What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-08-11 compared with 2022-08-12 · 317 added, 185 removed, 996 unchanged (34% of the section changed)

4 unchanged sentences

subsidiaries are maintained in their respective local currencies.

We transact business in various foreign currencies, including a number of major European currencies as well as the Australian dollar.

We have significant foreign currency exposure through both our Australian and Singapore 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 goal of this hedging program is to economically manage the financial impact of foreign currency exposures predominantly denominated in euros, Australian dollars and Singapore dollars.

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 our Australian and Singapore manufacturing activities and our international sales operations.

Net Investment and Fair Value Hedging

On November 17, 2022, we executed foreign cross-currency swaps as net investment hedges and fair value hedges in designated hedging relationships with either the foreign denominated net asset balances or the foreign denominated intercompany loan as the hedged items.

All derivatives are recorded at fair value as either an asset or liability.

Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the hedged item.

The purpose of the cross-currency swaps for the fair value hedge is to mitigate foreign currency risk associated with changes in spot rates on foreign denominated intercompany debt between USD and EUR.

For these hedges, we excluded certain components from the assessment of hedge effectiveness that are not related to spot rates.

For fair value hedges that qualify and are designated for hedge accounting, the change in fair value of the derivative is recorded in the same line item as the hedged item, Other, net, in the condensed consolidated statement of income.

The initial fair value of hedge components excluded from the assessment of effectiveness is recognized in the statement of operations under a systematic and rational method over the life of the hedging instrument and is presented in interest (expense) income, net.

Any difference between the change in the fair value of the hedge components excluded from the assessment of effectiveness and the amounts recognized in earnings is recorded as a component of other comprehensive income.

The purpose of the cross-currency swaps for the net investment hedge is to mitigate foreign currency risk associated with changes in spot rates on the net asset balances of our foreign functional subsidiaries.

For net investment hedges that qualify and are designated for hedge accounting, the change in fair value of the derivative is recorded in cumulative translation adjustment within other comprehensive loss and reclassified into earnings when the hedged net investment is either sold or substantially liquidated.

The initial fair value of components excluded from the assessment of hedge effectiveness will be recognized in interest (expense) income, net.

The notional value of outstanding foreign cross-currency swaps was $1,046.6 million at June 30, 2023.

These contracts mature at various dates prior to December 31, 2029.

Non-Designated Hedges

We transact business in various foreign currencies, including a number of major European currencies as well as the Australian and Singapore dollars.

We have foreign currency exposure through both our Australian and Singapore manufacturing activities, and international sales operations.

We have established a foreign currency hedging program using purchased foreign currency call options, collars 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 purpose of this hedging program is to economically manage the financial impact of foreign currency exposures denominated mainly in Euros, and 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.

We do not enter into financial instruments for trading or speculative purposes.

The foreign currency derivatives portfolio is recorded in the consolidated balance sheets at fair value and included in Other assets current, Other assets non-current, Accrued expenses and Other liabilities non-current.

All movements in the fair value of the foreign currency derivatives are recorded within Other income, net, on our consolidated statements of income.

We do not designate these foreign currency contracts as hedges.

All movements in the fair value of the foreign currency instruments are recorded within other, net in our condensed consolidated statements of income.

The notional value of the outstanding non-designated hedges was $954.7 million and $602.0 million at June 30, 2023 and June 30, 2022, respectively.

These contracts mature at various dates prior to December 15, 2024.

PART II Item 7A

AND SUBSIDIARIES

Quantitative and Qualitative Disclosures About Market and Business Risks

Fair Values of Derivative Instruments

The table below provides information (in U.S.

14 unchanged sentences

Net Total 34,049 26,252 — 1,323

The table below provides information about our foreign currency derivative financial instruments and presents the information in U.S.

dollar equivalents.

The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options, collars and forward contracts held at June 30, 2022.

The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our

PART II Item 7A

1 unchanged sentence

Quantitative and Qualitative Disclosures About Market and Business Risks

foreign currency derivative financial instruments.

These notional amounts generally are used to calculate payments to be exchanged under the options contracts (in thousands, except exchange rates):

The table below provides information about our material foreign currency derivative financial instruments and presents the information in U.S.

dollar equivalents.

The table summarizes information on instruments and transactions that are sensitive to foreign currency exchange rates, including foreign currency call options, collars, forward contracts and cross-currency swaps held at June 30, 2023.

The table presents the notional amounts and weighted average exchange rates by contractual maturity dates for our foreign currency derivative financial instruments, including the forward contracts used to hedge our foreign currency denominated assets and liabilities.

These notional amounts generally are used to calculate payments to be exchanged under the contracts (in thousands, except exchange rates).

Fair Value Assets / (Liabilities)

Foreign Exchange Contracts Year 1 Year 2 Total June 30,

Total June 30,

2023 June 30,

Contract amount 335,000 (1,064) (190)

contractual exchange rate USD 1 =

AUD 0.6928 USD 1 =

contractual exchange rate AUD 1 = USD 0.6708

Contract amount 212,896 (915) (413)

contractual exchange rate AUD 1 =

EUR 0.6867 AUD 1 =

EUR 0.6800 AUD 1 =

contractual exchange rate AUD 1 = EUR 0.6419

Contract amount 125,554 (1,760) 71

contractual exchange rate SGD 1 =

Euro 0.7117 — SGD 1 =

contractual exchange rate SGD 1 = Euro 0.7022

Contract amount 240,000 (4,133) (1,172)

contractual exchange rate SGD 1 =

USD 0.7216 SGD 1 =

contractual exchange rate SGD 1 = USD 0.7566

Contract amount 11,029 (31) (37)

contractual exchange rate AUD 1 =

CNY 4.6449 AUD 1 =

contractual exchange rate AUD 1 = CNY 4.7507

Contract amount 1,046,572 (60,546) —

contractual exchange rate USD 1 =

contractual exchange rate USD 1 = EUR 1.0406

Contract amount 30,219 156 (46)

contractual exchange rate USD 1 =

CAD 1.2902 USD 1 =

contractual exchange rate CAD 1 = USD 0.7594

Interest Rate Risk

38 unchanged sentences

Gross profit 506,289 504,318 491,197 522,506 2,024,311

Net income (loss) 178,372 179,514 (78,481) 195,098 474,505

Basic earnings (loss) per share 1.23 1.24 (0.54) 1.34 3.27

Diluted earnings (loss) per share 1.22 1.23 (0.54) 1.33 3.24

Net income 203,613 201,751 179,012 195,061 779,437

Basic earnings per share 1.40 1.38 1.22 1.33 5.34

Diluted earnings per share 1.39 1.37 1.22 1.33 5.30

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.

20 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates 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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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

2 unchanged sentences

In the current year, the Company performed qualitative, 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.

After completing Step 0, the Company determined that goodwill was not more likely than not impaired and, therefore, no Step 1, or quantitative assessment, was necessary.

After completing Step 0, the Company determined

PART II Item 8

AND SUBSIDIARIES

that goodwill was not more likely than not impaired and, therefore, no Step 1, or quantitative assessment, was necessary.

We identified the evaluation of goodwill triggering events as a critical audit matter.

8 unchanged sentences

• 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 acquisition-date fair value of intangible assets

As discussed in Note 17 to the consolidated financial statements, the Company acquired MediFox-Dan Investment GmbH and its subsidiaries (MEDIFOX DAN) on November 21, 2022, for a total purchase price of $997.5 million, which is net of cash acquired and debt assumed.

In connection with the transaction, the Company recorded customer relationships, developed technology, and trade names intangible assets (collectively, the intangible assets).

The acquisition-date fair value for the intangible assets was $250.6 million as of June 30, 2023.

We identified the evaluation of the acquisition-date fair value of certain intangible assets acquired in the MEDIFOX DAN transaction as a critical audit matter.

Due to limited observable market information, a high degree of subjective auditor judgment was required to evaluate key assumptions used to determine the fair value of the intangible assets, specifically the forecasted revenue growth rates, forecasted earnings before interest, tax, depreciation, and amortization (EBITDA) margins, and weighted-average cost of capital (WACC), including the discount rate.

In addition, valuation professionals with specialized skills and knowledge were required to assist in performing certain audit procedures related to evaluating the WACC and discount rate.

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 Company’s acquisition-date valuation process, including controls over the development of the key assumptions.

We evaluated the Company’s forecasted revenue growth rates by comparing forecasted growth assumptions to those of MEDIFOX DAN peers and industry reports, as well as historical results of MEDIFOX DAN.

We assessed the Company’s ability to accurately forecast by comparing the Company’s forecasted revenue growth rates and EBITDA margins of the acquired business to actual results subsequent to the acquisition date.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable peers

• assessing the Company’s WACC by comparing it against an independently developed WACC based on inputs obtained through published surveys and studies.

PART II Item 8

AND SUBSIDIARIES

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

75 unchanged sentences

Restructuring expenses (note 18) 9,177 — 8,673

Litigation settlement expenses — — ( 600 )

Acquisition related expenses 10,949 1,864 —

Total operating expenses 1,223,791 1,024,025 935,422

4 unchanged sentences

Gain (loss) on equity investments (note 5) 9,922 ( 12,202 ) 14,515

Gain on insurance recoveries 20,227 — —

Other, net ( 5,712 ) 3,197 301

17 unchanged sentences

Other comprehensive income (loss):

Unrealized losses on designated hedging instruments ( 35,596 ) — —

Foreign currency translation (loss) gain adjustments 75,815 ( 119,260 ) 90,495

20 unchanged sentences

Net income — — — — — 474,505 — 474,505

Cumulative effect adjustment from adoption of the credit loss standard, net of tax — — — — — ( 1,143 ) — ( 1,143 )

Dividends declared ($ 1.56 per common share)

8 unchanged sentences

Net income — — — — — 779,437 — 779,437

Cumulative effect adjustment from adoption of the credit loss standard, net of tax — — — — — ( 1,143 ) — ( 1,143 )

Dividends declared ($ 1.68 per common share)

25 unchanged sentences

Stock-based compensation costs (note 10) 71,142 65,257 63,927

Loss attributable to equity method investments (note 6) 8,486 11,205 25,058

Loss attributable to equity method investments, net of dividends received (note 5) 10,138 8,486 11,205

(Gain) loss on equity investments (note 5) ( 9,922 ) 12,202 ( 14,515 )

Restructuring expenses (note 18) 9,177 — 8,673

Changes in fair value of business combination contingent consideration — — ( 7 )

Gain on insurance recoveries ( 20,227 ) — —

Changes in operating assets and liabilities:

10 unchanged sentences

Proceeds from sale of investment (note 5) 3,937 6,802 —

(Payments) / proceeds on maturity of foreign currency contracts ( 17,176 ) 19,219 ( 14,397 )

Proceeds / (payments) on maturity of foreign currency contracts 15,196 ( 17,176 ) 19,219

Net cash used in investing activities ( 1,159,845 ) ( 229,918 ) ( 158,462 )

6 unchanged sentences

Dividends paid ( 258,276 ) ( 245,341 ) ( 226,713 )

Net cash used in financing activities ( 128,363 ) ( 764,632 ) ( 317,286 )

Net cash provided by (used in) financing activities 422,874 ( 128,363 ) ( 764,632 )

Effect of exchange rate changes on cash ( 2,147 ) ( 14,434 ) 18,498

Net increase (decrease) in cash and cash equivalents ( 21,568 ) ( 167,878 ) 316,028

Net decrease in cash and cash equivalents ( 45,819 ) ( 21,568 ) ( 167,878 )

Cash and cash equivalents at beginning of period 273,710 295,278 463,156

19 unchanged sentences

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.

We also operate a Software as a Service (“SaaS”) business in the United States and Germany 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

1 unchanged sentence

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.

All significant intercompany transactions and balances have been eliminated in consolidation.

The preparation of financial statements in conformity with U.S.

4 unchanged sentences

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.

Some contracts include additional performance obligations such as the provision of extended warranties and provision of 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.

5 unchanged sentences

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.

For our SaaS business, revenue associated with cloud-hosted 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.

20 unchanged sentences

rebates, discounts, free goods) and returns offered to our 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.

When we give customers the right to return eligible products and receive credit, returns are estimated based on an analysis of our historical experience.

However, returns of products, excluding warranty-related returns, have historically been 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.

3 unchanged sentences

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.

For rebates measured over annual periods, we update our estimates each quarter based on actual sales results and updated forecasts for the remaining rebate periods.

We participate in programs where we issue credits to our Sleep and Respiratory Care distributors when they are required to sell our products below negotiated list prices if we have preexisting contracts with the distributors' customers.

72 unchanged sentences

We assess non-marketable equity securities at least quarterly for impairment and consider qualitative and quantitative factors including the investee's financial metrics, product and commercial outlook and cash usage.

All gains and losses on marketable and non-marketable equity securities, realized and unrealized, are recognized in gain (loss) on equity investments as a component of other income (loss), net on the consolidated statements of operations.

PART II Item 8

2 unchanged sentences

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 as a component of other income (loss), net on the consolidated statements of operations.

Under this method, we record our share of gains or losses attributable to equity method investments as a component of other income (loss), net on the consolidated statements of income.

(k) Research and Development

11 unchanged sentences

(m) Foreign Exchange Risk Management

We may use derivative financial instruments, specifically foreign cross-currency swaps, purchased foreign currency call options, collars and forward contracts to mitigate exposure from certain foreign currency risk.

No derivatives are used for trading or speculative purposes.

We do not require or are not required to pledge collateral for the derivative instruments.

Fair Value and Net Investment Hedging

All derivatives are recorded at fair value as either an asset or liability.

Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the hedged item.

For these hedges, we excluded certain components from the assessment of hedge effectiveness that are not related to spot rates.

For fair value hedges that qualify and are designated for hedge accounting, the change in fair value of the derivative is recorded in the same line item as the hedged item, other, net, in the consolidated statement of income.

The initial fair value of hedge components excluded from the assessment of effectiveness is recognized in the statement of income under a systematic and rational method over the life of the hedging instrument and is presented in interest (expense) income, net.

The initial fair value of components excluded from the assessment of hedge effectiveness will be recognized in interest (expense) income, net.

The notional value of outstanding foreign cross-currency swaps was $ 1,046.6 million at June 30, 2023.

These contracts mature at various dates prior to December 31, 2029.

Non-Designated Hedges

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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.

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.

We have foreign currency exposure through both our Australian and Singapore manufacturing activities, and international sales operations.

The terms of such foreign currency hedging contracts generally do not exceed two years.

The purpose of this hedging program is to economically manage the financial impact of foreign currency exposures denominated mainly in Euros, and 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.

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 $ 602.0 million and $ 556.4 million at June 30, 2022 and June 30, 2021, respectively, to hedge foreign currency fluctuations.

These contracts mature at various dates prior to June 30, 2024.

All movements in the fair value of the foreign currency instruments are recorded within other, net in our consolidated statements of income.

The notional value of the outstanding non-designated hedges was $ 954.7 million and $ 602.0 million at June 30, 2023 and June 30, 2022, respectively.

These contracts mature at various dates prior to December 15, 2024.

We classified the fair values of all hedging instruments as Level 2 measurements within the fair value hierarchy.

We are exposed to credit-related losses in the event of non-performance by counter parties to financial instruments.

We minimize counterparty credit risk by entering into derivative transactions with major financial institutions and we do not expect material losses as a result of default by our counterparties.

(n) Income Taxes

5 unchanged sentences

Any interest and penalties related to uncertain tax positions are reflected in income tax expense.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(o) Provision for Warranty

9 unchanged sentences

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.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(q) Impairment of Long-Lived Assets

9 unchanged sentences

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

Recently adopted accounting pronouncements

2021-08 “Business Combinations:

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”

In October 2021, the FASB issued ASU No.

2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (Topic 805), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts.

This approach differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value.

The guidance is effective for us beginning in the first quarter of the year ending June 30, 2024 and early adoption is permitted.

We elected to early adopt this standard in the second quarter of our fiscal year ending June 30, 2022.

Adoption of ASU 2021-08 did not have a material impact on our consolidated financial statements.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(3) Supplemental Balance Sheet Information

22 unchanged sentences

Property, plant and equipment, net $ 537,856 $ 498,181

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(4) Goodwill and Other Intangible Assets, net

6 unchanged sentences

Balance at the end of the period $ 670,120 $ 2,100,179 $ 2,770,299

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Other Intangible Assets

25 unchanged sentences

Total $ 146,537 $ 58,375

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table shows a reconciliation of the changes in our equity investments for the year ended June 30, 2023 (in thousands):

1 unchanged sentence

Balance at the beginning of the period $ 39,290 $ 9,167 $ 9,918 $ 58,375

Net additions (reductions) to investments (1)

Additions to investments (1)

21,738 4,991 62,733 89,462

Observable price adjustments on non-marketable equity securities 12,612 — — 12,612

Unrealized losses on marketable equity securities — ( 18,341 ) — ( 18,341 )

Realized gains on marketable and non-marketable equity securities 2,355 1,626 — 3,981

Impairment of investments ( 4,892 ) — — ( 4,892 )

Realized gains on marketable and non-marketable equity securities 3,937 — — 3,937

Proceeds from exits of investments ( 3,937 ) — — ( 3,937 )

Unrealized losses on marketable equity securities — ( 1,735 ) — ( 1,735 )

Loss attributable to equity method investments — — ( 7,265 ) ( 7,265 )

Dividends received — — ( 2,873 ) ( 2,873 )

Foreign currency translation adjustments — — 2,853 2,853

Carrying value at the end of the period $ 68,748 $ 12,423 $ 65,366 $ 146,537

(1) Net additions (reductions) to investments includes additions from purchases, reductions due to exits of securities, or reclassifications due to our acquisition of an investee in which we held a prior equity interest.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(1) Includes additions from purchases and an equity method investment acquired and measured at fair value via our acquisition of MEDIFOX DAN.

Refer to Note 17 herein.

The following table shows a reconciliation of the changes in our equity investments for the year ended June 30, 2022 (in thousands):

1 unchanged sentence

Balance at the beginning of the period $ 23,002 $ 29,084 $ 17,154 $ 69,240

Additions to investments 2,538 5,000 14,250 21,788

Observable price adjustments on non-marketable equity securities 1,000 — — 1,000

Unrealized gains on marketable equity securities — 13,515 — 13,515

Reclassifications (2)

Net additions (reductions) to investments (2)

11,775 ( 3,202 ) 1,250 9,823

Observable price adjustments on non-marketable equity securities 5,367 — — 5,367

Impairment of investments ( 3,209 ) — — ( 3,209 )

Realized gains on marketable and non-marketable equity securities 2,355 1,626 — 3,981

Unrealized losses on marketable equity securities — ( 18,341 ) — ( 18,341 )

Loss attributable to equity method investments — — ( 8,486 ) ( 8,486 )

Carrying value at the end of the period $ 39,290 $ 9,167 $ 9,918 $ 58,375

(2) During the year ended June 30, 2021, one of our investments, which was previously accounted for under the measurement alternative, completed its initial public offering which resulted in a change of accounting methodology to fair value.

Net unrealized gains and losses recognized in the years ended June 30, 2022, 2021 and 2020 for equity investments in non-marketable and marketable securities still held as of those respective dates were a loss of $ 16.2 million, a gain of $ 14.5 million, and a loss of $ 14.5 million, respectively.

(2) Net additions (reductions) to investments includes additions from purchases, reductions due to exits of securities, or reclassifications due to our acquisition of an investee in which we held a prior equity interest.

Net unrealized gains and losses recognized in the years ended June 30, 2023, 2022 and 2021 for equity investments in non-marketable and marketable securities still held as of those respective dates were a gain of $ 6.0 million, a loss of $ 16.2 million, and a gain of $ 14.5 million, respectively.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(6) Accrued Expenses

5 unchanged sentences

Promotional and marketing 9,366 6,485

Foreign currency hedging instruments 9,558 1,947

Accrued interest 9,375 7,983

11 unchanged sentences

Balance at the end of the period $ 27,621 $ 25,889

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Debt at June 30, 2023 and June 30, 2022 consists of the following (in thousands):

8 unchanged sentences

On June 29, 2022, we entered into a second amended and restated credit agreement (the “Revolving Credit Agreement”), as borrower, with lenders MUFG Union Bank, N.A., as administrative agent, joint lead arranger, sole book runner, swing line lender and letter of credit issuer, Westpac Banking Corporation, as syndication agent and joint lead arranger, HSBC Bank USA, National Association, as syndication agent and joint lead arranger, and Wells Fargo Bank, National Association, as documentation agent.

The Revolving Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $ 1,500.0 million, with an uncommitted option to increase the revolving credit facility by an additional amount equal to the greater of $ 1,000.0 million and 1.00 times the EBITDA (as defined in the Revolving Credit Agreement) for the trailing twelve-month measurement period.

The Revolving Credit Facility amends and restates that certain Amended and Restated Credit Agreement, dated as of April 17, 2018, among ResMed, MUFG Union Bank, N.A., Westpac Banking Corporation and the lenders party thereto which provided ResMed with a senior unsecured revolving credit facility in an aggregate amount of $ 1,600.0 million with an uncommitted option to increase such facility by an additional $ 300.0 million.

The Revolving Credit Agreement, among other things, provided a senior unsecured revolving credit facility of $ 1,500.0 million, with an uncommitted option to increase the revolving credit facility by an additional amount equal to the greater of $ 1,000.0 million or 1.0 times the EBITDA (as defined in the Revolving Credit Agreement) for the trailing twelve-month measurement period.

The Revolving Credit Facility amends and restates that certain Amended and

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Restated Credit Agreement, dated as of April 17, 2018, among ResMed, MUFG Union Bank, N.A., Westpac Banking Corporation and the lenders party thereto.

Additionally, on June 29, 2022, ResMed Pty Limited entered into a Second Amendment to the Syndicated Facility Agreement and First Amendment to Unconditional Guaranty 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, which amends that certain Syndicated Facility Agreement dated as of April 17, 2018.

10 unchanged sentences

At June 30, 2023, the interest rate that was being charged on the outstanding principal amounts was 6.07 %.

An applicable commitment fee of 0.075 % to 0.150 % (depending on the then-applicable leverage ratio) applies

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

on the unused portion of the revolving credit facility.

As of June 30, 2022, we had $ 1.4 billion available for draw down under the revolving credit facility.

An applicable commitment fee of 0.075 % to 0.150 % (depending on the then-applicable leverage ratio) applies on the unused portion of the revolving credit facility.

As of June 30, 2023, we had $ 745.0 million 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 Adjusted Term SOFR plus the spreads described above, its carrying amount is equivalent to its fair value as at June 30, 2023 and June 30, 2022, which was $ 945.0 million and $ 280.0 million, respectively.

Quoted market prices in active markets for identical liabilities based inputs (Level 2) were used to estimate fair value.

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”).

5 unchanged sentences

This ratio is calculated at the end of each reporting period for which the Note Purchase Agreement requires us to deliver financial statements, using the results of the 12 consecutive month period ending with such reporting period.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of June 30, 2022, the Senior Notes have a carrying amount of $ 500.0 million, excluding deferred borrowing costs, and an estimated fair value of $ 477.7 million.

As of June 30, 2023 and June 30, 2022, the Senior Notes had a carrying amount of $ 500.0 million, excluding deferred borrowing costs, and an estimated fair value of $ 462.2 million and $ 477.7 million, respectively.

Quoted market prices in active markets for identical liabilities based inputs (Level 2) were used to estimate fair value.

2 unchanged sentences

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.

Right of Use, or 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.

7 unchanged sentences

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 13 years, some of which include options to extend or terminate the leases.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Operating lease costs for the years ended June 30, 2023, 2022 and 2021 were $ 33.6 million, $ 35.3 million and $ 35.5 million, respectively.

5 unchanged sentences

Total lease liabilities $ 138,772

As of June 30, 2022, we had additional operating lease commitments of $ 0.7 million for office space that have not yet commenced.

These leases will commence during the year ended June 30, 2023 with lease terms of 1 year to 5 years.

As of June 30, 2023, we had additional operating lease commitments of $ 57.3 million for manufacturing and office space that have not yet commenced.

These leases will commence during the years ended June 30, 2024 and June 30, 2025 with lease terms of 10 years to 15 years.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The supplemental information related to operating leases for the years ended June 30, 2023 and June 30, 2022 was as follows (in thousands):

8 unchanged sentences

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.

Contract terms for operating lease contracts 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 years ended June 30, 2022, 2021 and 2020 were as follows (in thousands):

2022 2021 2020

Sales-type lease revenue $ 9,342 $ 9,758 $ 13,457

Operating lease revenue 90,076 93,431 87,874

Total lease revenue $ 99,418 $ 103,189 $ 101,331

Our net investment in sales-type leases were classified in the consolidated balance sheets as of June 30, 2022 and June 30, 2021 as follows (in thousands):

Accounts receivable, net $ 6,473 $ 8,026

Prepaid taxes and other non-current assets 7,635 6,214

Total $ 14,108 $ 14,240

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Maturities of sales-type leases as of June 30, 2022 were as follows (in thousands):

Total 2023 2024 2025 2026 2027 Thereafter

Remaining lease payments $ 16,068 $ 6,757 $ 4,207 $ 2,057 $ 1,915 $ 1,132 —

imputed interest ( 1,960 )

Present value of remaining lease payments $ 14,108

Operating lease revenue was $ 88.6 million, $ 90.1 million and $ 93.4 million for the years ended June 30, 2023, 2022 and 2021, respectively.

(10) Stockholders’ Equity

17 unchanged sentences

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.

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 .

The maximum amounts to be issued under the awards range from 200 % to 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 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

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

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.

5 unchanged sentences

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).

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

In certain regions, shares are withheld on behalf of employees to satisfy statutory tax withholding requirements upon exercise or vesting of awards.

15 unchanged sentences

* Includes 139 thousand shares netted for tax.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

The following table summarizes option activity during the year ended June 30, 2023 (in thousands, except years and per share amounts):

17 unchanged sentences

At June 30, 2023, the number of shares remaining available for future issuance under the ESPP is 1.3 million shares.

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

During years ended June 30, 2023, 2022 and 2021, we issued 220,000 , 216,000 and 229,000 shares to our employees in two offerings and we recognized $ 11.5 million, $ 11.0 million and $ 10.9 million, respectively, of stock compensation expense associated with the ESPP.

10 unchanged sentences

Expected volatility is estimated based upon the historical volatility of ResMed stock.

PART II Item 8

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, 2023, 2022 and 2021:

26 unchanged sentences

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

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 272,104 , 67,000 and 141,000 for the years ended June 30, 2023, 2022 and 2021, respectively, as the effect would have been anti-dilutive.

PART II Item 8

1 unchanged sentence

Notes to the Consolidated Financial Statements

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 67,000 , 141,000 and 164,000 for the years ended June 30, 2022, 2021 and 2020, respectively, as the effect would have been anti-dilutive.

Basic and diluted earnings per share for the years ended June 30, 2023, 2022 and 2021 are calculated as follows (in thousands except per share data):

61 unchanged sentences

Lease liabilities 21,347 21,702

Hedging contracts 27,666 —

Other 454 ( 3,395 )

26 unchanged sentences

The total amount of these undistributed earnings at June 30, 2023 amounted to approximately $ 4.2 billion.

On June 14, 2019, the U.S.

Treasury Department issued final and temporary regulations relating to the repatriation of non-U.S.

As a result, in the event our non-U.S.

In the event our non-U.S.

earnings had not been permanently reinvested, approximately $ 5.5 million in U.S.

federal deferred taxes and $ 5.2 million in U.S.

state deferred taxes would have been recognized in the consolidated financial statements.

Tax Act also introduced U.S.

taxation on certain global intangible low-taxed income (“GILTI”).

We have elected to account for tax expense attributable to GILTI tax as a period cost when incurred.

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.

9 unchanged sentences

The ATO settlement fully resolved the dispute for all prior years, with no admission of liability and provides clarity in relation to certain future taxation principles.

The final net impact of the ATO settlement was $ 238.7 million, which represents a gross amount of $ 381.7 million, including interest and penalties of $ 48.1 million, and adjustments for credits and deductions of $ 143.0 million.

The final net impact of the ATO settlement was recorded during the years ended June 30, 2021 and 2022 in the amount of $ 238.7 million, which represents a gross amount of $ 381.7 million, including interest and penalties of $ 48.1 million, and adjustments for credits and deductions of $ 143.0 million.

As a result of the ATO settlement and due to movements in foreign currencies, we recorded a benefit of $ 14.1 million within other comprehensive income, and a $ 4.1 million reduction of tax credits, which was recorded to income tax expense.

11 unchanged sentences

Certain items are maintained at the corporate level and are not allocated to the segments.

The non-allocated items include corporate headquarters costs including stock-based compensation, amortization expense of acquired intangibles, restructuring expenses, litigation settlement expenses, deferred revenue fair value adjustment, net interest expense (income), loss attributable to equity method investments, gains and losses on equity investments, and other, net.

The non-allocated items include corporate headquarters costs, stock-based compensation, amortization expense from acquired intangibles, acquisition related expenses, net interest expense (income), loss attributable to equity method investments, gains and losses on equity investments, 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.

Additionally, effective in the first quarter of fiscal year 2023, we updated the extent of allocation and method of attribution of certain shared costs that are principally managed at the corporate level as part of our evaluation of segment operating performance.

As a result, certain shared administrative costs, including shared IT, legal and other administrative functions, which were previously included in segment operating results, are now reported in Corporate costs within our reconciliation of segment operating profit to income before income taxes.

The financial information presented herein reflects the impact of the preceding reporting change for all periods presented.

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, 2023, 2022 and 2021 (in thousands):

1 unchanged sentence

Net revenue by segment

Total Sleep and Respiratory Care $ 3,177,298 $ 2,823,235 $ 2,602,381

Sleep and Respiratory Care $ 3,725,017 $ 3,177,298 $ 2,823,235

Software as a Service 497,976 400,829 373,590

Deferred revenue fair value adjustment (1)

— — ( 2,102 )

Total Software as a Service 400,829 373,590 354,632

Total $ 4,222,993 $ 3,578,127 $ 3,196,825

12 unchanged sentences

Restructuring expenses 9,177 — 13,905

Litigation settlement expenses — — ( 600 )

Deferred revenue fair value adjustment (1)

Acquisition related expenses 10,949 1,864 —

Interest expense (income), net 47,379 22,312 23,627

1 unchanged sentence

(Gain) loss on equity investments ( 9,922 ) 12,202 ( 14,515 )

Gain on insurance recoveries ( 20,227 ) — —

Other, net 5,712 ( 3,197 ) ( 301 )

Income before income taxes $ 1,101,664 $ 960,483 $ 883,662

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

PART II Item 8

6 unchanged sentences

Masks and other 1,039,026 911,387 841,452

Total Sleep and Respiratory Care $ 1,981,807 $ 1,705,113 $ 1,572,327

Software as a Service 400,829 373,590 354,632

Total $ 2,382,636 $ 2,078,703 $ 1,926,959

Total U.S., Canada and Latin America $ 2,483,387 $ 1,981,807 $ 1,705,113

Combined Europe, Asia and other markets

1 unchanged sentence

Masks and other 415,289 399,003 371,743

Total Sleep and Respiratory Care $ 1,195,491 $ 1,118,122 $ 1,030,054

Total Combined Europe, Asia and other markets $ 1,241,630 $ 1,195,491 $ 1,118,122

Global revenue

23 unchanged sentences

Our total contributions to the plans for the years ended June 30, 2023, 2022 and 2021, were $ 13.0 million, $ 11.8 million and $ 10.7 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

PART II Item 8

1 unchanged sentence

Notes to the Consolidated Financial Statements

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 $ 12.7 million, $ 11.9 million and $ 9.6 million in fiscal 2023, 2022 and 2021, respectively.

5 unchanged sentences

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.

On June 2, 2021, New York University filed a complaint for patent infringement in the United States District Court, District of Delaware against ResMed Inc., case no.

1:21-cv-00813 (CFC).

On June 2, 2021, New York University ("NYU") filed a complaint for patent infringement in the United States District Court, District of Delaware against ResMed Inc., case no.

1:21-cv-00813 (JPM).

The complaint alleges that the AutoSet or AutoRamp features of ResMed’s AirSense 10 AutoSet flow generators infringe one or more claims of various NYU patents, including U.S.

2 unchanged sentences

The complaint seeks monetary damages and attorneys’ fees.

ResMed answered the complaint on September 30, 2021 and filed a motion to dismiss the complaint on the basis that the patents are invalid because the subject matter of the patents is not patentable under the Supreme Court and Federal Circuit precedent.

We answered the complaint on September 30, 2021 and filed a motion to dismiss the complaint on the basis that the patents are invalid because the subject matter of the patents is not patentable under the Supreme Court and Federal Circuit precedent.

The motion to dismiss was granted in part and denied in part.

The matter is proceeding to discovery.

On January 27, 2021, the International Trade Commission instituted In Re Certain UMTS and LTE Cellular Communications Modules and Products Containing the Same, Investigation No.

We have also requested that the court dismiss the case based on NYU’s license of the patents to Fisher & Paykel and Fisher & Paykel’s prior settlement with us;

that request is pending.

In December 2022, the Patent Trial and Appeals Board (“PTAB”) of the Patent and Trademark Office granted our request to review the validity of the claims in the patents asserted by NYU against us, determining that there is a reasonable likelihood that we will prevail.

The PTAB’s final written decisions on the validity of the asserted claims is expected by December 2023.

On April 10, 2023, the district court granted our request to stay the case pending the PTAB’s decision on the validity of the patents asserted by NYU.

On January 27, 2021, the International Trade Commission ("ITC") instituted In Re Certain UMTS and LTE Cellular Communications Modules and Products Containing the Same, Investigation No.

337-TA-1240, by complainants Philips RS North America, LLC and Koninklijke Philips N.V.

7 unchanged sentences

The administrative law judge issued an initial determination on April 1, 2022, finding no violation of any of the Philips' patents asserted in the ITC.

Philips sought review by the full International Trade Commission.

Philips sought review by the full ITC.

On July 6, 2022, the Commission affirmed the administrative law judge’s determination that there was no violation of asserted Philips' patents.

The Commission terminated the ITC proceedings.

Philips may appeal the ITC’s decision or return to the district court to pursue its civil case for damages and an injunction.

Philips did not appeal the ITC’s decision.

On December 17, 2020, Philips filed companion cases for patent infringement against the same defendants in the United States District Court for the District of Delaware, case nos.

1:20-cv-01707, 01708, 01709, 01710, 01711, and 01713 (CFC) seeking damages, an injunction, and a declaration from the court on the amount of a fair reasonable and non-discriminatory license rate for the standard essential patents it is asserting against the communications module defendants.

The district court cases have been stayed pending the resolution of the ITC proceedings.

ResMed is not a party to the ITC investigation or the district court cases but sells products that incorporate some of the communications modules at issue in the cases.

The district court cases were stayed pending the resolution of the ITC proceedings.

The parties have returned to the district court for further proceedings.

We were not a party to the ITC investigation, and we are not a party to the district court cases, but we sell products that incorporate communications modules at issue in the district court case.

On June 16, 2022, Cleveland Medical Devices Inc.

filed suit for patent infringement against ResMed Inc.

("Cleveland Medical") filed suit for patent infringement against ResMed Inc.

in the United States District Court for the District of Delaware, case no.

1:22-cv-00794.

Cleveland Medical asserts that numerous ResMed connected devices, when combined with ResMed’s AirView and ResScan data platforms, infringe one or more of eight Cleveland Medical patents, including U.S.

Cleveland Medical asserts that numerous ResMed connected devices, when combined with certain ResMed data platforms and/or software, including AirView and ResScan, infringe one or more of eight Cleveland Medical patents, including U.S.

and 11,234,637.

Based on currently available information, we are unable to make a reasonable estimate of loss or range of losses, if any, arising from matters that remain open.

We have moved to

PART II Item 8

1 unchanged sentence

Notes to the Consolidated Financial Statements

dismiss the action because Cleveland Medical sued the wrong ResMed entity.

We have also moved to dismiss all claims based on U.S.

10,076,269, as well as indirect and willful infringement allegations as to the remaining patents asserted against ResMed;

that motion is pending.

On March 23, 2023, we filed a petition with the Patent Trial and Appeals Board (“PTAB”) of the Patent and Trademark Office seeking review of the validity of Cleveland Medical U.S.

Patent 10,076,269.

The PTAB will decide whether to review the validity of the ‘269 patent by September 2023.

The parties are engaged in discovery in the Delaware action.

The case is set for trial in August 2024.

On March 23, 2023, ResMed Corp.

filed suit in the Southern District of California, case no.

23-cv-00500-TWR-JLB, seeking a declaration that it does not infringe U.S.

patent number 11,602,284 recently issued to Cleveland Medical.

Cleveland Medical has asked the court to dismiss the California case or to move it to Delaware.

Based on currently available information, we are unable to make a reasonable estimate of loss or range of losses, if any, arising from matters that remain open.

Contingent Obligations Under Recourse Provisions

8 unchanged sentences

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.

In addition, in June 2022 we signed a definitive agreement to acquire MEDIFOX DAN which is expected to close during our fiscal year 2023.

The MEDIFOX DAN acquisition remains subject to regulatory clearances and other customary closing conditions.

Upon closing, acquisition consideration will be paid, in part, with funds available for draw under our Revolving Credit Agreement.

Obligations under our purchase agreements and the MEDIFOX DAN acquisition agreement at June 30, 2022 were as follows (in thousands):

Obligations under our purchase agreements at June 30, 2023 were as follows (in thousands):

Total Fiscal Years Ending June 30

1 unchanged sentence

Minimum purchase obligations $ 1,390,640 $ 1,034,859 $ 345,033 $ 10,013 $ 735 $ — $ —

MEDIFOX DAN acquisition consideration $ 994,245 $ 994,245 $ — $ — $ — $ — $ —

(16) Derivative Instruments and Hedging Activities

Fair Values of Derivative Instruments

The following table presents our assets and liabilities related to derivative instruments on a gross basis within the consolidated balance sheets (in thousands):

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

2023 June 30,

2022 Balance Sheet Caption

Derivative Assets

Not Designated as Hedging Instruments

Foreign currency hedging instruments $ 2,126 $ 151 Prepaid expenses and other current assets

Foreign currency hedging instruments 279 9 Prepaid taxes and other non-current assets

Total derivative assets $ 2,405 $ 160

Derivative Liabilities

Designated as Hedging Instruments

Foreign cross-currency swaps – Fair Value Hedge $ 19,743 $ — Other long-term liabilities

Foreign cross-currency swaps – Net Investment Hedge 40,803 — Other long-term liabilities

Not Designated as Hedging Instruments

Foreign currency hedging instruments 9,558 1,947 Accrued expenses

Foreign currency hedging instruments 595 — Other long-term liabilities

Total derivative liabilities $ 70,699 $ 1,947

Fair Value Hedge Gains (Losses)

We recognized the following gains (losses) on the foreign cross currency swaps designated as fair value hedges (in thousands):

Twelve Months Ended

2023 2022 2021

Gain (loss) recognized in other comprehensive income (loss) $ ( 5,414 ) $ — $ —

Gain (loss) recognized on cross-currency swap in interest (expense) income, net (amount excluded from effectiveness testing) 3,754 — —

Gain (loss) recognized on cross-currency swap in other, net ( 14,329 ) — —

Gain (loss) recognized on intercompany debt in other, net 14,329 — —

Net Investment Hedge Gains (Losses)

We recognized the following gains (losses) on the foreign cross currency swaps designated as net investment hedges (in thousands):

Twelve Months Ended

2023 2022 2021

Gain (loss) recognized in cumulative translation adjustment within other comprehensive income (loss) $ ( 40,803 ) $ — $ —

Gain (loss) recognized from the excluded components in interest (expense) income, net 9,482 — —

Non-designated Derivative Gains (Losses)

We recognized the following gains (losses) in the consolidated statement of operations on derivatives not designated as hedging instruments (in thousands):

Twelve Months Ended

2023 2022 2021

Gain (loss) recognized on foreign currency hedging instruments in other, net $ 8,576 $ ( 19,511 ) $ 18,544

Gain (loss) recognized on other foreign-currency-denominated transactions in other, net ( 12,780 ) 22,320 ( 19,297 )

Total ( 4,204 ) 2,809 ( 753 )

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

(17) Business Combinations

On November 21, 2022, we completed our acquisition of 100 % of the shares in MediFox-Dan Investment GmbH and its subsidiaries (“MEDIFOX DAN”), a German leader in software solutions for a wide variety of out-of-hospital care providers, for $ 997.5 million.

This acquisition has been accounted for as a business combination using purchase accounting and included in our consolidated financial statements from November 21, 2022.

The acquisition was paid for using funds drawn down from our Revolving Credit Agreement.

The total purchase price was allocated to MEDIFOX DAN's tangible and identifiable intangible assets and liabilities based upon estimated fair values as of the November 21, 2022 closing date, as follows (in thousands):

Final Intangible assets - useful life

Accounts receivable 16,096

Property, plant and equipment 7,731

Equity method investment 57,298

Other assets 18,523

Accounts payable and accrued expenses ( 19,359 )

Deferred revenue ( 18,349 )

Other liabilities ( 11,623 )

Identifiable intangible assets:

Developed technology 43,081 6 - 7 years

Customer relationships 175,445 11 - 13 years

Trade names 32,050 10 years

Deferred tax liabilities ( 78,458 )

Goodwill 767,709

Purchase price $ 997,516

We completed the purchase price allocation in relation to this acquisition during the quarter ended June 30, 2023.

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.

Key assumptions used to determine the fair value of intangible assets acquired included forecast revenue growth rates, forecast earnings before interest, tax, depreciation, and amortization, and weighted average cost of capital.

The goodwill recognized as part of the acquisition is reflected in our SaaS 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.

Pro forma results of operations have not been presented because the effects of this acquisition were not material to our consolidated statements of income.

We recorded acquisition related expenses of $ 10.9 million and $ 1.9 million during the years ended June 30, 2023 and June 30, 2022, respectively.

We did not have material acquisition related expenses during the year ended June 30, 2021.

(18) Restructuring Expenses

In November 2020, we closed our Portable Oxygen Concentrator business, which was part of the Sleep and Respiratory Care segment.

During the year ended June 30, 2021, we recognized restructuring expenses of $ 13.9 million primarily related to inventory write-downs of $ 5.2 million, accelerated amortization of acquired intangible assets of $ 5.1 million, asset impairments of $ 2.3 million, employee-related costs of $ 0.7 million and contract cancellation costs of $ 0.6 million.

Of the total expense recognized during year ended June 30, 2021, the inventory write-down of $ 5.2 million is presented within cost of sales and the remaining $ 8.7 million in restructuring costs is separately disclosed as restructuring expenses on the consolidated statements of operations.

During the year ended June 30, 2023, we incurred restructuring expenses of $ 9.2 million associated with the reorganization and rationalization of our operations.

We recorded the full amount of $ 9.2 million during the year ended June 30, 2023, of which $ 6.7 million related to our Sleep and Respiratory Care segment and $ 2.5 million related to our SaaS segment.

The restructuring expenses consisted primarily of severance to employees and were separately disclosed within our operating expenses.

We had $ 7.8 million remaining in our accruals at year end which will be paid during the year ended June 30, 2024.

We did no t incur material restructuring expenses during the year ended June 30, 2022.

During the year ended June 30, 2021, we closed our Portable Oxygen Concentrator business, which was part of the Sleep and Respiratory Care segment.

We recognized restructuring expenses of $ 13.9 million primarily related to inventory write-

PART II Item 8

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

downs of $ 5.2 million, accelerated amortization of acquired intangible assets of $ 5.1 million, asset impairments of $ 2.3 million, employee-related costs of $ 0.7 million and contract cancellation costs of $ 0.6 million.

The restructure was completed as of June 30, 2021.

During the years ended June 30, 2022 and 2020 we did no t incur material restructuring expenses.

PART II Item 8

11 unchanged sentences

Allowance for trade accounts receivable $ 32,138 $ 2,620 $ ( 11,499 ) $ 23,259

$ 30,013 $ 7,805 $ ( 5,680 ) $ 32,138

Year ended June 30, 2021

1 unchanged sentence

Allowance for trade accounts receivable (1)

$ 30,013 $ 7,805 $ ( 5,680 ) $ 32,138

(1) Beginning balance is adjusted to reflect the cumulative pre-tax effect of adopting Accounting Standards Update No.

2 unchanged sentences

See accompanying report of independent registered public accounting firm.

PART II Items 9 – 9B

PART II Items 9 – 9C

AND SUBSIDIARIES

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk