Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is incorporated by reference to the financial statements set forth in Item 15 of Part IV of this report, “Exhibits and Consolidated Financial Statement Schedules.”

(a) Index to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm	51
Consolidated Balance Sheets as of June 30, 2020 and 2019	53
Consolidated Statements of Income for the years ended June 30, 2020, 2019 and 2018	54
Consolidated Statements of Comprehensive Income for the years ended June 30, 2020, 2019 and 2018	55
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2020, 2019 and 2018	56
Consolidated Statements of Cash Flows for the years ended June 30, 2020, 2019 and 2018	57
Notes to Consolidated Financial Statements	58
Schedule II – Valuation and Qualifying Accounts and Reserves	81

(b) Supplementary Data

Quarterly Financial Information (unaudited)—The quarterly results for the years ended June 30, 2020 and 2019 are summarized below (in thousands, except per share amounts):


2020	First‎Quarter		Second‎Quarter		Third‎Quarter		Fourth‎Quarter		Fiscal‎Year
Net revenue	$	681,056	$	736,157	$	769,455	$	770,343	$	2,957,013
Gross profit*		391,619		427,130		449,662		449,372		1,717,786
Net income		120,148		160,554		163,137		177,835		621,674
Basic earnings per share		0.84		1.11		1.13		1.23		4.31
Diluted earnings per share		0.83		1.10		1.12		1.22		4.27

2019	First‎Quarter		Second‎Quarter		Third‎Quarter		Fourth‎Quarter		Fiscal‎Year
Net revenue	$	588,279	$	651,100	$	662,228	$	704,964	$	2,606,572
Gross profit*		336,138		374,532		380,970		402,432		1,494,071
Net income		105,737		124,639		105,416		68,797		404,592
Basic earnings per share		0.74		0.87		0.74		0.48		2.83
Diluted earnings per share		0.73		0.86		0.73		0.48		2.80

*Within our consolidated statements of income for the years ended June 30, 2020 and 2019, cost of sales has been adjusted to include amortization of acquired intangible assets directly applicable to revenue. As a result, gross profit includes amortization of acquired intangible assets relating to cost of sales and operating expenses have been reduced by this amount. There was no impact on income from operations, income before taxes or net income, as a result of this reclassification

Note: the amounts for each quarter are computed independently and, due to the computation formula, the sum of the four quarters may not equal the year.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors ‎ResMed Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of ResMed Inc. and subsidiaries (the Company) as of June 30, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three year period ended June 30, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three year period ended June 30, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 12, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for leases beginning July 1, 2019 due to the adoption of the FASB’s Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of goodwill triggering events

As discussed in Notes 1(i) and 5 to the consolidated financial statements, the carrying amount of goodwill as of June 30, 2020 was $1,890 million. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit, including goodwill, might exceed the fair value of the reporting unit. In the current year, the Company performed qualitative,

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or Step 0, assessments to determine whether there was a greater than 50 percent likelihood that the fair value of each reporting unit was less than its carrying value.

We identified the evaluation of goodwill triggering events as a critical audit matter because such events indicate possible impairment of goodwill, which required the application of greater auditor judgment. Potential triggering events, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, market capitalization and events specific to the entity and reporting units, required a higher degree of auditor judgment to evaluate. These possible triggering events could have a significant effect on the Company’s Step 0 assessment and the determination of whether further quantitative analysis of goodwill impairment was required.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of internal controls related to the critical audit matter. This included a control related to the Company’s assessment of possible goodwill triggering events. We evaluated the Company’s Step 0 assessment for its reporting units by:

Considering macroeconomic indicators such as gross domestic product and inflation by key regions around the world;

Evaluating information from analyst reports in the enterprise software and sleep and respiratory care industries, which are compared to industry and market considerations used by the Company; and

Analyzing information including changes in the costs of raw materials and labor, the financial performance of the reporting units, the Company’s market capitalization, and other entity and reporting-unit specific events.

Evaluation of uncertain tax positions related to Australian Tax Office audits

As discussed in Note 14 to the consolidated financial statements, the Company’s tax filings in Australia for the years 2009 through 2017 are under audit by the Australian Tax Office (ATO). The Company has been assessed $266 million of additional income tax, penalties, and interest for tax years 2009 through 2013 in connection with this tax audit. Certain of these amounts have been paid by the Company to the ATO. However, the Company has not recorded any expense relating to the ongoing audit, or these assessments, as the Company believes it is more likely than not (more than a 50% likelihood) that its tax positions will be upheld.

We identified the evaluation of uncertain tax positions related to Australian Tax Office audits as a critical audit matter. This critical audit matter required challenging auditor judgment due to the nature and the subjectivity of the applicable tax rules and regulations.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the critical audit matter. This included controls over the Australian tax calculation and assessment of uncertain tax positions. We involved tax professionals with specialized skills and knowledge of Australian tax laws, who assisted in:

Reading formal notices and assessments, and other correspondence received by the Company from the ATO in connection with the audit, as well as responses and information the Company submitted to the ATO in response to its requests for information;

Evaluating the Company’s analysis and conclusions regarding its assertion, which included an assessment of the Company’s analysis of Australian tax laws and regulations related to the specific audit findings, and an evaluation of the facts, assumptions, and representations made; and

Reading legal opinions obtained by the Company from third parties, and inquiring of third-party legal counsel about the likelihood of the Company’s tax position being ultimately upheld.

We have served as the Company’s auditor since 1994.

San Diego, California ‎August 12, 2020

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Consolidated Balance Sheets

June 30, 2020 and 2019

(In thousands, except share and per share data)



	June 30,‎2020		June 30,‎2019
Assets
Current assets:
Cash and cash equivalents	$	463,156	$	147,128
Accounts receivable, net of allowance for doubtful accounts of $28,508 and $25,171 ‎ at June 30, 2020 and June 30, 2019, respectively		474,643		528,484
Inventories (note 4)		416,915		349,641
Prepaid expenses and other current assets		168,745		120,113
Total current assets		1,523,459		1,145,366
Non-current assets:
Property, plant and equipment, net (note 4)		417,335		387,460
Operating lease right-of-use assets (note 10)		118,348		-
Goodwill (note 5)		1,890,324		1,856,449
Other intangible assets, net (note 5)		448,168		521,950
Deferred income taxes (note 14)		41,065		45,478
Prepaid taxes and other non-current assets		148,677		150,979
Total non-current assets		3,063,917		2,962,316
Total assets	$	4,587,376	$	4,107,682
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	135,786	$	115,725
Accrued expenses (note 7)		270,353		266,359
Operating lease liabilities, current (note 10)		21,263		-
Deferred revenue		98,617		88,667
Income taxes payable (note 14)		64,755		73,248
Short-term debt, net (note 9)		11,987		11,992
Total current liabilities		602,761		555,991
Non-current liabilities:
Deferred revenue		87,307		81,143
Deferred income taxes (note 14)		13,011		11,380
Operating lease liabilities, non-current (note 10)		101,880		-
Other long-term liabilities		8,347		2,058
Long-term debt, net (note 9)		1,164,133		1,258,861
Long-term income taxes payable (note 14)		112,910		126,056
Total non-current liabilities		1,487,588		1,479,498
Total liabilities		2,090,349		2,035,489
Commitments and contingencies (note 17)
Stockholders’ equity: (note 11)
Preferred stock, $0.01 par value, 2,000,000 shares authorized; none issued		-		-
Common stock, $0.004 par value, 350,000,000 shares authorized; ‎ 186,723,407 issued and 144,887,175 outstanding at June 30, 2020 and ‎ 185,491,064 issued and 143,654,830 outstanding at June 30, 2019		580		575
Additional paid-in capital		1,570,694		1,511,473
Retained earnings		2,832,991		2,436,410
Treasury stock, at cost, 41,836,234 shares at June 30, 2020 and June 30, 2019		(1,623,256)		(1,623,256)
Accumulated other comprehensive loss		(283,982)		(253,009)
Total stockholders’ equity		2,497,027		2,072,193
Total liabilities and stockholders’ equity	$	4,587,376	$	4,107,682

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income

Years Ended June 30, 2020, 2019 and 2018

(In thousands, except per share data)


	June 30, 2020		June 30, 2019		June 30, 2018
Net revenue - Sleep and Respiratory Care products	$	2,602,381	$	2,330,783	$	2,183,193
Net revenue - Software as a Service		354,632		275,789		157,003
Net revenue		2,957,013		2,606,572		2,340,196

Cost of sales - Sleep and Respiratory Care products		1,067,967		977,223		929,350
Cost of sales - Software as a Service		121,657		92,764		48,682
Cost of sales		1,189,624		1,069,987		978,032

Amortization of acquired intangible assets - Sleep and Respiratory Care products		8,584		8,591		7,217
Amortization of acquired intangible assets - Software as a Service		41,019		33,923		20,049
Amortization of acquired intangible assets		49,603		42,514		27,266
Total cost of sales		1,239,227		1,112,501		1,005,298
Gross profit		1,717,786		1,494,071		1,334,898

Selling, general and administrative		676,689		645,010		600,369
Research and development		201,946		180,651		155,149
Amortization of acquired intangible assets		30,092		32,424		19,117
Restructuring expenses (note 19)		-		9,401		18,432
Litigation settlement expenses (note 20)		(600)		41,199		-
Acquisition related expenses (note 18)		-		6,123		-
Total operating expenses		908,127		914,808		793,067
Income from operations		809,659		579,263		541,831
Other income (loss), net:
Interest income		1,021		2,299		16,378
Interest expense		(40,377)		(36,156)		(28,355)
Loss attributable to equity method investments (note 6)		(25,058)		(15,833)		-
Other, net (note 13)		(12,157)		(10,726)		(8,542)
Total other income (loss), net		(76,571)		(60,416)		(20,519)
Income before income taxes		733,088		518,847		521,312
Income taxes		111,414		114,255		205,724
Net income	$	621,674	$	404,592	$	315,588

Basic earnings per share (note 12)	$	4.31	$	2.83	$	2.21
Diluted earnings per share (note 12)	$	4.27	$	2.80	$	2.19
Dividend declared per share	$	1.56	$	1.48	$	1.40
Basic shares outstanding (000's)		144,338		143,111		142,764
Diluted shares outstanding (000's)		145,652		144,484		143,987

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Comprehensive Income

Years Ended June 30, 2020, 2019 and 2018

(In US$ thousands)


	Years Ended June 30,
	2020		2019		2018
Net income	$	621,674		404,592		315,588
Other comprehensive (loss) income:
Foreign currency translation (loss) gain adjustments		(30,973)		(28,681)		(35,269)
Comprehensive income	$	590,701	$	375,911	$	280,319

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Stockholders’ Equity

Years ended June 30, 2020, 2019 and 2018

(In thousands)


	Common Stock			Additional‎Paid-in		Treasury Stock			Retained		Accumulated‎Other‎ Comprehensive
	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
Common stock issued on exercise of options (note 11)	539		2		18,759	-		-		-		-		18,761
Common stock issued on vesting of restricted stock units, net of shares withheld for tax (note 11)	214		1		(15,385)	-		-		-		-		(15,384)
Common stock issued on employee stock purchase plan (note 11)	302		1		19,955	-		-		-		-		19,956
Treasury stock purchases	-		(2)		-	(550)		(53,801)		-		-		(53,803)
Stock-based compensation costs	-		-		48,362	-		-		-		-		48,362
Other comprehensive income (loss)	-		-		-	-		-		-		(35,269)		(35,269)
Net income	-		-		-	-		-		315,588		-		315,588
Dividends declared	-		-		-	-		-		(199,497)		-		(199,497)
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 (note 11)	252		1		12,329	-		-		-		-		12,330
Common stock issued on vesting of restricted stock units, net of shares withheld for tax (note 11)	638		3		(28,104)	-		-		-		-		(28,101)
Common stock issued on employee stock purchase plan (note 11)	285		1		24,364	-		-		-		-		24,365
Treasury stock purchases	-		(1)		-	(200)		(22,844)		-		-		(22,845)
Stock-based compensation costs	-		-		52,063	-		-		-		-		52,063
Other comprehensive income (loss)	-		-		-	-		-		-		(28,681)		(28,681)
Net income	-		-		-	-		-		404,592		-		404,592
Cumulative effect of change in accounting standards	-		-		-	-		-		(188,798)		-		(188,798)
Dividends declared	-		-		-	-		-		(211,712)		-		(211,712)
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 (note 11)	350		1		19,986	-		-		-		-		19,987
Common stock issued on vesting of restricted stock units, net of shares withheld for tax (note 11)	617		3		(46,061)	-		-		-		-		(46,058)
Common stock issued on employee stock purchase plan (note 11)	265		1		28,196	-		-		-		-		28,197
Treasury stock purchases	-		-		-	-		-		-		-		-
Stock-based compensation costs	-		-		57,100	-		-		-		-		57,100
Other comprehensive income (loss)	-		-		-	-		-		-		(30,973)		(30,973)
Net income	-		-		-	-		-		621,674		-		621,674
Dividends declared	-		-		-	-		-		(225,093)		-		(225,093)
Balance, June 30, 2020	186,723	$	580	$	1,570,694	(41,836)	$	(1,623,256)	$	2,832,991	$	(283,982)	$	2,497,027

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows

Years ended June 30, 2020, 2019 and 2018

(In thousands)



	June 30, 2020		June 30, 2019		June 30, 2018
Cash flows from operating activities:
Net income	$	621,674	$	404,592	$	315,588
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		154,850		150,795		119,960
Amortization of right-of-use-assets		26,523		-		-
Stock-based compensation costs		57,559		52,073		48,412
Loss attributable to equity method investments (note 6)		25,058		15,833		-
Impairment of equity investments (note 6)		14,519		15,007		11,593
Gain on previously held equity interest (note 18)		-		(1,909)		-
Changes in fair value of business combination contingent consideration		(7)		(286)		411
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		54,383		(18,013)		(32,356)
Inventories		(69,881)		(84,188)		1,494
Prepaid expenses, net deferred income taxes and other current assets		(58,999)		(47,575)		(160,726)
Accounts payable, accrued expenses and other		(23,424)		(27,278)		200,650
Net cash provided by operating activities		802,255		459,051		505,026
Cash flows from investing activities:
Purchases of property, plant and equipment		(95,330)		(68,710)		(62,581)
Patent registration costs		(10,608)		(8,632)		(8,876)
Business acquisitions, net of cash acquired		(27,910)		(951,383)		(902)
Purchases of investments (note 6)		(31,616)		(46,717)		(14,495)
Payments on maturity of foreign currency contracts		(14,397)		(264)		(14,970)
Net cash used in investing activities		(179,861)		(1,075,706)		(101,824)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		48,182		36,727		38,717
Taxes paid related to net share settlement of equity awards		(46,061)		(28,104)		(15,385)
Purchases of treasury stock		-		(22,844)		(53,801)
Payments of business combination contingent consideration		(302)		(909)		(486)
Proceeds from borrowings, net of borrowing costs		1,190,000		1,519,230		350,000
Repayment of borrowings		(1,284,012)		(711,745)		(1,146,242)
Dividends paid		(225,093)		(211,712)		(199,497)
Net cash provided by (used in) financing activities		(317,286)		580,643		(1,026,694)
Effect of exchange rate changes on cash		10,920		(5,561)		(9,742)
Net increase (decrease) in cash and cash equivalents		316,028		(41,573)		(633,234)
Cash and cash equivalents at beginning of period		147,128		188,701		821,935
Cash and cash equivalents at end of period	$	463,156	$	147,128	$	188,701
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	$	180,359	$	242,860	$	170,653
Interest paid	$	40,377	$	36,156	$	28,355
Fair value of assets acquired, excluding cash	$	14,919	$	429,522	$	290
Liabilities assumed		(4,292)		(265,217)		-
Goodwill on acquisition		20,375		794,320		247
Deferred payments		408		(7,242)		365
Fair value of contingent consideration		(3,500)		-		-
Cash paid for acquisitions	$	27,910	$	951,383	$	902

See accompanying notes to consolidated financial statements.

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Notes to the Consolidated Financial Statements

(1) 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, Finland, Norway and Sweden. We also operate a Software as a Service (“SaaS”) business in the United States that includes 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.

(2) Summary of Significant Accounting Policies

(a) Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with U.S. generally accounting principles requires management estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from management’s estimates.

(b) Revenue Recognition

In accordance with Accounting Standard Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, 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

See note 15 – Segment Information for our net revenue disaggregated by segment, product and region for the years ended June 30, 2020, 2019 and 2018.

Effective in the fourth quarter of the fiscal year ended June 30, 2020, our consolidated statements of income separately present the revenues and related costs of the Sleep and Respiratory Care and SaaS segments. Net revenues and cost of sales were previously presented on an aggregate basis. This change separately states net sales of products and revenues from services, which materially aligns with net revenues associated with our Sleep and Respiratory Care and SaaS segments, respectively. While this change has been applied retrospectively to the consolidated statements of income for the years ended June 30, 2019 and 2018, there was no impact on net revenue, cost of sales, income from operations, income before taxes or net income as a result of this change.

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. Our contracts do not contain significant financing components.

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Notes to the Consolidated Financial Statements

The following table summarizes our contract balances as of June 30, 2020 and 2019 (in thousands):


	2020		2019		Balance sheet caption
Contract assets
Accounts receivable, net	$	474,643	$	528,484	Accounts receivable, net
Unbilled revenue, current		9,452		9,834	Prepaid expenses and other current assets
Unbilled revenue, non-current		6,957		4,592	Prepaid taxes and other non-current assets

Contract liabilities
Deferred revenue, current		(98,617)		(88,667)	Deferred revenue (current liabilities)
Deferred revenue, non-current		(87,307)		(81,143)	Deferred revenue (non-current liabilities)

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.

When Sleep and Respiratory Care or SaaS contracts have 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 each performance obligation. An allocation is not required for many of our Sleep and Respiratory Care contracts that have a single performance obligation, which is the shipment of our therapy-based equipment.

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 and presented on a net basis. 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.

(c) Concentration of Credit Risk and Significant Customers

Financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, derivatives and trade receivables. Our cash and cash equivalents are generally held with large, diverse financial institutions to reduce the amount of exposure to any single financial institution. Our derivative contracts are transacted with various financial institutions with high credit standings and any exposure to counterparty credit-related losses in these contracts is largely mitigated with collateralization and master-netting agreements. The risk with respect to trade receivables is mitigated by credit evaluations we perform on our customers, the short duration of our payment terms for the significant majority of our customer contracts and by the diversification of our customer base. No single customer accounted for 10% or more of our total revenues for any of the periods presented.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(d) Fair Value of Financial Instruments

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We measure our financial instruments at fair value at each reporting period using a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs that are supported by little or no market activity.

The carrying value of cash equivalents, accounts receivable and accounts payable, approximate their fair value because of their short-term nature. The carrying value of long-term debt related to our Revolving Credit and Term Credit Agreements approximates its fair value as the principal amounts outstanding are subject to variable interest rates that are based on market rates which are regularly reset. The carrying value of long-term debt related to our Senior Notes can differ to its fair value as the principal amounts outstanding are subject to fixed interest rates as outlined in note 9 - Debt. Foreign currency hedging instruments are marked to market and therefore reflect their fair value. We do not hold or issue financial instruments for trading purposes.

(e) Cash and Cash Equivalents

Cash equivalents include certificates of deposit and other highly liquid investments and we state them at cost, which approximates market. We consider investments with original maturities of 90 days or less to be cash equivalents for purposes of the consolidated statements of cash flows.

(f) Inventories

We state inventories at the lower of cost (determined principally by the first-in, first-out method) or net realizable value. We include material, labor and manufacturing overhead costs in finished goods and work-in-process inventories. We review and provide for any product obsolescence in our manufacturing and distribution operations by assessing throughout the year individual products and components (based on estimated future usage and sales).

(g) Property, Plant and Equipment

We record property, plant and equipment, including rental and demonstration equipment at cost. We compute depreciation expense using the straight-line method over the estimated useful lives of the assets. Useful lives are generally two years to ten years except for buildings which are depreciated over an estimated useful life of 40 years and leasehold improvements, which we amortize over the lease term. We charge maintenance and repairs to expense as we incur them.

Depreciation expense for property, plant, and equipment was $65.6 million, $65.9 million, and $64.7 million for the years ended June 30, 2020, 2019 and 2018, respectively.

(h) Intangible Assets

We capitalize the registration costs for new patents and amortize the costs over the estimated useful life of the patent, which is generally ten years. If a patent is superseded or a product is retired, any unamortized costs are written off immediately.

We amortize all of our other intangible assets on a straight-line basis over their estimated useful lives, which range from two years to fifteen years. We take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists and, at least annually, evaluate the recoverability of intangible assets. We have not identified any impairment of intangible assets during any of the periods presented.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(i) Goodwill

We conducted our annual review for goodwill impairment during the final quarter of 2020. Our goodwill impairment review is performed at our reporting unit level, which is one level below our operating segments and involves the following steps:

Step 0 or Qualitative assessment – Evaluate qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The factors we consider include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance or events-specific to that reporting unit. If or when we determine it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill, we would move to Step 1 of the quantitative method.

Step 1 – Compare the fair value for each reporting unit to its carrying value, including goodwill. Fair value is determined based on estimated discounted cash flows. A goodwill impairment charge is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. If a reporting unit’s fair value exceeds the carrying value, no further work is performed and no impairment charge is necessary.

During the annual review, we completed a Step 0 or Qualitative assessment and determined it was more likely than not that the fair value of our reporting units exceeded their carrying amounts, including goodwill and, therefore, goodwill was not impaired.

(j) Equity investments

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

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

(k) Research and Development

We record all research and development expenses in the period we incur them.

(l) Foreign Currency

The consolidated financial statements of our non-U.S. subsidiaries, whose functional currencies are other than the U.S. dollar, are translated into U.S. dollars for financial reporting purposes. We translate assets and liabilities of non-U.S. subsidiaries whose functional currencies are other than the U.S. dollar at period end exchange rates, but translate revenue and expense transactions at average exchange rates for the period. We recognize cumulative translation adjustments as part of comprehensive income, as detailed in the consolidated statements of comprehensive income, and include those adjustments in accumulated other comprehensive income in the consolidated balance sheets until such time the relevant subsidiary is sold or substantially or completely liquidated. We reflect gains and losses on transactions denominated in other than the functional currency of an entity in our results of operations.

(m) Foreign Exchange Risk Management

We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollars. We have significant foreign currency exposure through both our Australian and Singaporean manufacturing activities, and 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 terms of such foreign currency hedging contracts generally do not exceed three years. The goal of this hedging program is to economically manage the financial impact of foreign currency exposures denominated mainly in Euros, Australian 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.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

We do not designate these foreign currency contracts as hedges. We have determined our hedge program to be a non-effective hedge as defined under the FASB issued authoritative guidance. All movements in the fair value of the foreign currency instruments are recorded within other income, net in our consolidated statements of income and through changes in our operating assets and liabilities within our consolidated statements of cash flows. We classify purchases of foreign currency derivatives and proceeds received from the exercise of foreign currency derivatives as an investing activity within our consolidated statements of cash flows. We do not enter into financial instruments for trading or speculative purposes.

We held foreign currency instruments with notional amounts totaling $495.2 million and $496.9 million at June 30, 2020 and June 30, 2019, respectively, to hedge foreign currency fluctuations. These contracts mature at various dates prior to June, 2021.

(n) Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using the enacted tax rates we expect to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We recognize the impact of a tax position in the consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions are reflected in income tax expense.

(o) 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.

(p) Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which results in bad debt expense. We determine the adequacy of this allowance by periodically evaluating individual customer receivables, considering a customer’s financial condition, credit history and current economic conditions. Customer receivables are charged against the allowance when they are deemed uncollectible. We are also contingently liable, within certain limits, in the event of a customer default, to independent financing companies in connection with customer financing programs. We monitor the collection status of these installment receivables and provide for estimated losses separately under accrued expenses within our consolidated balance sheets based upon our historical collection experience with such receivables and a current assessment of our credit exposure.

(q) Impairment of Long-Lived Assets

We periodically evaluate the carrying value of long-lived assets to be held and used, including certain identifiable intangible assets, when events and circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If assets are considered to be impaired, we recognize as the impairment the amount by which the carrying amount of the assets exceeds the fair value of the assets. We report assets to be disposed of at the lower of the carrying amount or fair value less costs to sell. We did not recognize impairment charges in relation to long-lived assets during the fiscal years ended June 30, 2020, 2019 and 2018.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(r) Contingencies

We record a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded.

(3) New Accounting Pronouncements

(a) Recently issued accounting standards not yet adopted

ASU No. 2016-13 “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments”

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments” (Topic 326), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The guidance is effective for us beginning in the first quarter of the fiscal year ending June 30, 2021 and will be adopted using a modified retrospective approach, with a cumulative-effect adjustment recorded directly to retained earnings. We do not expect the adoption to have a material impact on our consolidated financial statements.

ASU No. 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for us beginning in the first quarter of the fiscal year ending June 30, 2021 and will be applied prospectively. Under the new ASU, capitalized implementation costs will be presented as other non-current assets on our consolidated balance sheets and within operating cash flows on our consolidated statements of cash flows. The adoption of this ASU is not expected to have a material effect on our consolidated financial statements.

ASU No. 2020-04 “Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting”

In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (Topic 848), which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance is effective for us as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact that this guidance, if elected, will have on our consolidated financial statements.

(b) Recently adopted accounting pronouncements

ASU No. 2016-02, “Leases”

In February 2016, the FASB issued 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 establishes a lease asset and lease liability by lessees for those leases classified as operating under prior GAAP. Leases are classified as either operating or finance under the new guidance. Operating leases result in straight-line expense in the income statement, similar to prior operating lease treatment, and finance leases result in more expense being recognized in the earlier years of the lease term, similar to prior capital lease treatment. For lessors, the update more closely aligns lease accounting to comparable guidance in the new revenue standards described.

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

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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 de-recognition of deferred rent balances of $3.7 million. We did not recognize any adjustment to the comparative period presented in the financial statements in accordance with our adoption method. The guidance did not have a material impact on our consolidated statements of income. See note 10 - Leases for further disclosures related to our leases under the new guidance.

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

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment” (Topic 350). 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. We adopted this guidance in the fourth quarter of fiscal year June 30, 2020. The adoption did not have a material impact on our consolidated financial statements.

(c) Adjustment to prior periods

As noted at note 2b) – Disaggregation of revenue, we now present revenue and cost of sales for our Sleep and Respiratory Care and SaaS segments on the consolidated statements of income. Additionally, within our consolidated statements of income for the years ended June 30, 2020, 2019 and 2018, cost of sales has been adjusted to include amortization of acquired intangible assets directly applicable to revenue. As a result, gross profit now includes amortization of acquired intangible assets relating to cost of sales and operating expenses have been reduced by this amount. There was no impact on income from operations, income before taxes or net income, as a result of this reclassification. The adjustments to the previously reported amounts are not material.

The table below presents a reconciliation of amortization of acquired intangible assets by income statement caption summing to total amortization of acquired intangible assets as previously reported for the years ended June 30, 2019 and June 30, 2018 (in thousands):


	2019		2018
Amortization of acquired intangible assets related to cost of sales	$	42,514	$	27,266
Amortization of acquired intangible assets related to operating expenses		32,424		19,117
Total as previously reported	$	74,938	$	46,383

The table below presents a reconciliation of gross profit as previously reported for the years ended June 30, 2019 and June 30, 2018 adjusted for the amortization of acquired intangible assets now included in cost of sales (in thousands):


	2019		2018
Gross profit as previously reported	$	1,536,585	$	1,362,164
Amortization of acquired intangible assets related to cost of sales		(42,514)		(27,266)
Gross profit	$	1,494,071	$	1,334,898

(4) Supplemental Balance Sheet Information

Components of selected captions in the consolidated balance sheets consisted of the following as of June 30, 2020 and June 30, 2019 (in thousands):


Inventories	2020		2019
Raw materials	$	128,096	$	80,861
Work in progress		2,807		2,256
Finished goods		286,012		266,524
Total inventories	$	416,915	$	349,641


Property, Plant and Equipment	2020		2019
Machinery and equipment	$	285,287	$	262,010
Computer equipment		188,036		173,895
Furniture and fixtures		54,275		51,942
Vehicles		5,513		7,477
Clinical, demonstration and rental equipment		95,860		94,007
Leasehold improvements		60,490		34,210
Land		51,803		52,406
Buildings		227,902		223,028
Property, plant and equipment, at cost	$	969,166	$	898,975
Accumulated depreciation and amortization		(551,831)		(511,515)
Property, plant and equipment, net	$	417,335	$	387,460

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PART II	Item 8

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Notes to the Consolidated Financial Statements

(5) Goodwill and Other Intangible Assets, net

Goodwill

For each of the years ended June 30, 2020 and June 30, 2019, we have not recorded any goodwill impairments. Changes in the carrying amount of goodwill is comprised of the following for the year ended June 30, 2020 (in thousands):


	2020
	Sleep and‎Respiratory Care		SaaS		Total
Balance at the beginning of the period	$	616,965	$	1,239,484	$	1,856,449
Business acquisitions		266		20,109		20,375
Adjustment to fair values of preliminary purchase price allocations		526		16,283		16,809
Foreign currency translation adjustments		(3,309)		-		(3,309)
Balance at the end of the period	$	614,448	$	1,275,876	$	1,890,324

Other Intangible Assets

Other intangibles, net are comprised of the following as of June 30, 2020 and June 30, 2019 (in thousands):


	2020		2019
Developed/core product technology	$	382,806	$	401,842
Accumulated amortization		(197,670)		(157,651)
Developed/core product technology, net		185,136		244,191
Customer relationships		279,370		273,114
Accumulated amortization		(80,922)		(68,630)
Customer relationships, net		198,448		204,484
Other intangibles		177,091		176,351
Accumulated amortization		(112,507)		(103,076)
Other intangibles, net		64,584		73,275
Total other intangibles, net	$	448,168	$	521,950

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

Refer to note 18 of the consolidated financial statements for details of acquisitions.

Amortization expense related to identified intangible assets for the years ended June 30, 2020 and June 30, 2019 was $79.7 million and $74.9 million, respectively. Amortization expense related to patents for the years ended June 30, 2020 and June 30, 2019 was $8.3 million and $8.1 million, respectively. Total estimated annual amortization expense for the years ending June 30, 2021 through June 30, 2025, is shown below (in thousands):


	Fiscal Years Ending June 30
	2021		2022		2023		2024		2025
Estimated amortization expense	$	80,636	$	72,219	$	55,015	$	50,628	$	45,298

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(6) Investments

We have a number of equity investments in privately held companies that are unconsolidated entities and are recorded in the non-current balance of other assets on the consolidated balance sheets. The following table shows a reconciliation of the changes in all of our investments during the years ended June 30, 2020 and June 30, 2019 (in thousands):



	2020		2019
Equity method investments
Balance at the beginning of the period	$	21,667	$	-
Investments		17,500		37,500
Loss attributable to equity method investments		(25,058)		(15,833)
Carrying value of equity method investments		14,109		21,667

Non-marketable securities
Balance at the beginning of the period	$	30,436	$	41,226
Investments		14,116		9,217
Impairment of investments		(14,519)		(15,007)
Acquisition of controlling interest in previously held investment		-		(5,000)
Carrying value of non-marketable securities		30,033		30,436
Total investments in unconsolidated entities	$	44,142	$	52,103

(7) Accrued Expenses

Accrued expenses at June 30, 2020 and June 30, 2019 consist of the following (in thousands):


	2020		2019
Product warranties (note 8)	$	21,132	$	19,625
Consulting and professional fees		18,740		12,726
Value added taxes and other taxes due		26,627		25,555
Employee related costs		148,383		123,446
Hedging instruments		427		244
Liability on receivables sold with recourse (note 17)		6,647		1,752
Accrued interest		8,313		1,683
Logistics and occupancy costs		6,350		8,137
Inventory in transit		21,679		15,175
Business acquisition contingent consideration		3,500		-
Litigation settlement expenses (note 20)		-		41,199
Restructuring expenses (note 19)		-		5,432
Other		8,555		11,385
	$	270,353	$	266,359

(8) Product Warranties

We include the liability for warranty costs in accrued expenses in our consolidated balance sheets. Changes in the liability for product warranty for the years ended June 30, 2020 and June 30, 2019 are as follows (in thousands):



	2020		2019
Balance at the beginning of the period	$	19,625	$	19,227
Warranty accruals for the period		14,167		15,416
Warranty costs incurred for the period		(12,229)		(14,634)
Foreign currency translation adjustments		(431)		(384)
Balance at the end of the period	$	21,132	$	19,625

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(9) Debt

Debt at June 30, 2020 and June 30, 2019 consists of the following (in thousands):


	2020		2019
Short-term debt	$	12,000	$	12,012
Deferred borrowing costs		(13)		(20)
Short-term debt, net		11,987		11,992
		-
Long-term debt	$	1,168,000	$	1,262,000
Deferred borrowing costs		(3,867)		(3,139)
Long-term debt, net	$	1,164,133	$	1,258,861
Total debt	$	1,176,120	$	1,270,853

Credit Facility

On April 17, 2018, we entered into an amended and restated credit agreement (the “Revolving Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, joint book runner, swing line lender and letter of credit issuer, and Westpac Banking Corporation, as syndication agent, joint lead arranger and joint book runner. The 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.

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 June 30, 2020, the interest rate that was being charged on the outstanding principal amounts was 1.2%. 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. As of June 30, 2020, we had $1.1 billion available for draw down under the revolving credit facility.

We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. As the Revolving Credit and Term Credit Agreements’ interest rate is calculated as LIBOR plus the spreads described above, its carrying amount is equivalent to its fair value as at June 30, 2020 and June 30, 2019, which was $680.0 million and $1,274.0 million, respectively. Quoted market prices in active markets for identical liabilities based inputs (Level 1) were used to estimate fair value.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Senior Notes

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

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

We are required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. As of June 30, 2020, the Senior Notes have a carrying amount of $500.0 million, excluding deferred borrowing costs, and an estimated fair value of $538.9 million. Quoted market prices in active markets for identical liabilities based inputs (Level 1) were used to estimate fair value.

At June 30, 2020, we were in compliance with our debt covenants and there was $1,180.0 million outstanding under the Revolving Credit Agreement, Term Credit Agreement and Senior Notes.

(10) Leases

(a) Leases where ResMed is the Lessee

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

We determine the lease term as the non-cancellable period of the lease, and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recognized on the balance sheet. Some of our leases include variable lease payments that are based on costs incurred or actual usage, or adjusted periodically based on an index or a rate. Our leases do not contain any residual value guarantees and we do not account for lease and non-lease components as a single lease component. Operating leases are included in operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheets. We lease certain office space, warehouses and distribution centers, manufacturing facilities, vehicles, and equipment with remaining lease terms ranging from less than 1 year to 15 years, some of which include options to extend or terminate the leases.

Operating lease costs for the year ended June 30, 2020 were $26.5 million. Short-term and variable lease costs were not material for the year ended June 30, 2020.

Future minimum lease payments under non-cancellable leases as of June 30, 2020 and for the periods ending June 30 of the years indicated below were as follows (in thousands):


	Total		2021		2022		2023		2024		2025		Thereafter
Minimum lease payments	$	143,774	$	24,810	$	18,084	$	14,853	$	12,075	$	10,493	$	63,459
Less: imputed interest		(20,631)
Total lease liabilities	$	123,143

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of June 30, 2020, we had additional operating lease commitments of $14.1 million for office space that have not yet commenced. These leases will commence during the year ended June 30, 2021 with lease terms of 1 years to 11 years.

The supplemental information related to operating leases for the year ended June 30, 2020 was as follows (in thousands):


	2020
Weighted-average inputs:
Weighted-average remaining lease term (years)		9.1
Weighted-average discount rate		3.2	%

Cash flow information:
Operating cash flows paid for amounts included in the measurement of lease liabilities	$	24,104
Right of use assets obtained in exchange for new lease liabilities:	$	51,663

Disclosures related to periods prior to adopting the new lease guidance

We lease certain facilities and equipment under operating leases expiring at various dates and most contain renewal options. Total expense for all operating leases was $23.4 million, $21.1 million, and $20.1 million for the years ended June 30, 2019, 2018, and 2017, respectively. Future minimum lease payments (including interest) under non-cancellable operating leases at June 30, 2019 were as follows (in thousands):


		Total			2020			2021			2022			2023			2024			Thereafter
Remaining operating lease payments		$	98,013		$	23,500		$	17,161		$	12,403		$	9,478		$	7,916		$	27,555

(b) Leases where ResMed is the Lessor

We lease sleep and respiratory medical devices to customers primarily as a means to comply with local health insurer requirements in certain foreign geographies. Device rental contracts include sales-type and operating leases, and contract terms vary by customer and include options to terminate or extend the contract. When lease contracts also include the sale of masks and accessories, we allocate contract consideration to those items on a relative standalone price basis and recognize revenue when control transfers to the customer.

The components of lease revenue for the year ended June 30, 2020 were as follows (in thousands):


	2020
Sales-type lease revenue	$	13,457
Operating lease revenue		87,874
Total lease revenue	$	101,331

Our net investment in sales-type leases were classified in the accompanying consolidated balance sheets captions as of June 30, 2020 as follows (in thousands):


	2020
Accounts receivable, net	$	7,697
Prepaid taxes and other non-current assets		6,957
Total	$	14,654

Maturities of sales-type leases as of June 30, 2020 were as follows (in thousands):


	Total		2021		2022		2023		2024		2025		Thereafter
Remaining lease payments	$	16,074	$	8,034	$	5,759	$	2,281	$	-	$	-	$	-
Less: imputed interest		(1,420)
Present value of remaining lease payments	$	14,654

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(11) Stockholders’ Equity

Common Stock. On February 21, 2014, our board of directors approved a new 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. The 20.0 million shares the new program authorizes us to purchase are in addition to the shares we repurchased on or before February 21, 2014 under our previous programs. 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 since February 21, 2014 have been executed in accordance with this program.

We have temporarily suspended our repurchase program and, accordingly, did not repurchase any shares during fiscal year 2020. During fiscal year 2019, we repurchased 200,000 shares at a cost of $22.8 million shares under our share repurchase program. As of June 30, 2020, we have repurchased a total of 41.8 million shares at a cost of $1.6 billion. Shares that are repurchased are classified as “treasury stock pending future use” and reduce the number of shares outstanding used in calculating earnings per share. At June 30, 2020, 12.9 million additional shares can be repurchased under the approved share repurchase program.

Preferred Stock. In April 1997, our board of directors authorized 2,000,000 shares of $0.01 par value preferred stock. No such shares were issued or outstanding at June 30, 2020.

Stock Options and Restricted Stock Units. We have granted stock options, restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”) to personnel, including officers and directors, in accordance with the ResMed Inc. 2009 Incentive Award Plan (the “2009 Plan”). Options and restricted stock units vest over one year to four years and the options have expiration dates of seven years from the date of grant. We have granted the options with an exercise price equal to the market value as determined at the date of grant. We have granted PRSUs that are subject to a market condition, with the ultimate realizable number of PRSUs dependent on relative total stockholder return over a period of three years, up to a maximum amount to be issued under the award of 225% of the original grant.

At the annual meeting of our stockholders in November 2017, 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 7.4 million. The amendment and restatement imposes a maximum award amount which may be granted under the 2009 Plan to non-employee director in a calendar year, which when taken together with any other cash fees earned for services as a non-employee director during the calendar year, has a total value of $0.7 million, or $1.2 million in the case of a non-employee director who is also serving as chairman of our board of directors. The amendment and restatement also increased the maximum amount payable pursuant to cash-denominated performance awards granted in any calendar year from $3.0 million to $5.0 million. In addition, the amendment and restatement extended the existing prohibition on the payment of dividends or dividend equivalents on unvested awards to apply to all awards, including time-based restricted stock, deferred stock and stock payment. The term of the 2009 Plan was extended by four years so that the plan expires on September 11, 2027.

The maximum number of shares of our common stock authorized for issuance under the 2009 Plan is 51.1 million. The number of securities remaining available for future issuance under the 2009 Plan at June 30, 2020 is 15.8 million. The number of shares of our common stock available for issuance under the 2009 Plan will be reduced by (i) 2.8 shares for each one share of common stock delivered in settlement of any “full-value award,” which is any award other than a stock option, stock appreciation right or other award for which the holder pays the intrinsic value and (ii) one share for each share of common stock delivered in settlement of all other awards. The maximum number of shares, which may be subject to awards granted under the 2009 Plan to any individual during any calendar year, may not exceed 3 million shares of our common stock (except in a participant’s initial year of hiring up to 4.5 million shares of our common stock may be granted).

In certain regions, shares are withheld on behalf of employees to satisfy statutory tax withholding requirements upon exercise or vesting of awards. The number of shares withheld is based upon the closing price of our common stock on the trading day of the applicable settlement date. The remaining shares are delivered to the recipient as shares of our common stock. The amount remitted to the tax authorities for the employees’ tax obligation is reflected as a financing activity on our consolidated statements of cash flows. Shares withheld by us as a result of the net settlement are not considered issued and outstanding and are added to the reserves of the 2009 Plan.

The total fair value of RSUs and PRSUs that vested during the years ended June 30, 2020, 2019 and 2018, was $56.8 million, $52.3 million and $34.6 million, respectively.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table summarizes the activity of RSUs, including PRSUs, during year ended June 30, 2020 (in thousands, except years and per share amounts):



	Restricted‎Stock‎Units		Weighted‎Average‎Grant-Date‎Fair Value		Weighted‎Average‎Remaining‎Contractual‎Term in Years
Outstanding at beginning of period		1,446	$	77.21	1.6
Granted		363		141.00
Vested*		(929)		61.13
Performance factor adjustment		294		-
Expired / cancelled		(37)		91.66
Forfeited		(5)		91.66
Outstanding at end of period		1,132	$	103.77	1.6

Includes 312 thousand shares netted for tax.

The following table summarizes option activity during the year ended June 30, 2020 (in thousands, except years and per share amounts):


	Options		Weighted‎Average‎Exercise‎Price		Weighted‎Average‎Remaining‎Contractual‎Term in Years
Outstanding at beginning of period		1,260	$	72.91	4.4
Granted		162		146.34
Exercised		(350)		57.17
Forfeited		(4)		110.19
Outstanding at end of period		1,068	$	89.05	4.4
Options exercisable at end of period		641	$	71.18	3.7
Options vested and expected to vest at end of period		1,046	$	88.32	4.4

The aggregate intrinsic value of options exercised during the fiscal years 2020, 2019 and 2018, was $31.2 million, $15.1 million and $27.5 million, respectively. As at June 30, 2020, the aggregate intrinsic value of options outstanding, exercisable, and vested and expected to vest were $110.0 million, $77.4 million and $108.5 million respectively.

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. Each offering period under the ESPP will be for a period of time determined by the board of directors’ compensation committee of no less than 3 months and no more than 27 months. The purchase price for our common stock under the ESPP will be the lower of 85% of the fair market value of our common stock on the date of grant or 85% of the fair market value of our common stock on the date of purchase. An individual participant cannot subscribe for more than $25,000 in common stock during any calendar year. At June 30, 2020, the number of shares remaining available for future issuance under the ESPP is 2.0 million shares.

During years ended June 30, 2020, 2019 and 2018, we issued 265,000, 285,000 and 302,000 shares to our employees in two offerings and we recognized $8.0 million, $6.4 million and $5.2 million, respectively, of stock compensation expense associated with the ESPP.

Stock–based Employee compensation. We measure the compensation expense of all stock-based awards at fair value on the grant date. We estimate the fair value of stock options and purchase rights granted under the ESPP using the Black-Scholes valuation model. The fair value of restricted stock units is equal to the market value of the underlying shares as determined at the grant date less the fair value of dividends that holders are not entitled to, during the vesting period. The fair value of performance restricted stock units is measured using a Monte-Carlo simulation valuation model. We recognize the fair value as compensation expense using the straight-line method over the service period for awards expected to vest.

We estimate the fair value of stock options granted under our stock option plans and purchase rights granted under the ESPP using the assumptions in the following tables. The risk-free interest rate is estimated using the U.S. Treasury yield curve and is based on the term of the award. The expected term of awards is estimated from the vesting period of the award, as well as historical exercise behavior, and represents the period of time the awards granted are expected to be outstanding. Expected volatility is estimated based upon the historical volatility of ResMed stock.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

We estimate the fair value of stock options granted under our stock option plans and purchase rights granted under the ESPP using the

following assumptions for the years ended June 30, 2020, 2019 and 2018:


	2020		2019		2018
Stock options:
Weighted average grant date fair value	$	32.14	$	21.92	$	16.68
Weighted average risk-free interest rate		1.58%		2.96%		2.08%
Expected life in years		4.9		4.9		4.9
Dividend yield		1.07%		1.34% - 1.46%		1.46% - 1.65%
Expected volatility		25%		23%		23%

ESPP purchase rights:
Weighted average grant date fair value	$	31.82	$	22.12	$	17.44
Weighted average risk-free interest rate		1.6%		2.4%		0.8%
Expected life in years		6 months		6 months		6 months
Dividend yield		0.98% - 1.42%		1.40% - 1.47%		1.47% - 1.92%
Expected volatility		23% - 60%		23%		23%

The following table summarizes the total stock-based compensation costs incurred and the associated tax benefit recognized during the years ended June 30, 2020, 2019 and 2018 (in thousands):


	2020		2019		2018
Cost of sales - capitalized as part of inventory	$	3,703	$	3,043	$	2,990
Selling, general and administrative expenses		47,265		42,700		39,754
Research and development expenses		6,591		6,330		5,668
Stock-based compensation costs		57,559		52,073		48,412
Tax benefit		(39,534)		(26,658)		(17,078)
Stock-based compensation costs, net of tax benefit	$	18,025	$	25,415	$	31,334

At June 30, 2020, there was $92.6 million in unrecognized compensation costs related to unvested stock-based compensation arrangements. This is expected to be recognized over a weighted average period of 2.2 years.

(12) Earnings Per Share

We compute basic earnings per share by dividing the net income available to common stockholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and restricted stock units. The weighted average number of outstanding stock options and restricted stock units not included in the computation of diluted earnings per share were 164,000, 200,000 and 153,000 for the years ended June 30, 2020, 2019 and 2018, respectively, as the effect would have been anti-dilutive.

Basic and diluted earnings per share for the years ended June 30, 2020, 2019 and 2018 are calculated as follows (in thousands except per share data):



	2020		2019		2018
Numerator:
Net income	$	621,674	$	404,592	$	315,588
Denominator:
Basic weighted-average common shares outstanding		144,338		143,111		142,764
Effect of dilutive securities:
Stock options and restricted stock units		1,314		1,373		1,223
Diluted weighted average shares		145,652		144,484		143,987
Basic earnings per share	$	4.31	$	2.83	$	2.21
Diluted earnings per share	$	4.27	$	2.80	$	2.19

(13) Other, net

Other, net, in the consolidated statements of income is comprised of the following for the years ended June 30, 2020, 2019 and 2018 (in thousands):


	2020		2019		2018
Gain (loss) on foreign currency transactions and hedging, net	$	1,331	$	1,712	$	(1,546)
Impairment of equity investments (note 6)		(14,519)		(15,007)		(11,593)
Other		1,031		2,569		4,597
	$	(12,157)	$	(10,726)	$	(8,542)

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(14) Income Taxes

Income before income taxes for the years ended June 30, 2020, 2019 and 2018, was taxed under the following jurisdictions (in thousands):


	2020		2019		2018
U.S.	$	60,548	$	(34,468)	$	42,627
Non-U.S.		672,540		553,315		478,685
	$	733,088	$	518,847	$	521,312

The provision for income taxes is presented below (in thousands):


		2020		2019		2018
Current:	Federal	$	9,790	$	28,658	$	128,971
	State		6,898		7,595		948
	Non-U.S.		124,602		127,540		68,858
			141,290		163,793		198,777
Deferred:	Federal		(13,000)		(30,456)		9,488
	State		(3,335)		(5,408)		(350)
	Non-U.S.		(13,541)		(13,674)		(2,191)
			(29,876)		(49,538)		6,947
Provision for income taxes		$	111,414	$	114,255	$	205,724

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 21% for the years ended June 30, 2020 and June 30, 2019 and 28% for the year ended June 30, 2018, to pretax income as a result of the following (in thousands):


	2020		2019		2018
Taxes computed at statutory U.S. rate	$	153,949	$	108,958	$	146,280
Increase (decrease) in income taxes resulting from:
Transition tax		-		6,038		126,753
State income taxes, net of U.S. tax benefit		3,563		2,186		2,427
Research and development credit		(13,595)		(12,953)		(4,089)
Change in statutory tax rates		-		-		16,685
Change in valuation allowance		7,216		(1,118)		(2,962)
Effect of non-U.S. tax rates		(20,935)		25,045		(70,250)
Foreign tax credits (1)		(4,026)		(7,806)		(6,473)
Stock-based compensation expense		(20,696)		(11,534)		(7,045)
Other		5,938		5,439		4,398
	$	111,414	$	114,255	$	205,724

(1) In fiscal year 2018, $75.5 million of the foreign tax credit is included as a reduction in the transition tax.

The components of our deferred tax assets and liabilities at June 30, 2020 and June 30, 2019, are as follows (in thousands):


	2020		2019
Deferred tax assets:
Employee liabilities	$	21,272	$	18,104
Tax credit carry overs		9,295		15,666
Inventories		9,129		4,905
Provision for warranties		3,585		3,551
Provision for doubtful debts		6,594		5,532
Net operating loss carryforwards		38,035		53,315
Capital loss carryover		10,864		6,640
Property, plant and equipment		(724)		3,002
Stock-based compensation expense		6,035		10,769
Deferred revenue		15,343		9,619
Research and development capitalization		39,195		17,910
Other		(2,282)		(332)
		156,341		148,681
Less valuation allowance		(16,891)		(11,644)
Deferred tax assets		139,450		137,037
Deferred tax liabilities:
Goodwill and other intangibles		(111,396)		(102,939)
Deferred tax liabilities		(111,396)		(102,939)
Net deferred tax asset	$	28,054	$	34,098

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

We reported the net deferred tax assets and liabilities in our consolidated balance sheets at June 30, 2020 and June 30, 2019, as follows (in thousands):


	2020		2019
Non-current deferred tax asset	$	41,065	$	45,478
Non-current deferred tax liability		(13,011)		(11,380)
Net deferred tax asset	$	28,054	$	34,098

As of June 30, 2020, we had $30.4 million of U.S. federal and state net operating loss carryforwards and $6.8 million of non-U.S. net operating loss carryforwards, which expire in various years beginning in 2020 or carry forward indefinitely.

The valuation allowance at June 30, 2020 relates to a provision for uncertainty of the utilization of net operating loss carryforwards of $1.6 million and capital loss and other items of $15.3 million. We believe that it is more likely than not that the benefits of deferred tax assets, net of any valuation allowance, will be realized.

A substantial portion of our manufacturing operations and administrative functions in Singapore operate under various tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2030. The end of certain tax holidays may be extended if specific conditions are met. The net impact of these tax holidays and tax incentive programs increased our net earnings by $43.8 million ($0.30 per diluted share) for the year ended June 30, 2020 and $20.3 million ($0.14 per diluted share) for the year ended June 30, 2019.

As a result of the U.S. Tax Act, we have treated all non-U.S. historical earnings as taxable, which resulted in additional tax expense of $126.9 million during the year ended June 30, 2018 and $6.0 million during the year ended June 30, 2019, which was payable over eight years. Therefore, future repatriation of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal tax if repatriated. The total amount of these undistributed earnings at June 30, 2020 amounted to approximately $3.0 billion. On June 14, 2019, the U.S. Treasury Department issued final and temporary regulations relating to the repatriation of non-U.S. earnings. As a result, in the event our non-U.S. earnings had not been permanently reinvested, deferred taxes of approximately $194.4 million in U.S. federal deferred tax and $5.2 million in U.S. state deferred taxes would have been recognized in the consolidated financial statements.

In accounting for uncertainty in income taxes, we recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (that is, a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for annual periods. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets. Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits on June 30, 2020, is not material to our results of operations, financial condition or cash flows, and if recognized, would not have a material impact on our effective tax rate.

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

In connection with the audit by the Australian Taxation Office (“ATO”) for the tax years 2009 to 2013, we received Notices of Amended Assessments in March 2018. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed or $75.9 million. As of June 30, 2020, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. The ATO is currently auditing tax years 2014 to 2018. We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Our income tax expense, short-term income taxes payable and long-term income taxes payable were impacted by charges associated with the U.S. Tax Act enacted on December 22, 2017, which resulted in additional income tax expense of $138.0 million during the year ended June 30, 2018. Specifically, the income tax expense includes the transition tax imposed on our accumulated foreign earnings, which resulted in additional income tax expense of $126.9 million for the year ended June 30, 2018. Additionally, it resulted in the write down in the carrying value of our net deferred tax assets due to the lower corporate tax rate and the reduction in the future value of deferred tax assets, which resulted in additional income tax expense of $11.1 million recorded in the year ended June 30, 2018. During the year ended June 30, 2019, we recorded additional tax expense of $6.0 million in transition tax imposed on our accumulated foreign earnings, which related to final treasury regulations issued and temporary guidance published during the year.

On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. Tax Act 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. During the year ended June 30, 2018, we recorded additional tax expense of $138.0 million relating to changes in U.S. tax legislation. During the year ended June 30, 2019, we recorded additional tax expense of $6.0 million in additional transition tax, which related to final treasury regulations issued and temporary guidance published during the year. 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.

(15) Segment Information

We 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 2 – significant accounting policies. 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, net interest expense and other, net. We neither discretely allocate assets to our operating segments, nor does our Chief Operating Decision Maker evaluate the operating segments using discrete asset information.

The table below presents a reconciliation of net revenues, depreciation and amortization and net operating profit by reportable segments for the years ended June 30, 2020, 2019 and 2018 (in thousands):


	2020		2019		2018
Revenue by segment
Total Sleep and Respiratory Care	$	2,602,381	$	2,330,783	$	2,183,193

Software as a Service		356,734		281,137		157,003
Deferred revenue fair value adjustment*		(2,102)		(5,348)		-
Total Software as a Service		354,632		275,789		157,003
Total	$	2,957,013	$	2,606,572	$	2,340,196

Depreciation and amortization by segment
Sleep and Respiratory Care	$	69,444	$	70,094	$	70,366
Software as a Service		3,850		3,250		809
Amortization of acquired intangible assets and corporate costs		81,556		77,451		48,785
Total	$	154,850	$	150,795	$	119,960

Net operating profit by segment
Sleep and Respiratory Care	$	934,697	$	766,068	$	656,311
Software as a Service		82,152		74,886		55,224
Total	$	1,016,849	$	840,954	$	711,535

Reconciling items
Corporate costs	$	125,993	$	124,682	$	104,889
Amortization of acquired intangible assets		79,695		74,938		46,383
Litigation settlement expenses		(600)		41,199		-
Restructuring expenses		-		9,401		18,432
Acquisition related expenses		-		6,123		-
Deferred revenue fair value adjustment*		2,102		5,348		-
Interest expense (income), net		39,356		33,857		11,977
Loss attributable to equity method investments		25,058		15,833		-
Other, net		12,157		10,726		8,542
Income before income taxes	$	733,088	$	518,847	$	521,312

The deferred revenue fair value adjustment is a purchase price accounting adjustment related to MatrixCare which was acquired on November 13, 2018.

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PART II	Item 8

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Notes to the Consolidated Financial Statements

The following table summarizes our net revenue disaggregated by segment, product and region for the years ended June 30, 2020, 2019 and 2018 (in thousands):


	2020		2019		2018
U.S., Canada and Latin America
Devices	$	792,766	$	743,066	$	689,603
Masks and other		779,561		677,430		600,480
Total Sleep and Respiratory Care	$	1,572,327	$	1,420,496	$	1,290,083
Software as a Service		354,632		275,789		157,003
Total	$	1,926,959	$	1,696,285	$	1,447,086

Combined Europe, Asia and other markets
Devices	$	715,056	$	618,525	$	613,978
Masks and other		314,998		291,762		279,133
Total Sleep and Respiratory Care	$	1,030,054	$	910,287	$	893,111

Global revenue
Devices	$	1,507,822	$	1,361,591	$	1,303,581
Masks and other		1,094,559		969,192		879,613
Total Sleep and Respiratory Care	$	2,602,381	$	2,330,783	$	2,183,194
Software as a Service		354,632		275,789		157,003
Total	$	2,957,013	$	2,606,572	$	2,340,197

Revenue information by geographic area for the years ended June 30, 2020, 2019 and 2018 is summarized below (in thousands):


	2020		2019		2018
United States	$	1,828,575	$	1,588,655	$	1,345,212
Rest of the World		1,128,438		1,017,917		994,984
Total	$	2,957,013	$	2,606,572	$	2,340,196

Long-lived assets of geographic areas are those assets used in our operations in each geographical area, and excludes goodwill, other intangible assets, and deferred tax assets. Long-lived assets by geographic area as of June 30, 2020, 2019 and 2018, is summarized below (in thousands):


	2020		2019		2018
United States	$	164,155	$	149,706	$	142,337
Australia		162,490		165,425		173,394
Singapore		39,977		19,465		17,657
Rest of the World		50,713		52,864		53,162
Total	$	417,335	$	387,460	$	386,550

(16) Employee Retirement Plans

We contribute to a number of employee retirement plans for the benefit of our employees. Details of the main plans are as follows:

Australia We contribute to defined contribution plans for each employee resident in Australia at the rate of approximately 9.5% of salaries. Employees may contribute additional funds to the plans. All Australian employees, after serving a qualifying period, are entitled to benefits on retirement, disability or death. Our total contributions to the plans for the years ended June 30, 2020, 2019 and 2018, were $9.5 million, $10.0 million and $10.5 million, respectively.

United States We sponsor a defined contribution plan available to substantially all domestic employees. Company contributions to this plan are based on a percentage of employee contributions to a maximum of 4.0% of the employee’s salary. Our total contributions to the plan were $9.3 million, $6.7 million and $5.0 million in fiscal 2020, 2019 and 2018, respectively.

Singapore We sponsor a defined contribution plan available to substantially all domestic employees. Company contributions to this plan are based on a percentage of employee contributions to a maximum of 17.0% of the employee’s salary. Our total contributions to the plan were $2.9 million, $2.6 million and $2.2 million in fiscal 2020, 2019 and 2018, respectively.

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(17) Legal Actions, Contingencies and Commitments

Litigation

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

Taxation Matters

As described in note 14 – Income Taxes, we received Notices of Amended Assessments from the ATO for the tax years 2009 to 2013. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed, or $75.9 million. As of June 30, 2020, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. The ATO is currently auditing tax years 2014 to 2018. We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position.

Contingent Obligations Under Recourse Provisions

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

The following table summarizes the amount of total receivables sold with recourse during the years ended June 30, 2020 and June 30, 2019 (in thousands):



	2020		2019
Full recourse	$	-	$	33,954
Limited recourse		154,529		98,123
Total	$	154,529	$	132,077

The following table summarizes the maximum exposure on outstanding receivables sold with recourse and provision for doubtful accounts as at June 30, 2020 and June 30, 2019 (in thousands):



	2020		2019
Full recourse	$	916	$	19,209
Limited recourse		21,890		10,241
Total	$	22,806	$	29,450
Contingent provision for receivables with recourse	$	(6,647)	$	(1,752)

Commitments

In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without penalty, primarily related to supply arrangements. Obligations under our purchase agreements at June 30, 2020 were as follows (in thousands):


			Fiscal Years Ending June 30
	Total		2021		2022		2023		2024		2025		Thereafter
Minimum purchase obligations	$	462,996	$	458,623	$	3,678	$	518	$	111	$	66	$	-

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(18) Business Combinations

Fiscal year ended June 30, 2020

On January 31, 2020, we completed the acquisition of 100% of the membership interests in SnapWorx, LLC (“SnapWorx”), a software company providing patient contact management and workflow optimization for the sleep apnea resupply market. This acquisition has been accounted for as a business combination using purchase accounting and the results of SnapWorx are included in our consolidated financial statements from the acquisition date. This acquisition is not considered a material business combination and accordingly pro forma information is not provided. The acquisition was funded by drawing on our existing revolving credit facility and through cash on-hand.

We completed our purchase price allocation during the quarter ending June 30, 2020, which was not materially different from the preliminary purchase price allocation. The cost of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of the acquisition is reflected in the Software as a Service segment and is deductible for tax purposes. It mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future.

During the year ended June 30, 2020 we did not record any material acquisition-related expenses.

Fiscal year ended June 30, 2019

MatrixCare

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

We completed the purchase price allocation in relation to this acquisition during the quarter ended December 31, 2019. The cost of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of the acquisition is reflected in the Software as a Service segment and is not deductible for tax purposes. It mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future. The fair values of assets acquired and liabilities assumed, and the estimated useful lives of intangible assets acquired are as follows (in thousands):


	Preliminary as of‎June 30, 2019		Adjustments		Final		Intangible‎assets -‎useful life
Current assets	$	50,325	$	-	$	50,325
Property, plant and equipment		4,401		-		4,401
Trade names		18,000		-		18,000		7 years
Developed technology		133,000		-		133,000		7 years
Customer relationships		114,000		2,000		116,000		15 years
Goodwill		517,995		5,664		523,659
Assets acquired	$	837,721	$	7,664	$	845,385
Current liabilities		(13,751)		(255)		(14,006)
Deferred revenue		(18,339)		(166)		(18,505)
Deferred tax liabilities		(41,570)		(7,243)		(48,813)
Debt assumed		(151,665)		-		(151,665)
Total liabilities assumed	$	(225,325)	$	(7,664)	$	(232,989)
Net assets acquired	$	612,396	$	-	$	612,396

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


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

During the year ended June 30, 2019, revenues of $79.2 million and losses from operations of $9.1 million related to MatrixCare were included in the consolidated statement of comprehensive income. The losses from operations for the year ended June 30, 2019 was negatively impacted by $19.0 million of amortization of acquired intangible assets and fair value purchase price adjustments relating to

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

deferred revenue of $5.3 million. Excluding the impact of these items, revenue for the year ended June 30, 2019 was $84.6 million and income from operations was $15.3 million.

The acquisition is considered a material business combination and accordingly unaudited pro forma information presented below for the year ended June 30, 2019, includes the effects of pro forma adjustments as if the acquisition of MatrixCare occurred on July 1, 2017. The pro forma results were prepared using the acquisition method of accounting and combine our historical results and MatrixCare’s for the years ended June 30, 2019 and June 30, 2018, including the effects of the business combination, primarily amortization expense related to the fair value of identifiable intangible assets acquired, interest expense associated with the financing obtained by us in connection with the acquisition, and the elimination of incurred acquisition-related costs.

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. The following table summarized unaudited pro forma consolidated results for the years ended June 30, 2019 and 2018 (in thousands, except per share information):


	2019		2018
Revenue	$	2,652,059	$	2,457,242
Net income	$	446,721	$	295,628
Basic earnings per share	$	3.12	$	2.07
Diluted earnings per share	$	3.09	$	2.05

The unaudited pro forma consolidated results for the years ended June 30, 2019 and June 30, 2018 reflect primarily the following pro forma pre-tax adjustments:

Net amortization expense related to the fair value of identifiable intangible assets acquired of $0.6 million and $8.3 million for the years ended June 30, 2019 and June 30, 2018, respectively.

Net interest expense associated with debt that was issued to finance the acquisition of $2.6 million and $12.7 million for the years ended June 30, 2019 and June 30, 2018, respectively.

Elimination of pre-tax acquisition-related costs incurred by ResMed and MatrixCare of $3.7 million and $16.7 million, respectively, for the year ended June 30, 2019.

Net income tax expense of $1.8 million and $3.2 million for the years ended June 30, 2019 and June 30, 2018, respectively.

Other acquisitions

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

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

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

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

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

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

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

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PART II	Item 8

RESMED INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

We have completed the purchase price allocation in relation to all of these acquisitions. 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 acquisitions during the year ended June 30, 2019, excluding MatrixCare, and the estimated useful lives of intangible assets acquired are as follows (in thousands):


	Final		Intangible‎assets -‎useful life
Current assets	$	31,648
Property, plant and equipment		2,290
Deferred tax assets		5,211
Trade names		7,828		10 years
Non-compete		1,000		3 years
Developed technology		48,280		5 to 6 years
Customer relationships		53,712		5 to 15 years
Goodwill		287,469
Assets acquired	$	437,438
Current liabilities		(7,648)
Deferred revenue		(3,619)
Deferred tax liabilities		(2,367)
Debt assumed		(35,104)
Total liabilities assumed	$	(48,738)
Net assets acquired	$	388,700

During the year ended June 30, 2019, we recorded acquisition-related expenses of $6.1 million.

(19) Restructuring Expenses

During the year ended June 30, 2020, we did not incur material restructuring expenses.

During the year ended June 30, 2019, we incurred restructuring expenses of $9.4 million associated with the reorganization, rationalization and relocation of some of our research and development and SaaS operations including the closure of our German research and development site. We recorded the full amount of $9.4 million during the year ended June 30, 2019, within our operating expenses, which was separately disclosed as restructuring expenses and had $5.4 million remaining in our accruals at year end, which was paid during the year ended June 30, 2020. The restructuring expenses consisted primarily of severance payments to employees and contract exit costs associated with several impacted sites.

During the year ended June 30, 2018, we incurred restructuring expenses within the Sleep and Respiratory Care segment of $18.4 million associated with a global strategic workforce planning review, which resulted in a reduction in headcount across most of our functions and locations and closure of our Paris site. We recorded the full amount of $18.4 million during the year ended June 30, 2018, within our operating expenses which was separately disclosed as restructuring expenses. We had $1.5 million remaining in our employee related costs accrual at June 30, 2018, which was paid during the year ended June 30, 2019. The restructuring expenses consisted primarily of severance payments to employees and the remaining expense relating to legal and consulting services associated with the completion of the employee severances and contract exit costs associated with the Paris site.

(20) Litigation Settlement Expenses

We did not recognize any material litigation settlement expenses during the years ended June 30, 2020 and 2018.

During the year ended June 30, 2019 we recognized litigation settlement expenses of $41.2 million associated with a tentative agreement with the United States Department of Justice to civilly resolve the investigation of certain marketing practices. We finalized the settlement in December 2019, and announced it in January 2020 on terms that were consistent with our prior reserve. The settlement amount consisted of the payment to the United States and to various states that joined the action, as well as attorneys’ fees and other costs to the private litigants that filed the suits that the Department of Justice pursued. We also entered into a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services with accompanying oversight of our sales and marketing practices in the United States for five years.

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PART II	Item 8

SCHEDULE II

RESMED INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

June 30, 2020, 2019 and 2018

(in thousands)


	Balance at‎Beginning‎of Period		Charged to costs and expenses		Other‎(deductions)		Balance at‎End of‎Period
Year ended June 30, 2020
Applied against asset account
Allowance for doubtful accounts	$	25,171	$	18,283	$	(14,946)	$	28,508
Year ended June 30, 2019
Applied against asset account
Allowance for doubtful accounts	$	19,258	$	12,379	$	(6,466)	$	25,171
Year ended June 30, 2018
Applied against asset account
Allowance for doubtful accounts	$	11,150	$	15,189	$	(7,081)	$	19,258

See accompanying report of independent registered public accounting firm.

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PART II	Items 9 – 9B

RESMED INC. AND SUBSIDIARIES

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET AND BUSINESS RISKS · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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