What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-08-09 compared with 2023-08-11 · 92 added, 87 removed, 275 unchanged (39% of the section changed)

7 unchanged sentences

Since the development of continuous positive airway pressure therapy, we have expanded our business by developing or acquiring a number of products and solutions for a broader range of respiratory disorders including technologies to be applied in medical and consumer products, ventilation devices, diagnostic products, mask systems for use in the hospital and home, headgear and other accessories, dental devices, and cloud-based software informatics solutions to manage patient outcomes and customer and provider business processes.

Our growth has been fueled by geographic expansion, our research and product development efforts, acquisitions and an increasing awareness of SDB and other respiratory conditions like chronic obstructive pulmonary disease as significant health concerns.

Our growth has been fueled by geographic expansion, our research and product development efforts, acquisitions and an increasing awareness of SDB and respiratory conditions like chronic obstructive pulmonary disease as significant health concerns.

During fiscal year 2024, we announced a new operating model to accelerate long-term growth.

The new operating model introduces dedicated leadership in Product, Revenue, and Marketing to the global executive team.

This change aims to increase the velocity of product development and sharpen our customer and brand focus.

Ultimately, the goal is to accelerate profitable growth, while driving greater value and improved care throughout the outside hospital care continuum and the patient journey.

We are committed to ongoing investment in research and development and product enhancements.

During fiscal year 2024, we invested $307.5 million on research and development activities, which represents 6.6% of net revenues with a continued focus on the development and commercialization of new, innovative products and solutions that improve patient outcomes, create efficiencies for our customers and help physicians and providers better manage chronic disease and lower healthcare costs.

During fiscal year 2023 we continued the launch of AirSense 11, which introduces new features such as a touch screen, algorithms for patients new to therapy and digital enhancements and over-the-air update capabilities as well as continued our global offering of devices including Card-to-Cloud ("C2C") versions of our prior model AirSense 10 and AirCurve 10 products that do not incorporate a communications module.

Due to multiple acquisitions, including Brightree in 2016, HEALTHCAREfirst and MatrixCare in 2018, and MEDIFOX DAN in November 2022, our operations now include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.

During fiscal year 2024, we continued the launch of AirSense 11, which introduces new features such as a touch screen, algorithms for patients new to therapy, digital enhancements and over-the-air update capabilities.

Through our acquisitions of Brightree in 2016, HEALTHCAREfirst and MatrixCare in 2018, and MEDIFOX DAN in November 2022, our operations include out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice.

These platforms comprise our SaaS business and along with our cloud-based remote monitoring and therapy management system, and a robust product pipeline, should continue to provide us with a strong platform for future growth.

5 unchanged sentences

At June 30, 2024, our total assets were $6.9 billion and our stockholders’ equity was $4.9 billion.

We paid a quarterly dividend of $0.44 per share during fiscal 2023 with a total amount of $258.3 million paid to stockholders.

PART II Item 7

1 unchanged sentence

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

We paid a quarterly dividend of $0.48 per share during fiscal 2024 with a total amount of $282.3 million paid to stockholders.

In order to provide a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency fluctuations, we provide certain financial information on a “constant currency basis”, which is in addition to the actual financial information presented.

In order to calculate our constant currency information, we translate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period.

To calculate our constant currency information, we translate the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period.

However, constant currency measures should not be considered in isolation or as an alternative to U.S.

2 unchanged sentences

Fiscal Year Ended June 30, 2024 Compared to Fiscal Year Ended June 30, 2023

Net revenue for the year ended June 30, 2023 increased to $4,223.0 million from $3,578.1 million for the year ended June 30, 2022, an increase of $644.9 million or 18% (a 21% increase on a constant currency basis).

Net revenue for the year ended June 30, 2024 increased to $4,685.3 million from $4,223.0 million for the year ended June 30, 2023, an increase of $462.3 million or 11% (an 11% increase on a constant currency basis).

The following table summarizes our net revenue disaggregated by segment, product and region for the year ended June 30, 2024 compared to the year ended June 30, 2023 (in thousands):

19 unchanged sentences

Movements in international currencies against the U.S.

dollar negatively impacted net revenues by approximately $95.6 million for the year ended June 30, 2023.

dollar positively impacted net revenues by approximately $15.2 million for the year ended June 30, 2024.

Excluding the impact of currency movements, total net revenue from our Sleep and Respiratory Care business for the year ended June 30, 2024 increased by 10% compared to the year ended June 30, 2023.

The increase in net revenue associated with devices was primarily attributable to increased demand, reduced competitive supply, increases in average selling prices, and incremental sales of the C2C devices.

The increase in masks was primarily due to an increase in unit sales .

The increase in net revenue associated with our devices and masks was primarily attributable to increased demand and unit sales.

PART II Item 7

2 unchanged sentences

Net revenue from our Sleep and Respiratory Care business in the United States, Canada and Latin America for the year ended June 30, 2024 increased to $2,722.6 million from $2,483.4 million for the year ended June 30, 2023, an increase of $239.2 million or 10%.

The increase in net revenue associated with our devices was primarily attributable to increased demand, reduced competitive supply, and incremental sales of the C2C devices.

The increase in masks was primarily due to an increase in unit sales .

Net revenue from our Sleep and Respiratory Care business in combined Europe, Asia and other markets increased for the year ended June 30, 2023 to $1,241.6 million from $1,195.5 million for the year ended June 30, 2022, an increase of $46.1 million or 4% (an 11% increase on a constant currency basis).

The constant currency increase in device sales in combined Europe, Asia and other was primarily attributable to increased demand as well as reduced competitive supply.

The increase in masks was primarily due to an increase in unit sales.

Net revenue from devices for the year ended June 30, 2023 increased to $2,270.7 million from $1,866.9 million for the year ended June 30, 2022, an increase of $403.8 million or 22%, including an increase of 35% in the United States, Canada and Latin America and an increase of 4% in combined Europe, Asia and other markets (an 11% increase on a constant currency basis).

The increase in net revenue associated with our devices and masks was primarily attributable to increased demand and unit sales .

Net revenue from our Sleep and Respiratory Care business in combined Europe, Asia and other markets increased for the year ended June 30, 2024 to $1,378.6 million from $1,241.6 million for the year ended June 30, 2023, an increase of $137.0 million or 11% (a 10% increase on a constant currency basis).

The constant currency increase in device and mask sales in combined Europe, Asia and other was primarily attributable to increased demand and unit sales.

Net revenue from devices for the year ended June 30, 2024 increased to $2,444.0 million from $2,270.7 million for the year ended June 30, 2023, an increase of $173.3 million or 8%, including an increase of 5% in the United States, Canada and Latin America and an increase of 11% in combined Europe, Asia and other markets (a 10% increase on a constant currency basis).

Excluding the impact of foreign currency movements, device sales for the year ended June 30, 2024 increased by 7%.

3 unchanged sentences

Net revenue from our SaaS business for the year ended June 30, 2024 was $584.1 million, compared to $498.0 million for the year ended June 30, 2023, an increase of $86.1 million or 17%.

The increase was predominantly due to our recent acquisition of MEDIFOX DAN, which was acquired on November 21, 2022.

The increase was predominantly due to our acquisition of MEDIFOX DAN, which was acquired on November 21, 2022.

Excluding the MEDIFOX DAN acquisition, SaaS revenue increased 9% and was driven by continued growth in the HME vertical within our SaaS business.

2 unchanged sentences

Gross margin, which is gross profit as a percentage of net revenue, was 56.7% for the year ended June 30, 2024, compared with the 55.8% for the year ended June 30, 2023.

The decrease in gross margin was due primarily to unfavorable product mix, higher component and manufacturing costs, higher warehouse related costs, and unfavorable foreign currency movements, partially offset by increases in average selling prices and a decrease in the amortization of acquired intangible assets.

The increase in gross margin was due primarily to reduced freight and manufacturing cost improvements, a favorable impact from our SaaS business, an increase in average selling prices and a favorable product mix, which were partially offset by $14.3 million of combined expenses associated with the field safety notifications for masks with magnets and Astral devices, and an increase in the amortization of acquired intangible assets.

The masks with magnets field safety notification expenses relate to estimated costs to provide alternative masks to patients in response to updated contraindications for use of masks that incorporate magnets.

The Astral field safety notification expenses relate to estimated costs associated with the replacement of a certain component in some of our Astral ventilation devices that were manufactured between 2013 to 2019.

Operating Expenses

8 unchanged sentences

Selling, general and administrative expenses increased for the year ended June 30, 2024 to $917.1 million from $874.0 million for the year ended June 30, 2023, an increase of $43.1 million or 5%.

Selling, general and administrative expenses, as reported in U.S.

dollars, were favorably impacted by the movement of international currencies against the U.S.

dollar, which decreased our expenses by approximately $27.9 million.

Excluding the impact of foreign currency movements, selling, general and administrative expenses for the year ended June 30, 2023 increased by 22% compared to

Selling, general and administrative expenses,

PART II Item 7

1 unchanged sentence

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

the year ended June 30, 2022.

As a percentage of net revenue, selling, general and administrative expenses for the year ended June 30, 2023 increased to 20.7% compared to 20.6% for the year ended June 30, 2022.

The constant currency increase in selling, general and administrative expenses for the year ended June 30, 2023 compared to the year ended June 30, 2022 was primarily due to increases in employee-related costs, increases in travel and entertainment expenses, and additional expenses associated with the consolidation of recent acquisitions.

as reported in U.S.

dollars, were unfavorably impacted by the movement of international currencies against the U.S.

dollar, which increased our expenses by approximately $1.8 million.

Excluding the impact of foreign currency movements, selling, general and administrative expenses for the year ended June 30, 2024 increased by 5% compared to the year ended June 30, 2023.

As a percentage of net revenue, selling, general and administrative expenses for the year ended June 30, 2024 improved to 19.6% compared to 20.7% for the year ended June 30, 2023.

The constant currency increase in selling, general and administrative expenses for the year ended June 30, 2024 compared to the year ended June 30, 2023 was primarily due to increases in employee-related costs and additional expenses associated with the consolidation of recent acquisitions.

Research and Development Expenses

9 unchanged sentences

Restructuring Expenses

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.

During the year ended June 30, 2024, we incurred restructuring expenses of $64.2 million associated with an evaluation of our existing operations to increase operational efficiency, decrease costs and increase profitability.

Restructuring charges for the year ended June 30, 2024 were comprised of $28.6 million of employee severance and other one-time termination benefits, $33.2 million of intangible asset impairments associated with the wind down of certain business activities, and $2.4 million of other miscellaneous asset impairments.

Total Other Income (Loss), Net

2 unchanged sentences

2024 2023 Change

Interest (expense) income, net $ (47,379) $ (22,312) $ (25,067)

Interest expense, net $ (45,708) $ (47,379) $ 1,671

Loss attributable to equity method investments (1,848) (7,265) 5,417

Gain (loss) on equity investments 9,922 (12,202) 22,124

(Loss) gain on equity investments (4,045) 9,922 (13,967)

Gain on insurance recoveries — 20,227 (20,227)

2 unchanged sentences

Total other income (loss), net for the year ended June 30, 2024 was a loss of $55.1 million, compared to a loss of $30.2 million for the year ended June 30, 2023.

Interest expense, net, increased to $47.4 million for the year ended June 30, 2023 compared to $22.3 million for the year ended June 30, 2022 due to higher debt levels associated with the acquisition of MEDIFOX DAN, which was funded by our Revolving Credit Facility.

Increases in interest expense, net, were partially offset by gains associated with our investments in marketable and non-marketable equity securities, which were a gain of $9.9 million for the year ended June 30, 2023 compared to a loss of $12.2 million or the year ended June 30, 2022.

In addition, we recognized recoveries from business interruption insurance for $20.2 million for the year ended June 30, 2023.

We recorded lower losses attributable to equity method investments for the year ended June 30, 2023 of $7.3 million compared to $8.5 million for the year ended June 30, 2022.

During the year ended June 30, 2023, we recognized recoveries from business interruption insurance for $20.2 million.

Losses associated with our investments in marketable and non-marketable equity securities were $4.0 million for the year ended June 30, 2024 compared to a gain of $9.9 million or the year ended June 30, 2023.

Losses associated with our investments in marketable and non-marketable equity securities were partially offset by lower losses attributable to equity method investments for the year ended June 30, 2024 of $1.8 million compared to $7.3

PART II Item 7

1 unchanged sentence

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

Our effective income tax rate decreased to 18.5% for the year ended June 30, 2023 from 18.8% for the year ended June 30, 2022.

Our effective rate of 18.5% for the year ended June 30, 2023 differs from the statutory rate of 21.0% primarily due to research credits, foreign operations and windfall tax benefits related to the vesting or settlement of employee share-based awards.

The decrease in our effective tax rate for the year ended June 30, 2023 was primarily due to a shift in the geographic mix of earnings and an increase in research credits.

million for the year ended June 30, 2023.

In addition, interest expense, net, decreased to $45.7 million for the year ended June 30, 2024 compared to $47.4 million for the year ended June 30, 2023 due to lower debt levels following the repayment of our revolving credit facility.

Our effective income tax rate increased to 19.3% for the year ended June 30, 2024 from 18.5% for the year ended June 30, 2023.

Our effective rate of 19.3% for the year ended June 30, 2024 differs from the statutory rate of 21.0% primarily due to research credits and foreign operations.

The increase in our effective tax rate for the year ended June 30, 2024 was primarily due to a shift in our geographic mix of earnings and lower tax deductions in the current year associated with the vesting or settlement of employee share-based awards.

Our Singapore operations operate under certain tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2030.

As a result of the U.S.

Tax Cuts and Jobs Act of 2017, we treated all non-U.S.

Tax Cuts and Jobs Act of 2017 ("TCJA"), we treated all non-U.S.

historical earnings as taxable during the year ended June 30, 2018.

1 unchanged sentence

subsidiaries will generally not be subject to U.S.

federal tax, if repatriated.

federal tax, if repatriated, except as discussed in Note 12 – Income Taxes of the Notes to the Consolidated Financial Statements (Part II, Item 8).

Net Income and Earnings per Share

8 unchanged sentences

Non-GAAP financial measures as presented herein may not be comparable to similarly titled measures used by other companies.

The measure “non-GAAP cost of sales” is equal to GAAP cost of sales less amortization of acquired intangible assets relating to cost of sales.

The measure “non-GAAP cost of sales” is equal to GAAP cost of sales less amortization of acquired intangible assets relating to cost of sales and field safety notification expenses.

The measure “non-GAAP gross profit” is the difference between GAAP net revenue and non-GAAP cost of sales, and “non-GAAP gross margin” is the ratio of non-GAAP gross profit to GAAP net revenue.

PART II Item 7

AND SUBSIDIARIES

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

These non-GAAP measures are reconciled to their most directly comparable GAAP financial measures below (in thousands, except percentages):

4 unchanged sentences

(32,963) (30,396)

Masks with magnets field safety notification expenses

Astral field safety notification expenses

Non-GAAP cost of sales $ 1,982,769 $ 1,836,935

3 unchanged sentences

Non-GAAP gross margin 57.7 % 56.5 %

PART II Item 7

AND SUBSIDIARIES

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

The measure “non-GAAP income from operations” is equal to GAAP income from operations once adjusted for amortization of acquired intangibles, restructuring expenses and acquisition-related expenses.

The measure “non-GAAP income from operations” is equal to GAAP income from operations once adjusted for amortization of acquired intangibles, restructuring expenses, field safety notification expenses, and acquisition-related expenses.

Non-GAAP income from operations is reconciled with GAAP income from operations below (in thousands):

4 unchanged sentences

Restructuring expenses 64,228 9,177

Masks with magnets field safety notification expenses 6,351 —

Astral field safety notification expenses 7,911 —

Acquisition-related expenses 483 10,949

Non-GAAP income from operations $ 1,478,350 $ 1,224,413

The measure “non-GAAP net income” is equal to GAAP net income once adjusted for amortization of acquired intangibles, restructuring expenses, acquisition-related expenses, gain on insurance recoveries, (gain) loss on equity investments, reserve for disputed tax positions, and associated tax effects.

PART II Item 7

AND SUBSIDIARIES

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

The measure “non-GAAP net income” is equal to GAAP net income once adjusted for amortization of acquired intangibles, restructuring expenses, field safety notification expenses, acquisition related expenses, gain on insurance recoveries, and associated tax effects.

The measure “non-GAAP diluted earnings per share” is the ratio of non-GAAP net income to diluted shares outstanding.

5 unchanged sentences

Restructuring expenses 64,228 9,177

Masks with magnets field safety notification expenses 6,351 —

Astral field safety notification expenses 7,911 —

Acquisition-related expenses 483 10,949

Gain on insurance recoveries — (20,227)

(Gain) loss on equity investments — 11,675

Reserve for disputed tax positions — 4,111

Income tax effect on non-GAAP adjustments (40,114) (20,114)

11 unchanged sentences

As part of our liquidity strategy, we will continue to monitor our current level of earnings and cash flow generation as well as our ability to access the market considering those earning levels.

PART II Item 7

AND SUBSIDIARIES

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

As of June 30, 2024 and June 30, 2023, we had cash and cash equivalents of $238.4 million and $227.9 million, respectively.

5 unchanged sentences

The amount of the current year foreign earnings that we have repatriated to the United States in the past has been determined, and the amount that we expect to repatriate during fiscal year 2025 will be determined, based on a variety of factors, including current year earnings of our foreign subsidiaries, foreign investment needs and the cash flow needs we have in the United States, such as for the repayment of debt, dividend distributions, and other domestic obligations.

As a result of the U.S.

Tax Act, we treated all non-U.S.

PART II Item 7

AND SUBSIDIARIES

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

As a result of the TCJA, we treated all non-U.S.

historical earnings as taxable, which resulted in additional tax expense of $92.4 million which was payable over the proceeding eight years.

20 unchanged sentences

Effect of exchange rate changes on cash (1,719) (2,147)

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

PART II Item 7

AND SUBSIDIARIES

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

Net increase (decrease) in cash and cash equivalents $ 10,470 $ (45,819)

Operating Activities

Cash provided by operating activities was $1,401.3 million for the year ended June 30, 2024, compared to cash provided of $693.3 million for the year ended June 30, 2023.

The $342.2 million increase in cash flow from operations was primarily due to the payment of our tax settlement with the ATO of $284.8 million during the year ended June 30, 2022 and an increase in operating profit for the year ended June 30, 2023.

The $708.0 million increase in cash flow from operations was primarily due to lower cash outflows on inventory purchases during the year ended June 30, 2024 compared to the year ended June 30, 2023 and an increase in operating profit for the year ended June 30, 2024.

Investing Activities

Cash used in investing activities was $269.8 million for the year ended June 30, 2024, compared to cash used of $1,159.8 million for the year ended June 30, 2023.

The $929.9 million increase in cash flow used in investing activities was primarily due to the cash used to acquire MEDIFOX DAN.

The $890.1 million decrease in cash flow used in investing activities was primarily due to the cash used to acquire MEDIFOX DAN during the year ended June 30, 2023, partially offset by the cash used to acquire Somnoware during the year ended June 30, 2024.

PART II Item 7

AND SUBSIDIARIES

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

Financing Activities

Cash provided by in financing activities was $422.9 million for the year ended June 30, 2023, compared to cash used of $128.4 million for the year ended June 30, 2022.

The $551.2 million increase in cash flow provided by financing activities was primarily due to the borrowing activity under our Revolving Credit Agreement in order to finance our acquisition of MEDIFOX DAN.

Cash used in financing activities was $1,119.3 million for the year ended June 30, 2024, compared to cash provided of $422.9 million for the year ended June 30, 2023.

The $1,542.2 million increase in cash flow used in financing activities was primarily due to borrowing activity under our Revolving Credit Agreement in order to finance our acquisition of MEDIFOX DAN during the year ended June 30, 2023 and subsequent repayments during the year ended June 30, 2024.

In addition, we repurchased $150.0 million of treasury stock during the year ended June 30, 2024.

We did not purchase any shares under our share repurchase program during the year ended June 30, 2023.

During the year ended June 30, 2024, we paid cash dividends of $1.92 per common share totaling $282.3 million.

18 unchanged sentences

Refer to Note 15 – Legal Actions, Contingencies and Commitments of the Notes to the Consolidated Financial Statements (Part II, Item 8) for details of our contingent obligations under recourse provisions.

PART II Item 7

AND SUBSIDIARIES

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

Segment Information

6 unchanged sentences

On an ongoing basis we evaluate our estimates, including those related to allowance for doubtful accounts, inventory reserves, warranty obligations, goodwill, potentially impaired assets, intangible assets, income taxes and contingencies.

PART II Item 7

AND SUBSIDIARIES

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

We state these accounting policies in the notes to the financial statements and at relevant sections in this discussion and analysis.

2 unchanged sentences

We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

(1) Valuation of Goodwill, Intangible and Other Long-Lived Assets.

We make assumptions in establishing the carrying value, fair value and estimated lives of our goodwill, intangibles and other long-lived assets.

(1) Valuation of Goodwill.

We make assumptions in establishing the carrying value and fair value of our goodwill.

Our goodwill impairment tests are performed at our reporting unit level, which is one level below our operating segments.

The criteria used for these evaluations include management’s estimate of the asset’s continuing ability to generate positive income from operations and positive cash flow in future periods compared to the carrying value of the asset, as well as the strategic significance of any identifiable intangible asset in our business objectives.

If assets are considered to be impaired, we recognize as an impairment the amount by which the carrying value of the assets exceeds their fair value, and for goodwill is limited to the value of goodwill allocated to the impaired reporting unit, as described in Step 1 below.

Factors that would influence the likelihood of a material change in our reported results include significant changes in the asset’s ability to generate positive cash flow, loss of legal ownership or title to the asset, a significant decline in the economic and competitive environment on which the asset depends, significant changes in our strategic business objectives, utilization of the asset, and a significant change in the economic and/or political conditions in certain countries.

If goodwill is considered to be impaired, we recognize as an impairment the amount by which the carrying value of the goodwill exceeds its fair value, limited to the value of goodwill allocated to the impaired reporting unit, as described in Step 1 below.

Factors that would influence the likelihood of a material change in our reported results include significant changes in the asset’s ability to generate positive cash flow, a significant decline in the economic and competitive environment on which the asset depends, significant changes in our strategic business objectives, utilization of the asset, and a significant change in the economic and/or political conditions in certain countries.

We conduct an annual review for goodwill impairment at our reporting unit level based on the following steps:

8 unchanged sentences

(2) Income Tax.

We assess our income tax positions and record tax benefits for all years subject to audit based upon management’s evaluation of the facts, circumstances and information available at the reporting date.

If we determine that it

PART II Item 7

AND SUBSIDIARIES

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

is not more likely than not that we would be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income tax expense in the period such determination is made.

Alternatively, if we determine that it is more likely than not that the net deferred tax assets would be realized, any previously provided valuation allowance is reversed.

These changes to the valuation allowance and resulting increases or decreases in income tax expense may have a material effect on our operating results.

Our income tax returns are based on calculations and assumptions subject to audit by various tax authorities.

7 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.

PART II Item 7

AND SUBSIDIARIES

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

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.

2 unchanged sentences

On September 28, 2021, we remitted final payment to the ATO of $284.8 million, consisting of the agreed settlement amount of $381.7 million less prior remittances made to the ATO of $96.9 million.

Tax years 2018 to 2022 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.

Tax years 2018 to 2023 remain subject to examination by the major tax jurisdictions in which we are subject to tax.

(3) Revenue Recognition.

10 unchanged sentences

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 our customers and their customers.

rebates, discounts, free goods) and returns by 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 our historical experience.

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

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.

PART II Item 7

AND SUBSIDIARIES

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

We offer our Sleep and Respiratory Care customers cash or product rebates based on volume or sales targets measured over quarterly or annual periods.

9 unchanged sentences

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.

PART II Item 7

AND SUBSIDIARIES

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

(4) Business Combinations.

The MEDIFOX DAN acquisition was accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations.

The acquisition method of accounting involved the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed.

Using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, we allocate the purchase price to the estimated fair values of the assets acquired and liabilities assumed.

This allocation process involves the use of estimates and assumptions made in connection with determining the fair value of assets acquired and liabilities assumed including cash flows expected to be derived from the use of the asset, the timing of such cash flows, the remaining useful life of assets and applicable discount rates.

We have finalized our allocation of consideration to net tangible and intangible assets acquired as of June 30, 2023.

In the event that actual results vary from the estimates or assumptions used in the valuation or allocation process, we may be required to record an impairment charge or an increase in depreciation or amortization in future periods, or both.

Refer to Note 17, Business Combinations, to the accompanying consolidated financial statements for additional information about accounting for the MEDIFOX DAN acquisition.

Recently Issued Accounting Pronouncements

If actual results vary from the estimates or assumptions used in the valuation or allocation process, we may be required to record an impairment charge or an increase in depreciation or amortization in future periods, or both.

Refer to Note 17 – Business Combinations of the Notes to the Consolidated Financial Statements (Part II, Item 8) for additional information about accounting for the MEDIFOX DAN acquisition.

Off-Balance Sheet Arrangements

4 unchanged sentences

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 7. Management’s Discussion and Analysis