Special Note Regarding Forward-Looking Statements

This report contains or may contain certain forward-looking statements and information that are based on the beliefs of our management as well as estimates and assumptions made by, and information currently available to, our management. All statements other than statements regarding historical facts are forward-looking statements. The words "believe," "expect," "anticipate," "will continue," "will," "estimate," "plan," "future" and other similar expressions, and negative statements of such expressions, generally identify forward-looking statements, including, in particular, statements regarding the development and approval of new products and product applications, market expansion, pending litigation and the development of new markets for our products, such as cardiovascular and stroke markets. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these forward-looking statements. Such forward-looking statements reflect the views of our management at the time such statements are made and are subject to a number of risks, uncertainties, estimates and assumptions, including, without limitation, and in addition to those identified in the text surrounding such statements, those identified in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008 and elsewhere in this report.

In addition, important factors to consider in evaluating such forward-looking statements include changes or developments in social, economic, market, legal or regulatory circumstances, changes in our business or growth strategy or an inability to execute our strategy due to changes in our industry or the economy generally, the emergence of new or growing competitors, the actions or omissions of third parties, including suppliers, customers, competitors and governmental authorities and various other factors. Should any one or more of these risks or uncertainties materialize, or underlying estimates or assumptions prove incorrect, actual results may vary significantly from those expressed in such forward-looking statements, and there can be no assurance that the forward-looking statements contained in this report will in fact occur.

Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described in our annual report on Form 10-K, in addition to the other cautionary statements and risks described elsewhere in this report and in our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock will likely decline and you may lose all or part of your investment.

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

Overview

The following is an overview of our results of operations for the three and nine months ended March 31, 2009. Management's discussion and analysis ("MD&A") of financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of Resmed Inc. MD&A is provided as a supplement to, and should be read in conjunction with selected financial data and consolidated financial statements and notes, included herein.

During the three and nine months ended March 31, 2009 we continued our efforts to build awareness of the consequences of untreated sleep-disordered breathing, or SDB, and to grow our business in this market. In our efforts we have attempted to raise awareness through market and clinical initiatives highlighting the increasing link between the potential effects SDB can have on cardiovascular diseases and Type 2 diabetes. In September 2008, the European Society of Cardiologists published guidelines for the treatment of acute and chronic heart failure. For the first time, the guidelines noted that patients with symptomatic heart failure frequently have sleep-related disorders (central or obstructive sleep apnea) and recommended treatment with Continuous Positive Airway Pressure, or CPAP, for patients diagnosed with obstructive sleep apnea. Just three months earlier the International Diabetes Federation issued a consensus statement on sleep disordered breathing and Type 2 Diabetes, where the substantial value of identifying and treating diabetic patients suffering from sleep disordered breathing was also recognized and recommended. The increasing awareness among the co-morbidity specialists supports the efforts and investment we are making in new markets, including diabetes and cardiology.

We are committed to ongoing investment in research and development and product enhancements. During the three months and nine months ended March 31, 2009 we invested $13.9 million and $46.1 million, respectively on research and development activities. Since the development of CPAP, we have developed a number of innovative products for SDB and other respiratory disorders including airflow generators, diagnostic products, mask systems, headgear and other accessories. Our new product release schedule remains active across both our mask and flow generator categories. We have introduced new masks in both Europe and the US during fiscal 2009, including the release of Swift LT for Her, which was the first nasal pillows product released that has been designed and marketed specifically for female patients. Additionally, during the nine months ended March 31, 2009, we released a series of new bilevel flow generators in Europe and in North and Latin America. These products utilize our patented EasyBreathe motor technology, providing performance at up to 90% less noise than other leading competitors.

During the quarter ended March 31, 2009, our net revenue increased by 8% when compared to the quarter ended March 31, 2008. These results were primarily driven by increasing unit sales of our flow generators, masks and accessories, including sales from our new VPAP IV bilevel flow generators and Swift LT nasal pillows. Gross margin was 61.0% for the quarter ended March 31, 2009 compared to 59.7% for the same period in fiscal 2008. For the quarter ended March 31, 2009, we recognized acquisition-related amortization expenses and stock-based compensation costs of $1.7 million and $6.7 million, respectively. Diluted earnings per share for the quarter ended March 31, 2009 increased to $0.51 per share, up from $0.38 per share in the quarter ended March 31, 2008.

Total operating cash flow for the nine months ended March 31, 2009, was $168.6 million compared to $81.0 million for the quarter ended March 31, 2008. At March 31, 2009, our cash and cash equivalents totaled $327.1 million, our total assets were $1.3 billion and our stockholders' equity was $1.0 billion.

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

Net Revenue

Net revenue increased for the three months ended March 31, 2009 to $227.9 million compared to $211.8 million for the three months ended March 31, 2008, an increase of $16.0 million or 8%. The increase in net revenue is primarily attributable to an increase in unit sales of our flow generators, masks and accessories. Movements in international currencies against the U.S. dollar negatively impacted revenues by approximately $17.6 million during the three months ended March 31, 2009. Excluding the impact of unfavorable foreign currency movements, net revenue for the three months ended March 31, 2009 increased by 16% compared to the three months ended March 31, 2008.

Net revenue in North and Latin America increased for the three months ended March 31, 2009 to $122.5 million from $99.6 million for the three months ended March 31, 2008, an increase of 23%. We believe this growth has been generated by increased public and physician awareness of sleep-disordered breathing and growth generated from our recent product releases including the S8II flow generator, VPAP IV bilevel flow generator, Swift LT nasal pillows mask and Mirage Quattro full-face mask. Net international revenue, which includes all markets outside North and Latin America, for the three months ended March 31, 2009 decreased to $105.4 million from $112.2 million compared to the three months ended March 31, 2008, a decrease of 6%. Movements in international currencies against the U.S. dollar negatively impacted international revenues by approximately $17.6 million during the three months ended March 31, 2009. Excluding the impact of movements in international currencies, international sales grew by 10% compared to the three months March 31, 2008. This international sales growth predominantly reflects growth in the overall sleep-disordered breathing market and growth generated from our recent product releases including the S8II flow generator, VPAP IV bilevel flow generator and Mirage Quattro full-face mask.

Revenue from sales of flow generators, including humidifiers, for the three months ended March 31, 2009 totaled $131.1 million, an increase of 7% compared to the three months ended March 31, 2008 of $123.0 million, with an increase of 24% in North and Latin America offset by a decrease of 5% elsewhere. Revenue from sales of masks, motors and other accessories for the three months ended March 31, 2009 totaled $96.7 million, an increase of 9% compared to the three months ended March 31, 2008 of $88.9 million, including increases of 22% in North and Latin America offset by a decrease of 8% elsewhere. Excluding the impact of unfavorable currency movements international revenue increased by 11% and 8% for revenue of flow generators and masks, motors and other accessories, respectively for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. We believe these increases primarily reflect growth in the overall sleep-disordered breathing market and contributions from new products.

The following table summarizes the percentage movements in our net revenue for the three months ended March 31, 2009 compared to the three months ended March 31, 2008:

                                        North and          International     Total       International         Total
                                      Latin America                                        (Constant         (Constant
                                                                                          Currency) *        Currency)
Flow generators                              24%                  (5%)          7%               11%             16%
Masks, motors and other accessories          22%                  (8%)          9%                8%             16%
Total                                        23%                  (6%)          8%               10%             16%

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

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

Net Revenue, continued

Net revenue for the nine months ended March 31, 2009, increased to $668.8 million or 11% as compared to $600.2 million for the nine months ended March 31, 2009. For the nine months ended March 31, 2009, revenue from sales of flow generators increased by 11% compared to the nine months ended March 31, 2008; 22% in North and Latin America and 4% internationally. Revenue from sales of mask systems, motors and other accessories increased by 12%; 20% in North and Latin America and flat internationally, for the nine months ended March 31, 2009 compared to the nine months ended March 31, 2008. Movement in international currencies against the U.S. dollar negatively impacted net revenue by approximately $23.0 million during the nine months ended March 31, 2009. Excluding the impact of unfavorable currency movements, total revenue for the nine months ended March 31, 2009 increased by 15% compared to the nine months ended March 31, 2008. We believe these increases primarily reflect growth in the overall sleep-disordered breathing market, and strong sales from our new products.

The following table summarizes the percentage movements in our net revenue for the nine months ended March 31, 2009 compared to the nine months ended March 31, 2008:

                                        North and          International     Total       International         Total
                                      Latin America                                        (Constant         (Constant
                                                                                          Currency) *        Currency)
Flow generators                              22%                  4%           11%               11%             16%
Masks, motors and other accessories          20%                  0%           12%                7%             15%
Total                                        21%                  2%           11%               10%             15%

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

Gross Profit

Gross profit increased for the three months ended March 31, 2009 to $138.9 million from $126.6 million for the three months ended March 31, 2008, an increase of $12.4 million or 10%. Gross profit as a percentage of net revenue for the three months ended March 31, 2009 increased to 61.0% from 59.7% for the three months ended March 31, 2008. The higher gross margin for the three months ended March 31, 2009 is primarily due to the depreciation of the Australian dollar against the U.S. dollar as the majority of our manufacturing labor and overhead is denominated in Australian dollars, a favorable change in product mix as sales of our higher margin products represented a higher proportion of our sales and cost savings attributable to manufacturing and supply chain improvements.

Gross profit increased for the nine months ended March 31, 2009 to $397.1 million from $359.7 million for the nine months ended March 31, 2008, an increase of $37.4 million or 10%. Gross profit as a percentage of net revenue for the nine months ended March 31, 2009 was 59.4% compared to 59.9% for the nine months ended March 31, 2008. The lower gross margin for the nine months ended March 31, 2009 is primarily due to a general reduction in average selling prices partially offset by cost savings attributable to manufacturing and supply chain improvements and a favorable change in product mix as sales of our higher margin products represented a higher proportion of our sales.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased for the quarter ended March 31, 2009 to $70.9 million from $70.1 million for the quarter ended March 31, 2008, an increase of 1%. Stock-based compensation expenses of $5.7 million and $4.8 million have been included within the selling, general and administration expenses for the three months ended March 31, 2009 and 2008, respectively. Selling, general and administrative expenses, as a percentage of net revenue, were 31% for the three months ended March 31, 2009 compared to 33% for the three months ended March 31, 2008.

Selling, general and administrative expenses increased for the nine months ended March 31, 2009 to $212.3 million from $200.6 million for the nine months ended March 31, 2008, an increase of $11.6 million or 6%. Stock-based compensation expenses of $16.1 million and $13.2 million, have been included within the selling, general and administrative expenses for the nine months ended March 31, 2009 and 2008 respectively. Selling, general and administrative expenses, as a percentage of net revenue, were 32% for the nine months ended March 31, 2009 compared to 33% for the nine months ended March 31, 2008.

The increase in selling, general and administrative expenses was primarily due to an increase in the number of sales and administrative personnel to support our growth and the increase in stock-based compensation expenses. This increase in selling, general and administrative expenses was partly offset by the net depreciation of international currencies against the US dollar, which reduced our expenditure by approximately $8.7 million and $13.6 million for the three and nine months ended March 31, 2009, respectively, as reported in U.S. dollars. As a percentage of net revenue, we expect our future selling, general and administrative expenses to continue in the range of 30% to 32%.

Research and Development Expenses

Research and development expenses decreased for the three months ended March 31, 2009 to $13.9 million, from the $15.0 million for three months ended March 31, 2008 a decrease of $1.1 million or 7%. Stock-based compensation expenses of $0.7 million and $0.5 million have been included within research and development expenses for the three months ended March 31, 2009 and 2008, respectively. Research and development expenses, as a percentage of net revenue, were 6% for the three months ended March 31, 2009 compared to 7% for the three months ended March 31, 2008.

Research and development expenses increased for the nine months ended March 31, 2009 to $46.1 million from $42.9 million for the nine months ended March 31, 2008, an increase of $3.2 million or 7%. Stock-based compensation expenses of $2.1 million and $1.4 million have been included within research and development expenses for the nine months ended March 31, 2009 and 2008, respectively. Research and development expenses, as a percentage of net revenue, were 7%, for the nine months ended March 31, 2009, which is consistent with the 7% for the nine months ended March 31, 2008.

The increase in research and development expenses was primarily due to an increase in charges for consulting fees and an increase in clinical trials. The increase in research and development expenses was partly offset by the net depreciation of international currencies against the U.S. dollar, which lowered our expenses by approximately $4.4 million and $7.9 million for the three and nine months ended March 31, 2009, as reported in U.S. dollars. As a percentage of net revenue, we expect our future research and development expense to continue in the range of 6% to 7%.

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

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three months and nine months ended March 31, 2009 totaled $1.7 million and $5.3 million, respectively, as compared to $2.0 million and $ 5.7 million for the three months and nine months ended March 31, 2008, respectively. The decrease in amortization expense is mainly attributable to the appreciation of the U.S. dollar against the Euro as the majority of the acquired intangible assets are denominated in Euros.

Donations to Foundation

During the three and nine months ended March 31, 2009, we donated nil and $1.0 million, respectively, to the ResMed Sleep Disordered Breathing Foundation. The Foundation was established primarily to promote research into the deleterious medical consequences of untreated sleep-disordered breathing. A donation of $2.0 million was made during the three and nine months ended March 31, 2008.

Restructuring Expenses

No restructuring expenses were incurred during the three months and nine months ended March 31, 2009 compared to $0.1 million and $2.4 million, respectively, for the three months and nine months ended March 31, 2008. Restructuring expenses consisted of expenses associated with our decision to streamline European management, including the closure of part of the European headquarters in Basel, Switzerland and two regional offices in the Netherlands.

Other Income (Expense), Net

Other income for the three months ended March 31, 2009 was $1.1 million, compared to $6.2 million for the three months ended March 31, 2008. The decrease in other income was predominantly due to the gain on sale of $5.9 million recognized for the disposal of our building at Poway, California during the three months ended March 31, 2008. This was partly offset by the impairment write-down of our at cost-method investments recognized during the three months ended March 31, 2008 of $3.2 million compared to $0.2 million recognized during the three months ended March 31, 2009. The remaining movement is mainly due to foreign currency gains and losses.

Other income (expense), net for the nine months ended March 31, 2009 decreased to $6.9 million compared to $10.2 million for the nine months ended March 31, 2008. The decrease in other income for the nine months ended March 31, 2009 is predominantly due to the gain on sale of $5.9 million recognized for the disposal of our building at Poway, California during the nine months ended March 31, 2008. This was partly offset by the impairment write-down of our at cost-method investments recognized during the nine months ended March 31, 2008 of $3.2 million compared to $1.3 million recognized during the nine months ended March 31, 2009. The remaining movement is mainly due to an increase in net interest income due to higher cash balances and an increase in capitalized interest expense.

Income Taxes

Our effective income tax rate of approximately 26.9% for the three months ended March 31, 2009 was lower than our effective income tax rate of approximately 31.9% for the three months ended March 31, 2008. Our effective income tax rate of approximately 27.4% for the nine months ended March 31, 2009 was lower than our effective tax rate of 30.6% for the nine months ended March 31, 2008.

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

The lower tax rate was primarily due to a change in the geographic mix of taxable income, including the impact of lower taxes associated with our new Singapore manufacturing operation.

Net Income

As a result of the factors above, our net income for the three months ended March 31, 2009 was $39.2 million or $0.51 per diluted share compared to net income of $29.7 million or $0.38 per diluted share for the three months ended March 31, 2008.

As a result of the factors above, our net income for the nine months ended March 31, 2009 was $101.1 million or $1.31 per diluted share compared to net income of $80.7 million or $1.02 per diluted share for the nine months ended March 31, 2008.

Liquidity and Capital Resources

As of March 31, 2009 and June 30, 2008, we had cash and cash equivalents of $327.1 million and $321.1 million, respectively. Working capital was $499.5 million and $546.6 million at March 31, 2009 and June 30, 2008, respectively.

Inventories at March 31, 2009 decreased by $21.8 million or 13% to $147.7 million compared to March 31, 2008 inventories of $169.5 million. The percentage decrease in inventories reflects improved working capital management and the impact of movements in foreign currency exchange rates, particularly the depreciation of the Australian dollar and Euro relative to the U.S. dollar.

Accounts receivable at March 31, 2009 were $196.0 million, an increase of $16.1 million or 9% over the March 31, 2008 accounts receivable balance of $179.9 million. This increase was largely consistent with the 10% incremental increase in revenues for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Accounts receivable days outstanding of 74 days at March 31, 2009, increased by 1 day compared to the 73 days at March 31, 2008. Our allowance for doubtful accounts as a percentage of total accounts receivable at March 31, 2009 and June 30, 2008 was 3.6% and 2.5%, respectively. To date we have not experienced any significant adverse decline in the credit quality of our customers and it remains broadly consistent with our past experience.

During the nine months ended March 31, 2009, we generated cash of $168.6 million from operations. Movements in foreign currency exchange rates during the nine months ended March 31, 2009 had the effect of decreasing our cash and cash equivalents by $84.4 million, as reported in U.S. dollars. Capital expenditures for the nine months ended March 31, 2009, and 2008 aggregated $83.9 million and $57.6 million, respectively. The capital expenditures for the nine months ended March 31, 2009 primarily reflected the construction of our new corporate headquarters in San Diego, California, computer hardware and software, rental and loan equipment and the purchase of production tooling equipment and machinery. As a result of these capital expenditures, our balance sheet reflects net property, plant and equipment of approximately $334.7 million at March 31, 2009.

We are currently developing new corporate headquarters in San Diego, California. To date we have incurred expenditures of $82.5 million in relation to the construction of our new corporate headquarters and we estimate additional construction and fit-out costs of approximately $21.2 million to complete the project. We expect to complete the project in the final quarter of fiscal 2009 and to fund the remaining project costs through a combination of cash on hand and operating cash flows.

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

Liquidity and Capital Resources, Continued



Details of contractual obligations at March 31, 2009 are as follows:



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