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Masimo Reports Third Quarter 2009 Financial Results

11/03/2009
Q3 2009 Highlights:

IRVINE, Calif., Nov. 3 /PRNewswire-FirstCall/ -- Masimo Corporation (Nasdaq: MASI), the inventor of Pulse CO-Oximetry(TM) and Measure-Through Motion and Low-Perfusion pulse oximetry, today announced its financial results for the third quarter of 2009.

For the third quarter of 2009, Masimo reported product revenues of $75.1 million representing a 14% increase over $66.1 million for the third quarter of 2008. Including royalty revenues, Masimo reported total 2009 third quarter revenues of $87.4 million compared to $78.1 million for the third quarter of 2008. For the third quarter of 2009, Masimo reported earnings per share of $0.22 compared to $0.22 per share for the third quarter of 2008.

Masimo reported that it shipped 26,200 Masimo SET and Masimo Rainbow SET pulse oximetry units, excluding handheld units, during the third quarter of 2009, resulting in over 600,000 Masimo SET and Masimo Rainbow SET pulse oximeters in use worldwide. In the third quarter of 2009, revenues from Masimo Rainbow SET products increased to $6.0 million from $3.0 million in the same prior year quarter.

For the first nine months of 2009, Masimo reported product revenues of $219.7 million representing a 17% increase over $188.0 million for the first nine months of 2008. Including royalty revenues, Masimo reported total 2009 year to date revenues of $256.5 million compared to $224.0 million for the prior year period. For the first nine months of 2009, Masimo reported earnings per share of $0.65, up 20% from $0.54 per share for the first nine months of 2008.

Joe E. Kiani, Chairman and Chief Executive Officer of Masimo, said, "We are encouraged by the continuing growth of our business, especially during a period of historical economic turmoil. We are seeing great enthusiasm combined with solid growth for our latest innovation, Masimo Rainbow SET technology, which has ushered in new noninvasive measurements, including hemoglobin and carbon monoxide."

Masimo also reported that as of October 3, 2009, cash and cash equivalents totaled $174.7 million, up from $146.9 million at January 3, 2009.

Conference Call

Masimo will hold a conference call today at 1:30 p.m. PT (4:30 p.m. ET) to discuss the results. The dial-in numbers are (888) 520-7182 for domestic callers and +1 (706) 679-9937 for international callers. The reservation number for both dial-in numbers is 35275093. A live web cast of the conference call will be available online from the "Investor Relations" page of the Company's corporate website at www.masimo.com. After the live web cast, the call will remain available on Masimo's website through December 3, 2009. In addition, a telephonic replay of the call will be available until November 17, 2009. The replay dial-in numbers are (800) 642-1687 for domestic callers and +1 (706) 645-9291 for international callers. Please use reservation code 35275093.

About Masimo

Masimo (NASDAQ: MASI) develops innovative monitoring technologies that significantly improve patient care-helping solve "unsolvable" problems. In 1995, the company debuted Measure-Through Motion and Low-Perfusion pulse oximetry, known as Masimo SET®, which virtually eliminated false alarms and increased pulse oximetry's ability to detect life-threatening events. More than 100 independent and objective studies demonstrate Masimo SET provides the most reliable SpO2 and pulse rate measurements even under the most challenging clinical conditions, including patient motion and low peripheral perfusion. In 2005, Masimo introduced Masimo Rainbow SET® Pulse CO-Oximetry(TM), a breakthrough noninvasive blood constituent monitoring platform that can measure many blood constituents that previously required invasive procedures. Rainbow SET continuously and noninvasively measures total hemoglobin (SpHb(TM)), oxygen content (SpOC(TM)), carboxyhemoglobin (SpCO®), methemoglobin (SpMet®), and PVI®, in addition to oxyhemoglobin (SpO2), pulse rate (PR), and perfusion index (PI), allowing early detection and treatment of potentially life-threatening conditions. Founded in 1989, Masimo has the mission of "Improving Patient Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications." Additional information about Masimo and its products may be found at www.masimo.com. Information on the company's website does not form part of this press release.

Forward-Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about: our financial condition, results of operations, prospects and business generally; and expectations regarding our ability to design and deliver innovative new noninvasive technologies. These forward-looking statements are based on management's current expectations and beliefs and are subject to uncertainties and factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our dependence on Masimo SET and Masimo Rainbow SET products and technologies for substantially all of our revenue; any failure in protecting our intellectual property exposure to competitors' assertions of intellectual property claims; the highly competitive nature of the markets in which we sell our products and technologies; any failure to continue developing innovative products and technologies; the lack of acceptance of any new products and technologies of ours; obtaining regulatory approval of our current and future products and technologies, including the recently announced total hemoglobin measurement; the risk that the implementation of our international realignment will not produce the anticipated operational and financial benefits, including a continued lower effective tax rate; the loss of our customers the failure to retain and recruit senior management; product liability claims exposure; a failure to obtain expected returns from the amount of intangible assets we have recorded; the maintenance of our brand; the impact of the decline in the worldwide credit markets on us and our customers; the amount and type of equity awards that we may grant to employees and service providers in the future; and other factors discussed in the "Risk Factors" section of our most recent periodic reports filed with the Securities and Exchange Commission ("SEC"), which you may obtain for free on the SEC's website at www.sec.gov. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Masimo, SET, Signal Extraction Technology, Improving Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications, Rainbow, SpHb, SpCO, SpMet, PVI, Pulse CO-Oximetry and Pulse CO-Oximeter are trademarks or registered trademarks of Masimo Corporation.

                            MASIMO CORPORATION
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)


                                                  October 3,  January 3,
                                                     2009        2009
                                                     ----        ----
                                                 (Unaudited)
      ASSETS
      Current assets
            Cash and cash equivalents             $174,686    $146,910
            Accounts receivable, net of
             allowance for
             doubtful accounts                      39,222      30,715
            Royalties receivable                    11,434      11,375
            Inventories                             31,254      27,400
            Prepaid expenses                         7,267       4,780
            Deferred tax assets                     10,511      10,511
            Other current assets                       793         551
                                                       ---         ---
                      Total current assets         275,167     232,242
      Deferred cost of goods sold                   27,600      28,431
      Property and equipment, net                   12,118      12,979
      Deferred tax assets                            8,817       8,781
      Intangible assets, net                         7,825       7,410
      Other assets                                   4,462       3,505
                                                     -----       -----
                      Total assets                $335,989    $293,348
                                                  ========    ========

      LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities
            Accounts payable                       $13,806     $15,914
            Accrued compensation                    17,051      15,607
            Accrued liabilities                      7,168       5,566
            Income taxes payable                       890      10,862
            Deferred revenue                        17,314      17,233
            Current portion of long-term debt          226         465
                                                       ---         ---
                      Total current
                       liabilities                  56,455      65,647
      Long-term debt, less current portion             187         157
      Other liabilities                              8,667       8,046
                                                     -----       -----
                      Total liabilities             65,309      73,850

      Stockholders' equity
            Common stock                                58          57
            Treasury stock                          (1,209)     (1,209)
            Additional paid-in capital             190,832     179,666
            Accumulated other comprehensive
             income (loss)                             120          (7)
            Retained earnings                       80,052      40,884
                                                    ------      ------
                Total Masimo Corporation
                 stockholders' equity              269,853     219,391
                Noncontrolling interest                827         107
                                                       ---         ---
                      Total stockholders' equity   270,680     219,498
                                                   -------     -------
                      Total liabilities and
                       stockholders' equity       $335,989    $293,348
                                                  ========    ========



                                    MASIMO CORPORATION
                       CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                         (in thousands, except share information)
                                       (unaudited)

                             Three Months Ended          Nine Months Ended
                             ------------------          -----------------
                          October 3,  September 27,  October 3,  September 27,
                             2009          2008         2009          2008
                             ----          ----         ----          ----
      Revenue:
            Product        $75,146        $66,125    $219,690       $187,954
            Royalty         12,295         12,007      36,812         36,054
                            ------         ------      ------         ------
      Total revenue         87,441         78,132     256,502        224,008
      Cost of
       goods sold           25,198         22,393      73,517         64,917
                            ------         ------      ------         ------
      Gross profit          62,243         55,739     182,985        159,091
      Operating expenses:
            Research and
             development     7,742          6,020      22,761         18,298
            Selling,
             general and
             administrative 33,476         29,167      99,122         89,062
            Antitrust
             litigation        185             46         228            491
                               ---            ---         ---            ---
      Total operating
       expenses             41,403         35,233     122,111        107,851
                            ------         ------     -------        -------
      Operating income      20,840         20,506      60,874         51,240
      Non-operating
       income (expense):
            Interest income     48            545         161          2,129
            Interest expense   (54)           (19)        (71)          (722)
            Other              301           (413)        286           (235)
                               ---           ----         ---           ----
      Total non-operating
       income (expense)        295            113         376          1,172
                               ---            ---         ---          -----
      Income before
       provision for
       income taxes         21,135         20,619      61,250         52,412
      Provision for
       income taxes          7,814          7,554      21,414         19,955
                             -----          -----      ------         ------
      Net income including
       noncontrolling
       interest             13,321         13,065      39,836         32,457
      Net income
       attributable to
       the noncontrolling
       interest               (266)             -        (668)             -
                              ----            ---        ----            ---
      Net income
       attributable
       to Masimo
       Corporation         $13,055        $13,065     $39,168        $32,457
                           =======        =======     =======        =======

      Net income per
       share attributable
       to Masimo
       Corporation
       stockholders:
            Basic            $0.23          $0.23       $0.68          $0.58
                             =====          =====       =====          =====
            Diluted          $0.22          $0.22       $0.65          $0.54
                             =====          =====       =====          =====



    The following table presents details of the share based compensation
    expense that is included in each functional line item in the condensed
    consolidated statements of income above (in thousands):

                             Three Months Ended         Nine Months Ended
                             ------------------          -----------------
                          October 3,   September 27, October 3,  September 27,
                             2009           2008        2009          2008
                             ----           ----        ----          ----
      Cost of goods sold     $102            $55        $273          $159
      Research and
       development            645            608       1,878         1,627
      Selling, general and
       administrative      $1,683         $1,328      $5,752        $3,952



                                MASIMO CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (in thousands)
                                    (unaudited)

                                                        Nine Months Ended
                                                        -----------------
                                                     October 3,  September 27,
                                                        2009          2008
                                                        ----          ----
      Cash flows from operating
       activities:
            Net income including
             noncontrolling interest                   $39,836        $32,457
            Adjustments to reconcile net
             income including
             noncontrolling interest to net
             cash provided by operating
             activities:
                Depreciation and amortization            4,512          4,226
                Share based compensation                 7,903          5,738
                Loss on disposal of
                 property and equipment                      3              -
                Provision for doubtful
                 accounts                                  682             20
                Provision for obsolete
                 inventory                                 346          1,175
                Provision for warranty costs             1,582          1,085
                Income tax benefit from
                 exercise of stock options               1,403         14,488
                Excess tax benefit from share
                 based payment arrangements               (185)        (2,449)
                Changes in operating assets
                 and liabilities:
                      Increase in accounts
                       receivable                       (9,377)        (2,428)
                      (Increase) decrease in
                       royalties receivable                (59)         2,491
                      Increase in inventories           (4,233)        (7,287)
                      (Increase) decrease in
                       deferred cost of goods
                       sold                                891           (797)
                      Increase in prepaid expenses      (2,407)          (887)
                      (Increase) decrease in other
                       assets                           (1,165)         1,422
                      Decrease in accounts payable      (2,124)          (126)
                      Increase in accrued
                       compensation                      1,191            882
                      Decrease in accrued
                       liabilities                         (48)        (1,397)
                      Increase (decrease) in
                       income taxes payable             (9,781)         2,453
                      Increase (decrease) in
                       deferred revenue                    (99)         1,516
                      Increase in other liabilities        833             65
                                                           ---            ---
      Net cash provided by
       operating activities                             29,704         52,647
                                                        ------         ------

      Cash flows from investing
       activities:
            Purchases of property and
             equipment                                  (2,889)        (5,344)
            Increase in intangible assets               (1,100)        (2,195)
            Increase in restricted cash                    (15)             -
                                                           ---            ---
      Net cash used in investing
       activities                                       (4,004)        (7,539)
                                                        ------         ------

      Cash flows from financing
       activities:
            Repayments on long-term debt                  (268)       (30,310)
            Proceeds from issuance of
             common stock                                1,834          8,477
            Excess tax benefit from share
             based payment arrangements                    185          2,449
            Dividends paid                                   -            (13)
                                                           ---            ---
      Net cash provided by (used in)
       financing activities                              1,751        (19,397)
      Effect of foreign currency
       exchange rates on cash                              325            159
                                                           ---            ---
      Net increase in cash and
       cash equivalents                                 27,776         25,870
      Cash and cash equivalents at
       beginning of period                             146,910         96,733
                                                       -------         ------
      Cash and cash equivalents
       at end of period                               $174,686       $122,603
                                                      ========       ========



SOURCE Masimo Corporation

Investors,
Mark P. de Raad,
Executive Vice President and Chief Financial Officer,
+1-949-297-7080,
mderaad@masimo.com,
or
Media,
Dana Banks,
Manager, Public Relations,
+1-949-297-7348,
dbanks@masimo.com,
both of Masimo Corporation

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