.

Total other (loss) income, net for the nine months ended March 31, 2019 was a loss of $35.1 million compared to a loss of $14.6 million for the nine months ended March 31, 2018. The increase in loss was due primarily to a reduction in interest income to $2.0 million for the nine months ended March 31, 2019 compared to interest income to $13.7 million for the nine months ended March 31, 2018.

We also recorded losses attributable to equity method investments ~~or impairments of investments~~ for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2019 of ~~$11.8~~$6.9 million ~~and $18.2 million respectively,~~ compared to ~~$1.4 million and $3.6~~$0.0 million for the three ~~and nine~~ months ended ~~March 31,~~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 ~~and nine~~ months ended ~~March 31,~~September 30, 2019 was ~~23.6% and 20.6%, respectively,~~20.2% as compared to ~~15.4% and 45.9%~~23.9% for ~~the three and nine months ended March 31, 2018, respectively.~~

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118 (“SAB 118”), Income Tax Accounting Implications of the Tax Cuts and Jobs Act directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. Effective December 31, 2018, the accounting relating to the impact of U.S. legislation was no longer considered provisional. However, further adjustments could be required as a result of future legislation, amended tax returns, or tax examinations of the years impacted by the calculation. During the three months ended ~~March 31, 2019, we recorded additional tax expense of $3.3 million, which~~September 30, 2018. The decrease in our rate was primarily related to final treasury regulations issued and temporary guidance published during the quarter and $4.5 million during the nine months ended March 31, 2019. During the three and nine months ended March 31, 2018, we recorded additional tax expense of $5.4 million and $132.2 million, respectively, relating to recent changes in ~~U.S. tax legislation.~~

~~Our effective income tax rate was affected by~~ the geographic mix of our earnings.

Our Singapore ~~and Malaysia~~ 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 legislation,~~Tax laws, we treated all non-U.S. historical earnings as taxable during the year ended June 30, 2018. Therefore, future ~~repatriation~~repatriations of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal ~~tax, if repatriated.~~income tax.

Finally, in connection with the audit by the ~~Australian Taxation Office (“ATO”)~~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

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PART I – FINANCIAL INFORMATION	Item 2

RESMED INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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. ~~We are~~The ATO is currently ~~under audit by the ATO for the~~auditing tax years 2014 to ~~2017.~~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 ~~March 31,~~September 30, 2019 was ~~$105.4~~$120.1 million compared to net income of ~~$110.1~~$105.7 million for the three months ended ~~March 31,~~September 30, 2018, ~~a decrease~~an increase of 4%14% over the three months ended ~~March 31,~~September 30, 2018. Our net income for the nine months ended March 31, 2019 was $335.8 million compared to net income of $205.8 million for the nine months ended March 31, 2018, an increase of 63% over the nine months ended March 31, 2018.

Our diluted earnings per share for the three months ended ~~March 31,~~September 30, 2019 were ~~$0.73~~$0.83 per diluted share compared to ~~$0.76~~$0.73 for the three months ended ~~March 31, 2018. Our diluted earnings per share for~~September 30, 2018, an increase of 14% over the ~~nine~~three months ended ~~March 31, 2019 were $2.33 per diluted share compared to $1.43 for the nine months ended March 31, 2018~~September 30, 2018.

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~~PART I – FINANCIAL INFORMATION~~	~~Item 2~~

~~RESMED INC. AND SUBSIDIARIES~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Liquidity and Capital Resources

As of ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, we had cash and cash equivalents of ~~$146.5~~$172.2 million and ~~$188.7~~$147.1 million, respectively. Working capital was ~~$639.7~~$610.6 million and ~~$554.5~~$589.4 million, at ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, respectively.

As of ~~March 31,~~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, ~~2018,~~2019, our cash and cash equivalent balances held within the United States amounted to ~~$50.9~~$57.1 million and ~~$36.9~~$33.6 million, respectively. Our remaining cash and cash equivalent balances at ~~March 31,~~September 30, 2019 and June 30, ~~2018,~~2019, were ~~$95.6~~$115.1 million and ~~$151.8~~$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. ~~legislation,~~tax laws, we treated all non-U.S. historical earnings as taxable, ~~for U.S. federal tax purposes,~~ which resulted in additional tax expense ~~that is~~of $126.9 million which was payable over the ~~next seven~~proceeding eight years. As of March 31, 2019, we recorded $12.0 million and $126.0 million in income taxes payable and long-term income taxes payable, respectively, in relation to this change in U.S. legislation. Future repatriationTherefore, future repatriations of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal ~~tax if repatriated. As~~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 ~~evaluate the impact of~~do not provide for U.S. tax ~~legislation~~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 ~~future cash needs of our global operations, we may revise the amount of foreign earnings considered to be permanently reinvested outside the United States.~~consolidated financial statements.

Inventories at ~~March 31,~~September 30, 2019 were ~~$319.9~~$357.0 million, an increase of ~~$51.2~~$7.4 million or ~~19%~~2% from the June 30, ~~2018~~2019 balance of ~~$268.7~~$349.6 million. The increase in inventories was required to support our revenue growth.

Accounts receivable at ~~March 31,~~September 30, 2019 were ~~$511.4~~$493.8 million, ~~an increase~~a decrease of ~~$27.7~~$34.7 million or 6%7% compared to the June 30, ~~2018,~~2019, balance of ~~$483.7~~$528.5 million. ~~The increase in accounts receivable is primarily due to the impact of recent acquisitions.~~ Accounts receivable days outstanding of 6967 days at ~~March 31,~~September 30, 2019, were the same as at June 30, ~~2018.~~2019. Our allowance for doubtful accounts as a percentage of total accounts receivable at ~~March 31,~~September 30, 2019, was ~~4.8%~~4.7%, compared to ~~3.8%~~4.5% at June 30, ~~2018.~~ 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 ~~nine~~three months ended ~~March 31,~~September 30, 2019, we generated cash of ~~$317.2~~$162.4 million from operations compared to ~~$375.6~~$48.1 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2018. The ~~lower level of~~increase in cash generated from operations during the ~~nine~~three months ended ~~March 31,~~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 ~~increased~~decreased to ~~$211.8~~$30.9 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2019 from ~~$75.1~~$125.0 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2018. Movements in foreign currency exchange rates during the ~~nine~~three months ended ~~March 31,~~September 30, 2019, had the effect of decreasing our cash and cash equivalents by ~~$5.8~~$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 ~~March 31,~~September 30, 2019. During the ~~nine~~three months ended ~~March 31, 2019,~~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 compared to 300,000 shares of our common stock at an aggregate purchase price of $27.9 million during the nine months ended March 31, 2018.~~program.In addition, during the ~~nine~~three months ended ~~March 31,~~September 30, 2019 and 2018, we paid dividends to holders of our common stock totaling ~~$158.6~~$56.1 million and ~~$149.5~~$52.8 million, respectively.

Capital expenditures for the ~~nine~~three months ended ~~March 31,~~September 30, 2019 and 2018, amounted to ~~$46.5~~$22.7 million and ~~$45.0~~$13.0 million, respectively. The capital expenditures for the ~~nine~~three months ended ~~March 31,~~September 30, 2019, primarily reflected investment in production tooling, buildings, equipment and machinery, and computer hardware and software. At ~~March 31,~~September 30, 2019, our balance sheet reflects net property, plant and equipment of ~~$382.5~~$383.0 million compared to ~~$386.6~~$387.5 million at June 30, ~~2018.~~ 2019.

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PART I – FINANCIAL INFORMATION	Item 2

RESMED INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Contractual Obligations

Details of contractual obligations at ~~March 31,~~September 30, 2019, are as follows (in thousands):



			Payments Due by March 31,														Payments Due by September 30,
In $000’s	Total		2020		2021		2022		2023		2024		Thereafter		Total		2020		2021		2022		2023		2024		Thereafter
Debt		1,339,367		12,352		12,015		12,000		12,000		1,291,000		-	$	1,225,009	$	12,009	$	12,000	$	12,000	$	689,000	$	-	$	500,000
Interest on debt		194,297		48,374		47,920		47,478		47,035		3,490		-		222,532		40,332		39,929		39,539		26,682		16,725		59,325
Operating leases		96,796		24,521		17,686		12,544		9,627		8,334		24,084		125,515		22,208		19,425		18,261		11,451		10,248		43,922
Capital leases		41		41		-		-		-		-		-
Purchase obligations		306,544		304,960		1,584		-		-		-		-		251,871		251,210		631		27		2		1		-
Total	$	1,937,045	$	390,248	$	79,205	$	72,022	$	68,662	$	1,302,824	$	24,084	$	1,824,927	$	325,759	$	71,985	$	69,827	$	727,135	$	26,974	$	603,247

Details of other commercial commitments at ~~March 31,~~September 30, 2019, are as follows (in thousands):



			Amount of Commitment Expiration Per Period														Amount of Commitment Expiration Per Period
In $000’s	Total		2020		2021		2022		2023		2024		Thereafter		Total		2020		2021		2022		2023		2024		Thereafter
Standby letter of credit	$	10,609	$	3,637	$	136	$	12	$	-	$	-	$	6,824	$	10,164	$	3,661	$	11	$	-	$	46	$	-	$	6,446
Guarantees*		6,629		45		141		19		20		15		6,389		6,556		184		23		14		23		21		6,291
Total	$	17,238	$	3,682	$	277	$	31	$	20	$	15	$	13,213	$	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.

On April 17, 2018, we entered into an amended and restated credit agreement ~~(the~~(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 ~~Amended and Restated~~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). ~~At March 31,~~On September 30, 2019, the interest rate that was being charged on the outstanding principal amounts was ~~3.6%~~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. ~~At March 31,~~

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RESMED INC. AND SUBSIDIARIES

Quantitative and Qualitative Disclosures About Market Risk

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 ~~significant foreign-currency-denominated balances by legal entity functional~~foreign currency denominated operating assets and liabilities and after considering our foreign currency hedging activities as of ~~March 31,~~September 30, 2019 (in thousands):



	U.S.		Canadian	Chinese	U.S.		Canadian	Chinese
	Dollar	Euro	Dollar	Yuan	Dollar	Euro	Dollar	Yuan
	(USD)	(EUR)	(CAD)	(CNY)	(USD)	(EUR)	(CAD)	(CNY)
AUD Functional:
Assets	284,950	154,131	-	30,745	445,067	129,129	-	43,124
Liability	(224,127)	(119,211)	-	(2,670)	(254,069)	(98,306)	-	(2,539)
Foreign Currency Hedges	(55,000)	(39,273)	-	(20,860)	(190,000)	(27,267)	-	(22,381)
Net Total	5,823	(4,353)	-	7,215	998	3,556	-	18,204
USD Functional:
Assets	-	-	18,070	-	-	-	17,812	-
Liability	-	-	(5,124)	-	-	-	-	-
Foreign Currency Hedges	-	-	(14,991)	-	-	-	(15,104)	-
Net Total	-	-	(2,045)	-	-	-	2,708	-
SGD Functional:
Assets	475,716	179,074	-	13	485,367	194,928	-	(12)
Liability	(181,509)	(53,036)	-	-	(260,488)	(54,038)	-	-
Foreign Currency Hedges	(288,000)	(125,672)	-	-	(228,000)	(130,882)	-	-
Net Total	6,207	366	-	13	(3,121)	10,008	-	(12)

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Quantitative and Qualitative Disclosures About Market Risk

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 ~~March 31,~~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)					Fair Value Assets / (Liabilities)
Foreign Exchange Contracts	Year 1	Year 2	Total	March 31, 2019	June 30, 2018	Year 1	Year 2	Total	September 30, ‎2019	June 30, ‎2019
AUD/USD
Contract amount	55,000	-	55,000	100	(140)	190,000	-	190,000	(1,461)	202
Ave. contractual exchange rate	AUD 1 = USD 0.7085		AUD 1 = USD 0.7085			AUD 1 = ‎USD 0.6804		AUD 1 = ‎USD 0.6804
AUD/Euro
Contract amount	72,935	22,441	95,376	(3)	(1,286)	70,894	10,907	81,801	164	(124)
Ave. contractual exchange rate	AUD 1 = Euro 0.6511	AUD 1 = Euro 0.6300	AUD 1 = Euro 0.6460			AUD 1 = ‎Euro 0.6336	AUD 1 = ‎Euro 0.6330	AUD 1 = ‎Euro 0.6335
SGD/Euro
Contract amount	125,672	-	125,672	205	(939)	130,882	-	130,882	1,054	40
Ave. contractual exchange rate	SGD 1 = Euro 0.6491		SGD 1 = Euro 0.6491			SGD 1 = ‎Euro 0.6566		SGD 1 = ‎Euro 0.6566
SGD/USD
Contract amount	288,000	-	288,000	(3,046)	(309)	228,000	-	228,000	390	71
Ave. contractual exchange rate	SGD 1 = USD 0.7405		SGD 1 = USD 0.7405			SGD 1 = ‎USD 0.7222		SGD 1 = ‎USD 0.7222
AUD/CNY
Contract amount	20,860	-	20,860	(81)	(17)	22,381	-	22,381	(91)	(15)
Ave. contractual exchange rate	AUD 1 = CNY 4.79		AUD 1 = CNY 4.79			AUD 1 = ‎CNY 4.8950		AUD 1 = ‎CNY 4.8950
USD/CAD
Contract amount	14,991	-	14,991	221	(8)	15,104	-	15,104	193	(66)
Ave. contractual exchange rate	USD 1 = CAD 1.3148		USD 1 = CAD 1.3148			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 ~~March 31,~~September 30, 2019, we held cash and cash equivalents of ~~$146.5~~$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 ~~March 31,~~September 30, 2019, there was ~~$1,339.0~~$725.0 million outstanding under the Revolving Credit Agreement and Term Credit Agreement, which ~~in each case was~~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 ~~March 31,~~September 30, 2019, would not have had a material impact on pretax income. We have no interest rate hedging agreements.

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RESMED INC. AND SUBSIDIARIES

Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports made pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~March 31,~~September 30, 2019.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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RESMED INC. AND SUBSIDIARIES

Item 1 Legal ~~Proceedings~~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.

~~Fisher & Paykel Healthcare patent litigation.~~ As previously described in the Company’s Quarterly Report on Form 10-Q for the second quarter, ResMed and Fisher & Paykel Healthcare have been engaged in patent disputes in several global forums. ResMed and Fisher & Paykel also filed proceedings in patent offices in the United States, New Zealand, Germany and Europe to invalidate many of the patents being asserted against that party. On February 19, 2019, the parties entered into a settlement agreement resolving all of the pending patent infringement disputes in all venues pursuant to a confidential settlement agreement. The settlement involves no payment or admission of liability by either side. As a result, all of the litigation proceedings have been dismissed. The parties continue to pursue various invalidity and other administrative proceedings in the United States, Germany, Europe and New Zealand.

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 ~~ResMed~~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, ~~2018 and in our quarterly report on Form 10-Q for the quarter ended December 31, 2018, each of~~2019, which was filed with the SEC and describe the various risks and uncertainties to which we are or may become subject. As of ~~March 31,~~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 ~~March 31,~~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.

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Item 3 Defaults Upon Senior Securities

None

Item 4 Mine Safety Disclosures

None

Item 5 Other Information

None

‎

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PART II – OTHER INFORMATION	Item 1-6

RESMED INC. AND SUBSIDIARIES

Item 6 Exhibits

Exhibits (numbered in accordance with Item 601 of Regulation S-K)


	~~2.1~~3.1		Agreement and Plan of Merger, dated November 5, 2018, by and among ResMed Operations Inc., Evolved Sub, Inc., ResMed Inc., OPE LGI Holdings Limited, in its capacity as the agent acting on behalf of the holders of common stock of MatrixCare Holdings, Inc., and MatrixCare Holdings, Inc.. (Incorporated by reference to Exhibit 2.1 to ResMed Inc.’s Current Report on Form 8-K, filed with the SEC on November 8, 2018)*

	~~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
	~~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
	~~31.1~~		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2
	~~31.2~~		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32
	32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	101
	~~101~~		The following financial statements from ResMed Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2019, filed on ~~May 2,~~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.

* Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. ResMed Inc. hereby undertakes to supplementally furnish copies of any of the omitted exhibits and schedules upon request by the SEC; provided, however, that ResMed Inc. may request confidential treatment pursuant Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any exhibits or schedules so furnished.

3633

Table of Contents


PART II – OTHER INFORMATION	Signatures

RESMED INC. AND SUBSIDIARIES

Signatures

We have authorized the persons whose signatures appear below to sign this report on our behalf, in accordance with the Securities Exchange Act of 1934.

~~May 2,~~October 24, 2019

ResMed Inc.


/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)

3734


Large ~~accelerated filer~~Accelerated Filer	☒x	Accelerated ~~filer~~Filer	☐¨
~~Non-accelerated filer~~Non-Accelerated Filer	☐ ¨	Smaller ~~reporting company~~Reporting Company	☐¨
Emerging ~~growth company~~Growth Company	☐¨


	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


	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


	Nine Months Ended March 31,
Investments	2019		2018
Balance at the beginning of the period	$	41,226	$	38,324
Investments		31,092		6,445
Impairment of investments		(8,801)		(3,620)
Loss attributable to equity method investments		(9,371)		-
Disposal of investments		(5,000)		-
Balance at the end of the period	$	49,146	$	41,149



	Nine Months Ended March 31,				Three Months Ended ‎September 30,
	2019		2018		2019		2018
Balance at the beginning of the period	$	19,227	$	19,558	$	19,625	$	19,227
Warranty accruals for the period		11,601		13,041		2,901		3,948
Warranty costs incurred for the period		(10,790)		(13,135)		(2,792)		(3,589)
Foreign currency translation adjustments		(405)		485		(572)		(261)
Balance at the end of the period	$	19,633	$	19,949	$	19,162	$	19,325


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


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


Part I	Financial Information	3

~~Item 1~~	~~Financial Statements~~	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	22
		21

Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
		28
~~Item 4~~	~~Controls and Procedures~~	33

~~Part II~~Item 4	~~Other Information~~Controls and Procedures	34
		30
~~Item 1~~	~~Legal Proceedings~~	34

~~Item 1A~~Part II	~~Risk Factors~~Other Information	34	31

Item 21	Legal Proceedings	31

Item 1A	Risk Factors	31

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	34
		31

Item 3	Defaults Upon Senior Securities	35
			32
~~Item 4~~	~~Mine Safety Disclosures~~	35
Item 4	Mine Safety Disclosures	32
~~Item 5~~	~~Other Information~~	35

Item 65	~~Exhibits~~Other Information	36
		32

Item 6	~~Signatures~~Exhibits	37 33

	Signatures	34




Balance Sheet Caption	As reported balance June 30, 2018		Adoption of ASU 2016-16 Increase/(Decrease)		Revised balance July 1, 2018
Assets
Prepaid expenses and other current assets	$	124,634	$	(28,947)	$	95,687
Prepaid taxes and other non-current assets		273,710		(156,406)		117,304
Deferred income taxes		53,818		(3,445)		50,373
Equity
Retained Earnings		2,432,328		(188,798)		2,243,530



	March 31, 2019		��	June 30, 2018
Machinery and equipment	$	256,797		$	239,671
Computer equipment		170,620			155,069
Furniture and fixtures		51,510			51,045
Vehicles		7,390			7,399
Clinical, demonstration and rental equipment		91,133			92,229
Leasehold improvements		33,677			32,169
Land		52,735			54,089
Buildings		224,482			229,193
		888,344			860,864
Accumulated depreciation and amortization		(505,848)			(474,314)
Property, plant and equipment, net	$	382,496		$	386,550



	Nine Months Ended March 31, 2019
	Sleep and Respiratory Care		SaaS		Total
Balance at the beginning of the period	$	464,157	$	604,787	$	1,068,944
Business acquisition		182,159		697,260		879,419
Foreign currency translation adjustments		(9,227)		-		(9,227)
Balance at the end of the period	$	637,089	$	1,302,047	$	1,939,136


	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%


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



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Options		Weighted ‎Average ‎Exercise ‎Price		Weighted ‎Average ‎Remaining ‎Contractual ‎Term in Years
Outstanding at beginning of period		1,205,826	$	60.48	4.4		1,260,114	$	72.91	4.4
Granted		306,842		102.12			-		-
Exercised		(103,100)		46.41			(110,379)		50.81
Forfeited		(183)		52.02			-		-
Outstanding at end of period		1,409,385	$	70.57	4.4		1,149,735	$	75.03	4.5
Exercise price of granted options	$	102.12				$	-
Options exercisable at end of period		848,075	$	57.65			594,087	$	60.89



	Restricted Stock Units		Weighted Average Grant-Date Fair Value		Weighted Average Remaining Contractual Term in Years	Restricted ‎Stock ‎Units		Weighted ‎Average ‎Grant-Date ‎Fair Value		Weighted ‎Average ‎Remaining ‎Contractual ‎Term in Years
Outstanding at beginning of period		1,644,754	$	62.90	1.6		1,446,170	$	77.21	1.6
Granted		758,775		99.13			3,316		129.63
Vested		(902,467)		57.41			(5,186)		72.33
Expired / cancelled		(38,277)		66.76			(13,355)		79.40
Forfeited		(823)		66.76			(6,361)		79.40
Outstanding at end of period		1,461,962	$	77.06	1.9		1,424,584	$	77.29	1.4



	Nine Months Ended March 31,				Three Months Ended September 30,
	2019		2018		2019		2018
Total receivables sold:
Full recourse	$	28,846	$	16,125	$	-	$	10,082
Limited recourse		70,847		56,302		33,673		18,824
Total	$	99,693	$	72,427	$	33,673	$	28,906


Base consideration	$	750,000
Cash acquired		~~15,576~~ 15,873
Debt assumed		(151,665)
Net working capital and other adjustments		~~(1,007)~~ (1,812)
Net consideration	$	~~612,904~~ 612,396


Unaudited Proforma Consolidated Results
(In thousands, except per share information)
	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
Revenue	$	662,228	$	620,933	$	1,947,096	$	1,803,685
Net income	$	105,416	$	106,583	$	334,302	$	192,445
Basic earnings per share	$	0.74	$	0.75	$	2.34	$	1.35
Diluted earnings per share	$	0.73	$	0.74	$	2.32	$	1.34


	Nine Months Ended March 31,
	2019		2018		% Change		Constant Currency*
U.S., Canada and Latin America
Devices	$	540.2	$	499.7	8	%
Masks and other		494.8		443.7	12
Total Sleep and Respiratory Care	$	1,035.0	$	943.4	10
Software as a Service		190.6		116.6	63
Total	$	1,225.6	$	1,060.0	16
Combined Europe, Asia and other markets
Devices	$	463.0	$	451.8	2	%	6	%
Masks and other		213.0		204.8	4		9
Total Sleep and Respiratory Care	$	676.0	$	656.6	3		7
Global revenue
Devices	$	1,003.2	$	951.5	5	%	7	%
Masks and other		707.8		648.5	9		11
Total Sleep and Respiratory Care	$	1,711.0	$	1,600.0	7		9
Software as a Service		190.6		116.6	63		63
Total	$	1,901.6	$	1,716.6	11		12