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Masimo Reports Third Quarter 2010 Financial Results

11/02/2010
Product revenue grew 18% as rainbow revenue nearly doubled

IRVINE, Calif., Nov. 2, 2010 /PRNewswire via COMTEX/ -- Q3 2010 Highlights (compared to Q3 2009):

  • Total revenue rose 15.5% to $101.0 million
  • Product revenue rose 18.2% to $88.8 million
  • Masimo SET and Masimo rainbow SET unit shipments rose 43.1% to 37,500
  • Masimo rainbow revenue rose 98.7% to $11.9 million
  • GAAP EPS rose 22.7% to $0.27. Excluding $0.01 in one-time expenses, adjusted EPS rose 27.3% to $0.28

Masimo Corporation (Nasdaq: MASI) today announced its financial results for the third quarter of 2010.

Masimo's total revenue for the third quarter rose 15.5% to $101.0 million, compared to $87.4 million for the third quarter of 2009. Masimo's third quarter product revenue rose 18.2% to $88.8 million, compared to $75.1 million for the third quarter of 2009. Revenue from Masimo rainbow products rose 98.7% to $11.9 million in the third quarter, compared to $6.0 million for the third quarter of 2009.

Net income for the third quarter was $16.4 million, or $0.27 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 in the first quarter of 2010 from an antitrust lawsuit against Covidien. Excluding these one-time expenses, adjusted net income for the third quarter was $16.9 million, or $0.28 per diluted share, compared to net income of $13.1 million, or $0.22 per diluted share, in the third quarter of 2009.

During the third quarter, the company shipped approximately 37,500 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, up 43.1% compared to approximately 26,200 in the same period last year. Masimo estimates its worldwide installed base as of October 2, 2010 to be 821,000 units, up 17.8% from 697,000 units as of October 3, 2009.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Masimo continues to pursue its mission to improve patient outcomes and reduce healthcare costs by taking noninvasive monitoring to new sites and applications. Our third-quarter results demonstrate the strength of our technology and mission."

As of October 2, 2010, cash, cash equivalents and short-term investments totaled $125.4 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 nine 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 17706796. After the live webcast, the call will be available on Masimo's website through December 2, 2010. In addition, a telephonic replay of the call will be available through November 16, 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 17706796.

About Masimo

Masimo (NASDAQ: MASI) is the global leader in innovative noninvasive 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 rainbow(R) SET Pulse CO-Oximetry(TM) technology, 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 Pleth Variability Index (PVI(R)), in addition to SpO2, pulse rate, and perfusion index (PI). In 2008, Masimo introduced Patient SafetyNet(TM), a remote monitoring and wireless clinician notification system designed to help hospitals avoid preventable deaths and injuries associated with failure to rescue events. In 2009, Masimo introduced rainbow Acoustic Monitoring(TM), the first-ever noninvasive and continuous monitoring of acoustic respiration rate (RRa(TM)). Masimo's rainbow SET technology platform offers a breakthrough in patient safety by helping clinicians detect life-threatening conditions and helping guide treatment options. In 2010, Masimo acquired SEDLine(R), a pioneer in the development of innovative brain function monitoring technology and devices. Masimo SET and Masimo rainbow SET technologies can also be found in over 100 multiparameter patient monitors from over 50 medical device manufacturers around the world. 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(R)." Additional information about Masimo and its products may be found at http://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 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 of our current or future products and technologies; 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 http://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, Masimo Corporation

Manager, Public Relations, Masimo 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)






October 2,


January2,


2010


2010

ASSETS




Current assets




Cash and cash equivalents

$ 125,407


$ 132,054

Short-term investments

--


56,989

Accounts receivable, net of allowance for doubtful accounts

49,330


38,897

Royalties receivable

11,500


11,500

Inventories

43,401


31,559

Prepaid expenses

4,966


5,447

Deferred tax assets

11,586


11,585

Other current assets

1,729


1,357

Total current assets

247,919


289,388

Deferred cost of goods sold

35,334


28,163

Property and equipment, net

13,822


11,682

Deferred tax assets

11,380


11,500

Intangible assets, net

10,294


9,829

Other assets

8,117


5,783

Total assets

$ 326,866


$ 356,345





LIABILITIES AND EQUITY




Current liabilities




Accounts payable

$ 23,892


$ 16,716

Accrued compensation

19,478


17,793

Accrued liabilities

10,814


9,754

Income taxes payable

1,021


477

Deferred revenue

14,624


14,641

Current portion of capital lease obligations

54


60

Total current liabilities

69,883


59,441

Deferred revenue

1,979


270

Capital lease obligations, less current portion

134


171

Other liabilities

7,490


6,775

Total liabilities

79,486


66,657





Equity




Masimo Corporation stockholders' equity:




Common stock

59


58

Treasury stock

(1,209)


(1,209)

Additional paid-in capital

211,882


195,690

Accumulated other comprehensive income

775


63

Retained earnings

34,022


94,112

Total Masimo Corporation stockholders' equity

245,529


288,714

Noncontrolling interest

1,851


974

Total equity

247,380


289,688

Total liabilities and equity

$ 326,866


$ 356,345

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands, except per share amounts)










Three Months Ended


Nine Months Ended


October 2,


October3,


October 2,


October3,


2010


2009


2010


2009

Revenue:








Product

$ 88,823


$ 75,146


$ 262,647


$ 219,690

Royalty

12,165


12,295


37,186


36,812

Total revenue

100,988


87,441


299,833


256,502

Cost of goods sold

29,376


25,198


88,379


73,517

Gross profit

71,612


62,243


211,454


182,985

Operating expenses:








Research and development

9,227


7,742


27,688


22,761

Selling, general and administrative

39,547


33,476


129,862


99,122

Antitrust litigation expense (proceeds)

--


185


(30,728)


228

Total operating expenses

48,774


41,403


126,822


122,111

Operating income

22,838


20,840


84,632


60,874

Non-operating income

1,232


295


1,194


376

Income before provision for income taxes

24,070


21,135


85,826


61,250

Provision for income taxes

7,376


7,814


29,052


21,414

Net income including noncontrolling interests

16,694


13,321


56,774


39,836

Net (income) loss attributable to the noncontrolling interests

(275)


(266)


642


(668)

Net income attributable to Masimo Corporation

$ 16,419


$ 13,055


$ 57,416


$ 39,168









Net income per share attributable to Masimo Corporation

stockholders:








Basic

$ 0.28


$ 0.23


$ 0.98


$ 0.68

Diluted

$ 0.27


$ 0.22


$ 0.95


$ 0.65









Weighted average shares used in per share calculations:








Basic

58,866


57,666


58,644


57,542

Diluted

60,572


60,157


60,527


60,127









Cash dividend declared per share

$ --


$ --


$ 2.00


$ --

















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 2,


October3,


October 2,


October3,


2010


2009


2010


2009

Cost of goods sold

$ 140


$ 102


$ 351


$ 273

Research and development

$ 651


$ 645


$ 2,022


$ 1,878

Selling, general and administrative

$ 1,777


$ 1,683


$ 6,514


$ 5,752

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)






Nine Months Ended


October 2,


October3,


2010


2009

Cash flows from operating activities:




Net income including noncontrolling interests

$ 56,774


$ 39,836

Adjustments to reconcile net income including noncontrolling interests

to net cash provided by operating activities:




Depreciation and amortization

4,755


4,512

Share-based compensation

8,887


7,903

Loss on disposal of property and equipment

--


3

Provision for doubtful accounts

129


682

Provision for obsolete inventory

448


346

Provision for warranty costs

1,790


1,582

Provision for deferred income taxes

133


--

Income tax benefit from exercise of stock options granted prior to

January 1, 2006

2,072


1,403

Excess tax benefit from share-based payment arrangements

(494)


(185)

Changes in operating assets and liabilities:




Increase in accounts receivable

(10,561)


(9,377)

Increase in royalties receivable

--


(59)

Increase in inventories

(12,290)


(4,233)

(Increase) decrease in deferred cost of goods sold

(7,201)


891

(Increase) decrease in prepaid expenses

522


(2,407)

Increase in other assets

(2,717)


(1,165)

Increase (decrease) in accounts payable

7,189


(2,124)

Increase in accrued compensation

1,650


1,191

Decrease in accrued liabilities

(734)


(48)

Increase (decrease) in income taxes payable

1,036


(9,781)

Increase (decrease) in deferred revenue

1,691


(99)

Increase in other liabilities

677


833

Net cash provided by operating activities

53,756


29,704





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

(5,942)


(2,889)

Increase in intangible assets

(1,381)


(1,100)

(Increase) decrease in restricted cash

42


(15)

Net cash provided by (used in) investing activities

49,708


(4,004)





Cash flows from financing activities:




Repayments on long-term debt

(43)


(268)

Proceeds from issuance of common stock

6,277


1,834

Excess tax benefit from share-based payment arrangements

494


185

Dividends paid

(117,506)


--

Net cash provided by (used in) financing activities

(110,778)


1,751

Effect of foreign currency exchange rates on cash

667


325

Net increase (decrease) in cash and cash equivalents

(6,647)


27,776

Cash and cash equivalents at beginning of period

132,054


146,910

Cash and cash equivalents at end of period

$ 125,407


$174,686

SOURCE Masimo Corporation

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