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Masimo Reports Fourth Quarter and Full Year 2009 Financial Results

02/16/2010
IRVINE, Calif., Feb 16, 2010 /PRNewswire via COMTEX/ -- Masimo (Nasdaq: MASI), the inventor of Pulse CO-Oximetry and Measure-Through Motion and Low Perfusion pulse oximetry, today announced its financial results for the fourth quarter and year ended January 2, 2010.

Fourth Quarter 2009 Highlights:

  • Product revenues of $80.5 million, up 12% compared to the fourth quarter last year
  • Rainbow revenues of $5.8 million, up 23% compared to the fourth quarter last year
  • Shipped 30,400 Masimo SET and Masimo Rainbow SET pulse oximeter units
  • Diluted EPS of $0.23

Full Year 2009 Highlights:

  • Product revenues of $300.1 million, up 16% compared to 2008
  • Rainbow revenues of $19.5 million, up 46% compared to 2008
  • Shipped over 111,000 Masimo SET and Masimo Rainbow SET pulse oximeter units in 2009
  • Diluted EPS of $0.88

Masimo's fourth quarter product revenues rose 12% to $80.5 million, compared to $71.6 million for the fourth quarter of 2008. Revenues from Masimo Rainbow SET products rose 23% to $5.8 million in the fourth quarter. Including royalty revenues, Masimo's total revenues for the fourth quarter were $92.6 million, up 11% from $83.1 million for the fourth quarter of 2008.

Net income for the fourth quarter was $14.1 million, or $0.23 per diluted share, compared to a net loss of approximately $530,000, or $0.01 per share in the same period last year, which included a $14.9 million, or $0.25 per share, tax charge related primarily to the prepayment of licensing rights to utilize pre-existing intangibles as part of the implementation of a new international business organization and structure.

For 2009, Masimo product revenues rose 16% to $300.1 million, compared to $259.6 million in 2008. Revenues from Masimo Rainbow SET products rose 46% to $19.5 million in 2009. Including royalty revenues, 2009 total revenues were $349.1 million, up 14% from $307.1 million in 2008. Total 2009 direct and distribution revenues were $241.7 million, up 20% from $201.1 million in 2008 while OEM revenues were unchanged at $58.4 million.

Masimo reported 2009 net income of $53.2 million, or $0.88 per diluted share, compared to $31.9 million, or $0.53 per diluted share in 2008, which included the $0.25 per share tax charge related to the prepayment of licensing rights to utilize pre-existing intangibles as part of the implementation of its new international business organization and structure.

During the fourth quarter, the company shipped 30,400 Masimo SET pulse oximetry and Masimo Rainbow SET Pulse CO-Oximetry units, excluding handheld units, compared to 31,700 in the same period last year. Based on a 10-year average useful life assumption, the company estimates its worldwide installed base as of January 2, 2010 to be approximately 724,000 units, compared to approximately 625,000 for the same period last year.

Joe E. Kiani, Chairman and Chief Executive Officer of Masimo, said, "We focus on inventing and delivering breakthrough noninvasive vital signs monitors that help clinicians make better and faster decisions in order to improve the quality and efficiency of patient care. Our fourth quarter and full year 2009 financial results show the fundamental strength of our innovation engine and business model. We attribute our sustained growth to the power of our core Masimo SET pulse oximetry platform, combined with our Masimo Rainbow Pulse CO-Oximetry offering, which is extending use of noninvasive measurements to new applications such as carboxyhemoglobin, methemoglobin, hemoglobin and beyond."

As of January 2, 2010, cash, cash equivalents and short-term investments totaled $189.0 million, up 29% from $146.9 million at January 3, 2009.

Financial Guidance

Masimo expects fiscal 2010 total revenues to be between $390 million and $405 million, including product revenues between $345 million and $360 million, and royalty revenues between $44 million and $46 million. The company expects fiscal 2010 earnings per share to be between $1.12 and $1.18, including approximately $0.15 from a one-time gain related to resolution of an anticompetitive legal matter with Covidien in the first quarter of 2010, offset by expected incremental one-time spending associated with this recovery. The company's guidance also includes an increase in 2010 non-cash stock-based compensation expense to $14.7 million from $10.7 million in 2009. The components of Masimo's guidance set forth above are estimates only and actual performance could differ.

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 code for both dial-in numbers is 52590350. A live web cast of the conference call will be available online from the "Investor Relations" page of the company's corporate web site at www.masimo.com. After the live web cast, the call will remain available on Masimo's website through March 16, 2010. In addition, a telephonic replay of the call will be available through March 2, 2010. The replay dial-in numbers are (800) 642-1687 for domestic callers and +1 (706) 645-9291 for international callers. Please use reservation code 52590350.

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(R), 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(R) Pulse CO-Oximetry(TM), allowing noninvasive and continuous monitoring of blood constituents that previously required invasive procedures, including total hemoglobin (SpHb(R)), oxygen content (SpOC(TM)), carboxyhemoglobin (SpCO(R)), methemoglobin (SpMet(R)), and PVI(R), in addition to SpO2, pulse rate, and perfusion index (PI). In 2009, Masimo introduced Masimo Rainbow SET(R) Acoustic Monitoring(TM), the first-ever noninvasive and continuous monitoring of acoustic respiration rate (RRa(TM)). Masimo's Rainbow platform offers a breakthrough in patient safety by helping clinicians detect life-threatening conditions and helping guide treatment options. 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.

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; expectations regarding our ability to design and deliver innovative new noninvasive technologies; and expectations for total revenues, including royalty revenues, product revenues and Rainbow revenues, non-cash stock based compensation charges, and GAAP earnings per share for the full fiscal year 2010. 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 Corporation
    Investor Contact:
    Sheree Aronson
    Vice President, Investor Relations
    Masimo Corporation
    (949) 297-7043
    saronson@masimo.com

    Media Contact:
    Dana Banks
    Manager, Public Relations
    Masimo Corporation
    (949) 297-7348
    dbanks@masimo.com


Masimo, SET, Signal Extraction Technology, Improving Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications, Rainbow, SpHb, SpOC, SpCO, SpMet, PVI, RRa, Radical-7, Rad-87, Rad-57, Rad-9, Rad-8, Rad-5, Pulse CO-Oximetry and Pulse CO-Oximeter are trademarks or registered trademarks of Masimo Corporation.

                           MASIMO CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                             (in thousands)


                                               January 2,   January 3,
                                                   2010        2009
                                                   ----        ----
                                             (Unaudited)
      ASSETS
      Current assets
            Cash and cash equivalents           $132,054    $146,910
            Short-term investments                56,989         -
            Accounts receivable, net of
             allowance for doubtful accounts      38,897      30,715
            Royalties receivable                  11,500      11,375
            Inventories                           31,559      27,400
            Prepaid expenses                       5,447       4,780
            Deferred tax assets                   11,585      10,511
            Other current assets                   1,357         551
                                                   -----         ---
                Total current assets             289,388     232,242

      Deferred cost of goods sold                 28,163      28,431
      Property and equipment, net                 11,682      12,979
      Deferred tax assets                         11,500       8,781
      Intangible assets, net                       9,829       7,410
      Other assets                                 5,783       3,505
                                                   -----       -----
                Total assets                    $356,345    $293,348
                                                ========    ========


      LIABILITIES AND
       STOCKHOLDERS' EQUITY
      Current liabilities
            Accounts payable                     $16,716     $15,914
            Accrued compensation                  17,793      15,607
            Accrued liabilities                    9,754       5,566
            Income taxes payable                     477      10,862
            Deferred revenue                      14,641      17,233
            Current portion of long-
             term debt                                60         465
                                                     ---         ---
                Total current liabilities         59,441      65,647

      Long-term debt, less
       current portion                               171         157
      Other liabilities                            7,045       8,046
                                                   -----       -----
                Total liabilities                 66,657      73,850

      Stockholders' equity
            Common stock                              58          57
            Treasury stock                        (1,209)     (1,209)
            Additional paid-in capital           195,690     179,666
            Accumulated other comprehensive
             income (loss)                            63          (7)
            Retained earnings                     94,112      40,884
                                                  ------      ------
                Total Masimo Corporation
                 stockholders' equity            288,714     219,391
                Noncontrolling interest              974         107
                                                     ---         ---
                Total stockholders' equity       289,688     219,498
                                                 -------     -------
                Total liabilities and
                 stockholders' equity           $356,345    $293,348
                                                ========    ========



                                  MASIMO CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share information)
                                      (Unaudited)


                                Three Months Ended      Twelve Months Ended
                                ------------------      -------------------
                               January 2,   January 3,  January 2,  January 3,
                                  2010         2009        2010         2009
                                  ----         ----        ----         ----

      Revenue:
            Product             $80,453      $71,638    $300,143     $259,592
            Royalty              12,160       11,428      48,972       47,482
                                 ------       ------      ------       ------
      Total revenue              92,613       83,066     349,115      307,074
      Cost of goods sold         26,796       24,537     100,313       89,454
                                 ------       ------     -------       ------
      Gross profit               65,817       58,529     248,802      217,620
      Operating expenses:
            Research and
             development          8,940        7,197      31,701       25,495
            Selling, general and
             administrative      35,455       31,007     134,577      120,069
            Antitrust litigation     70          215         298          706
                                     --          ---         ---          ---
      Total operating
       expenses                  44,465       38,419     166,576      146,270
                                 ------       ------     -------      -------
      Operating income           21,352       20,110      82,226       71,350
      Non-operating income
       (expense):
            Interest income          17          176         178        2,305
            Interest expense         (4)         (31)        (75)        (753)
            Other                  (435)        (276)       (149)        (511)
                                   ----         ----        ----         ----
      Total non-operating
       income (expense)            (422)        (131)        (46)       1,041
                                   ----         ----         ---        -----
      Income before
       provision for
       income taxes              20,930       19,979      82,180       72,391
      Provision for income
       taxes                      6,744       20,509      28,158       40,464
                                  -----       ------      ------       ------
      Net income (loss)
       including
       noncontrolling
       interest                  14,186         (530)     54,022       31,927
      Net income
       attributable to
       noncontrolling
       interest                    (126)       -            (794)       -
                                   ----       ------        ----       ------
      Net income (loss)
       attributable to
       Masimo Corporation       $14,060        $(530)    $53,228      $31,927
                                =======        =====     =======      =======

      Net income (loss)
       per share
       attributable to
       Masimo
       Corporation
       stockholders:
            Basic                 $0.24       $(0.01)      $0.92        $0.57
                                  =====       ======       =====        =====

            Diluted               $0.23       $(0.01)      $0.88        $0.53
                                  =====       ======       =====        =====



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

                                 Three Months Ended     Twelve Months Ended
                                 ------------------     -------------------
                               January 2,  January 3, January 2,  January 3,
                                  2010        2009       2010        2009
                                  ----        ----       ----        ----
      Cost of goods sold          $140         $98       $413        $257
      Research and development     663         609      2,541       2,236
      Selling, general and
       administrative           $1,968      $1,271     $7,720      $5,223



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

                                                        Twelve Months Ended
                                                        -------------------
                                                      January 2,   January 3,
                                                         2010          2009
                                                         ----          ----
      Cash flows from operating
       activities:
            Net income including
             noncontrolling interest                    $54,022       $31,927
            Adjustments to reconcile net
             income including
             noncontrolling interest to
             net cash provided by
             operating activities:
                Depreciation and
                 amortization                             5,979         5,745
                Share-based payment                      10,674         7,716
                Loss on disposal of
                 property and equipment                       5            91
                Provision for doubtful
                 accounts                                   733           108
                Provision for obsolete
                 inventory                                  232         1,352
                Provision for warranty
                 costs                                    2,220         1,646
                Provision (benefit) for
                 deferred income taxes                   (3,566)          447
                Income tax benefit from
                 exercise of stock options
                 granted prior to January
                 1, 2006                                  2,758        17,201
                Excess tax benefits from
                 share-based payment
                 arrangements                              (215)       (1,889)
                Changes in operating
                 assets and liabilities:
                      Increase in accounts
                       receivable                        (8,982)       (3,191)
                      (Increase) decrease in
                       royalties receivable                (125)        2,491
                      Increase in inventories            (3,929)       (5,588)
                      (Increase) decrease in
                       deferred cost of goods
                       sold                                 309        (2,232)
                      (Increase) decrease in
                       prepaid expenses                    (636)        2,322
                      (Increase) decrease in other
                       assets                            (3,065)        1,163
                      Increase in accounts
                       payable                              777         1,264
                      Increase in accrued
                       compensation                       1,926         3,121
                      Increase (decrease) in
                       accrued liabilities                1,935        (2,485)
                      Increase (decrease) in
                       income taxes payable             (10,169)       12,754
                      Increase (decrease) in
                       deferred revenue                  (2,518)          111
                      Increase (decrease) in other
                       liabilities                       (1,244)        4,104
                                                         ------         -----
      Net cash provided by
       operating activities                              47,121        78,178
                                                         ------        ------

      Cash flows from investing
       activities:
                Purchases of property and
                 equipment                               (3,636)       (6,852)
                Purchase of short-term
                 investments                            (56,989)          -
                Increase in intangible
                 assets                                  (1,851)       (2,523)
                Increase in restricted cash                 (15)          (67)
                Cash paid for acquisitions               (1,981)          -
                                                         ------           ---
      Net cash used in investing
       activities                                       (64,472)       (9,442)
                                                        -------        ------

      Cash flows from financing
       activities:
            Repayments on long-
             term debt                                     (450)      (30,436)
            Proceeds from issuance of
             common stock                                 2,575         9,755
            Excess tax benefits from
             share-based payment
             arrangements                                   215         1,889
            Dividends paid                                  -             (13)
                                                            ---           ---
      Net cash provided by
       (used in) financing
       activities                                         2,340       (18,805)
                                                          -----       -------

      Effect of foreign currency
       exchange rates on cash                               155           246
                                                            ---           ---

      Net increase (decrease)
       in cash and cash
       equivalents                                      (14,856)       50,177
      Cash and cash equivalents at
       beginning of period                              146,910        96,733
                                                        -------        ------

      Cash and cash equivalents
       at end of period                                $132,054      $146,910
                                                       ========      ========



SOURCE Masimo Corporation

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