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Masimo Reports Second Quarter 2010 Financial Results

08/03/2010

Total quarterly revenue exceeds $100 million for first time in company's history
Q2 2010 Highlights (compared to Q2 2009):
-- Total revenue rose 20% to $100.1 million
-- Product revenue rose 26% to $88.0 million
-- Masimo SET and Masimo Rainbow SET unit shipments rose 35% to 36,700
-- Rainbow revenue rose 60% to $7.2 million
-- GAAP EPS of $0.24 included $0.01 in one-time expenses. Adjusted EPS of $0.25, compared to $0.22 in year-ago period

IRVINE, Calif., Aug 03, 2010 /PRNewswire via COMTEX/ -- Masimo Corporation (Nasdaq: MASI), today announced its financial results for the second quarter of 2010.

Masimo's total revenue for the second quarter rose 19.8% to $100.1 million, compared to $83.6 million for the second quarter of 2009. Masimo's second quarter product revenue rose 25.6% to $88.0 million, compared to $70.0 million for the second quarter of 2009. Revenue from Masimo Rainbow SET products rose 59.5% to $7.2 million in the second quarter, compared to $4.5 million for the second quarter of 2009.

Net income for the second quarter was $14.3 million, or $0.24 per diluted share, including $0.01 per diluted share in one-time marketing-related expenses that Masimo had previously planned and announced after receiving $30.1 million in proceeds from an antitrust lawsuit against Covidien in the first quarter of 2010. Excluding these one-time expenses, adjusted net income for the second quarter was $15.2 million, or $0.25 per diluted share, compared to net income of $13.1 million, or $0.22 per diluted share, in the second quarter of 2009.

During the second quarter, the company shipped 36,700 Masimo SET pulse oximetry and Masimo Rainbow SET Pulse CO-Oximetry units, excluding handheld units, up 35.4% compared to 27,100 in the same period last year. Masimo estimates its worldwide installed base as of July 3, 2010 to be 789,000 units, up 16.9% from 675,000 as of July 4, 2009.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Masimo's second quarter results reveal momentum across virtually all parts of our business, demonstrating the underlying strength and value of our technology to clinicians and patients. Our core SET franchise grew by double digits again this quarter and revenue from Rainbow SET products achieved a new high, allowing Masimo to deliver our first-ever $100 million revenue quarter. Our second quarter performance reflects strong domestic and international customer demand from both our direct and OEM sales channels. The quarter was also highlighted by the launch of two new Masimo innovations: Rainbow Acoustic Monitoring for continuous and noninvasive respiration rate monitoring, and Pronto-7, a palm-sized device for noninvasive spot-check hemoglobin testing."

As of July 3, 2010, cash, cash equivalents and short-term investments totaled $111.0 million, compared to $189.0 million as of January 2, 2010. The decline was due primarily to the March 31, 2010 dividend payment of $117.5 million, partially offset by the net proceeds from the antitrust lawsuit and operating cash flow in the first six months of 2010.

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 88305128. A live webcast of the conference call will be available online from the investor relations page of the company's corporate web site at http://www.masimo.com/. After the live webcast, the call will be available on Masimo's website through September 3, 2010. In addition, a telephonic replay of the call will be available through August 17, 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 88305128.

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 Rainbow Pulse CO-Oximetry(TM), allowing noninvasive and continuous monitoring of blood constituents that previously required invasive procedures, including total hemoglobin (SpHb®), oxygen content (SpOC(TM)), carboxyhemoglobin (SpCO®), methemoglobin (SpMet®), and Pleth Variability Index (PVI®), in addition to SpO2, pulse rate, and perfusion index (PI). In 2009, Masimo introduced Rainbow 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 http://www.masimo.com/. Any information contained in, or that can be accessed through, our website is not incorporated by reference into, nor is it in any way a part of, this 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 and business generally. 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 or existing products and technologies of ours; obtaining regulatory approval of our current and future products and technologies; the risk that the implementation of our international realignment will not continue to 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.

    Investor Contact: Sheree Aronson    Media Contact: Dana Banks
    Vice President, Investor Relations,  Manager, Public Relations, Masimo
     Masimo Corporation                  Corporation
    (949) 297-7043                      (949) 297-7348
    saronson@masimo.com                 dbanks@masimo.com

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

                            MASIMO CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                        (unaudited, in thousands)
                                                      July 3,    January 2,
                                                           2010        2010
                                                           ----        ----
     ASSETS
     Current assets
          Cash and cash equivalents                    $110,971    $132,054
          Short-term investments                              -      56,989
          Accounts receivable, net of allowance for
           doubtful accounts                             49,093      38,897
          Royalties receivable                           11,500      11,500
          Inventories                                    37,110      31,559
          Prepaid expenses                                4,158       5,447
          Deferred tax assets                            11,589      11,585
          Other current assets                            1,445       1,357
                                                            ---         ---
       Total current assets                             225,866     289,388
     Deferred cost of goods sold                         32,557      28,163
     Property and equipment, net                         13,083      11,682
     Deferred tax assets                                 11,363      11,500
     Intangible assets, net                              10,129       9,829
     Other assets                                         7,653       5,783
                                                            ---         ---
       Total assets                                    $300,651    $356,345
                                                       ========    ========
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities
          Accounts payable                              $21,751     $16,716
          Accrued compensation                           15,833      17,793
          Accrued liabilities                             9,541       9,754
          Income taxes payable                            1,013         477
          Deferred revenue                               15,585      14,641
          Current portion of capital lease obligation        58          60
                                                              -           -
        Total current liabilities                        63,781      59,441
     Deferred revenue                                     2,029         270
     Capital lease obligation, less current
      portion                                               145         171
     Other liabilities                                    7,839       6,775
                                                            ---         ---
       Total liabilities                                 73,794      66,657
     Stockholders' equity
          Common stock                                       59          58
          Treasury stock                                 (1,209)     (1,209)
          Additional paid-in capital                    208,329     195,690
          Accumulated other comprehensive income            517          63
          Retained earnings                              17,603      94,112
                                                           ----        ----
       Total Masimo Corporation stockholders'
        equity                                          225,299     288,714
       Noncontrolling interest                            1,558         974
                                                            ---           -
       Total stockholders' equity                       226,857     289,688
                                                          -----       -----
       Total liabilities and stockholders' equity      $300,651    $356,345
                                                       ========    ========

                                MASIMO CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (unaudited, in thousands, except per share amounts)
                                   Three Months Ended        Six Months Ended
                                   ------------------        ----------------
                                  July 3,     July 4,   July 3,     July 4,
                                      2010        2009      2010        2009
                                      ----        ----      ----        ----
      Revenue:
             Product               $87,958     $70,047  $173,824    $144,544
             Royalty                12,122      13,522    25,021      24,517
                                    ------      ------    ------        ----
      Total revenue                100,080      83,569   198,845     169,061
      Cost of goods sold            29,775      23,574    59,003      48,319
                                    ------      ------    ------        ----
      Gross profit                  70,305      59,995   139,842     120,742
      Operating expenses:
             Research and
              development            9,051       7,252    18,461      15,019
             Selling, general and
              administrative        41,004      32,766    90,315      65,646
             Antitrust litigation
              expense (proceeds)      (760)         29   (30,728)         43
                                      ----         ---   -------         ---
      Total operating
       expenses                     49,295      40,047    78,048      80,708
                                    ------      ------    ------      ------
      Operating income              21,010      19,948    61,794      40,034
      Non-operating income
       (expense)                       309         368       (38)         81
                                       ---         ---       ---         ---
      Income before
       provision for income
       taxes                        21,319      20,316    61,756      40,115
      Provision for income
       taxes                         7,403       7,065    21,676      13,600
                                     -----       -----    ------      ------
      Net income including
       noncontrolling
       interests                    13,916      13,251    40,080      26,515
      Net (income) loss
       attributable to the
       noncontrolling
       interests                       371        (159)      917        (402)
                                       ---        ----       ---        ----
      Net income
       attributable to
       Masimo Corporation          $14,287     $13,092   $40,997     $26,113
                                   =======     =======   =======     =======
      Net income per share
       attributable to
       Masimo Corporation
       stockholders:
             Basic                   $0.24       $0.23     $0.70       $0.45
                                     =====       =====     =====       =====
             Diluted                 $0.24       $0.22     $0.68       $0.43
                                     =====       =====     =====       =====
      Weighted average
       shares used in per
       share calculations:
             Basic                  58,798      57,552    58,532      57,480
                                    ======      ======    ======      ======
             Diluted                60,510      60,185    60,496      60,177
                                    ======      ======    ======      ======
    Cash dividend
     declared per share                 $-          $-     $2.00          $-
                                       ===         ===     =====         ===

                          MASIMO CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (unaudited, in thousands)
                                                         Six Months Ended
                                                         ----------------
                                                   July 3, 2010  July 4, 2009
                                                   ------------  ------------
     Cash flows from operating activities:
            Net income including noncontrolling
             interests                                  $40,080       $26,515
            Adjustments to reconcile net income
             including noncontrolling interests to
             net cash provided by operating
             activities:
            Depreciation and amortization                 3,151         3,063
            Share-based compensation                      6,318         5,473
            Loss on disposal of property and
             equipment                                        -             5
            Provision for doubtful accounts                 154           370
            Provision for obsolete inventory                359           527
            Provision for warranty costs                  1,150           981
            Provision for deferred income taxes             133             -
            Income tax benefit from exercise of
             stock options granted prior to
             January 1, 2006                              1,631           820
            Excess tax benefit from share-based
             payment arrangements                          (537)         (152)
            Changes in operating assets and
             liabilities:
        Increase in accounts receivable                 (10,338)       (8,295)
        Decrease in royalties receivable                      -           269
        Increase in inventories                          (5,910)       (2,994)
        Increase in deferred cost of goods
         sold                                            (4,499)         (497)
        (Increase) decrease in prepaid expense            1,243        (2,148)
        Increase in other assets                         (2,003)         (250)
        Increase (decrease) in accounts
         payable                                          5,084        (1,869)
        Decrease in accrued compensation                 (1,752)       (2,000)
        Decrease in accrued liabilities                  (1,291)         (192)
        Increase (decrease) in income taxes
         payable                                          1,073       (10,403)
        Increase in deferred revenue                      2,703         1,493
        Increase in other liabilities                     1,064           416
                                                          -----             -
     Net cash provided by operating
      activities                                         37,813        11,132
                                                         ------        ------
     Cash flows from investing activities:
            Purchase of short-term investments          (75,986)            -
            Proceeds from sale and maturities of
             short-term investments                     132,975             -
            Purchases of property and equipment          (3,930)       (1,987)
            Increase in intangible assets                  (911)         (743)
            (Increase) decrease in restricted cash           40           (15)
                                                            ---           ---
     Net cash provided by (used in)
      investing activities                               52,188        (2,745)
                                                         ------        ------
     Cash flows from financing activities:
            Repayments on long-term debt                    (28)         (255)
            Proceeds from issuance of common stock        5,662         1,415
            Excess tax benefit from share-based
             payment arrangements                           537           152
            Dividends paid                             (117,506)            -
                                                       --------             -
     Net cash provided by (used in)
      financing activities                             (111,335)        1,312
     Effect of foreign currency exchange
      rates on cash                                         251           (43)
                                                            ---           ---
     Net increase (decrease) in cash and
      cash equivalents                                  (21,083)        9,656
     Cash and cash equivalents at beginning
      of period                                         132,054       146,910
                                                        -------       -------
     Cash and cash equivalents at end of
      period                                           $110,971      $156,566
                                                       ========      ========

SOURCE Masimo Corporation

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