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Masimo Reports First Quarter 2011 Financial Results

05/03/2011

Product revenue exceeds $100 million for first time in company's history
Q1 2011 Highlights (compared to Q1 2010):
- Total revenue, including royalties, rose 14% to $113.0 million
- Product revenue rose 18% to $101.6 million
- Masimo SET® and Masimo rainbow® SET unit shipments rose 16% to 43,100
- Masimo rainbow revenue rose 39% to $7.4 million
- GAAP EPS was $0.30 compared to $0.44 in Q1 2010, which included $0.20 in one-time items related to the antitrust lawsuit victory in Q1 2010. Excluding these one-time items, GAAP EPS of $0.30 was up 25% from an adjusted EPS of $0.24 in Q1 2010

IRVINE, Calif., May 3, 2011 /PRNewswire via COMTEX/ --

Masimo (NASDAQ: MASI) today announced its financial results for the first quarter ended April 2, 2011.

Masimo's total revenue, including royalties, for the first quarter rose 14% to $113.0 million, compared to $98.8 million for the first quarter of 2010. Masimo's first quarter product revenue rose 18% to $101.6 million, compared to $85.9 million for the first quarter of 2010. Revenue from Masimo rainbow products rose 39% to $7.4 million in the first quarter, compared to $5.3 million for the first quarter of 2010.

Net income for the first quarter was $18.0 million, or $0.30 per diluted share, compared to reported net income of $26.7 million, or $0.44 per diluted share, in the first quarter of 2010 and compared to adjusted net income of $14.3 million, or $0.24 per diluted share, in the first quarter of 2010. Adjusted earnings per share in the first quarter of 2010 excludes $0.20 per diluted share from the net of a $30.1 million one-time gain related to an antitrust lawsuit victory and offset by $10.9 million in one-time grants and marketing initiatives. One-time grants in the first quarter of 2010 included a $10.3 million donation to establish the Masimo Foundation for Ethics, Innovation and Competition in Healthcare.

During the first quarter, the company shipped approximately 43,100 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, up 16% compared to approximately 37,100 in the same prior year period. Masimo estimates its worldwide installed base as of April 2, 2011 to be 890,000 units, up 18% from 757,000 units as of April 3, 2010.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "We continue to experience increasing global demand for our breakthrough technologies as evidenced by our new highs in product revenue and driver shipments in the quarter. We continue to pursue our mission to improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and applications."

As of April 2, 2011, cash, cash equivalents and short-term investments totaled $105.6 million, compared to $88.3 million as of January 1, 2011.

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) 758-3929 for international callers. The reservation code for both dial-in numbers is 58223656. After the live webcast, the call will be available on Masimo's website through June 3, 2011. In addition, a telephonic replay of the call will be available through May 17, 2011. The replay dial-in numbers are (800) 642-1687 for domestic callers and +1 (706) 645-9291 for international callers. Please use reservation code 58223656.

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®, 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® SET Pulse CO-Oximetry(TM) technology, 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 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®, 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®." 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; expectations regarding our ability to design and deliver innovative new noninvasive technologies; and global demand for our 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 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 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, 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)










April 2, 2011


January 1, 2011

ASSETS




Current assets




Cash and cash equivalents

$ 105,604


$ 88,305

Accounts receivable, net of allowance for doubtful accounts

51,886


49,694

Royalties receivable

11,772


12,000

Inventories

42,163


45,028

Prepaid expenses

4,881


7,887

Deferred tax assets

12,541


12,555

Other current assets

2,940


2,136

Total current assets

231,787


217,605

Deferred cost of goods sold

51,918


47,184

Property and equipment, net

15,249


15,951

Intangible assets, net

10,462


10,497

Deferred tax assets

12,576


12,560

Other assets

5,996


6,438

Total assets

$ 327,988


$ 310,235





LIABILITIES AND EQUITY




Current liabilities




Accounts payable

$ 17,791


$ 22,150

Accrued compensation

14,253


21,074

Accrued liabilities

9,869


9,832

Income taxes payable

4,490


722

Deferred revenue

16,694


16,369

Current portion of capital lease obligations

46


50

Total current liabilities

63,143


70,197

Deferred revenue

1,390


1,554

Capital lease obligations, less current portion

110


122

Other liabilities

8,669


8,323

Total liabilities

73,312


80,196





Equity




Masimo Corporation stockholders' equity:




Common stock

60


59

Treasury stock

(1,209)


(1,209)

Additional paid-in capital

228,796


222,206

Accumulated other comprehensive income

797


925

Retained earnings

23,677


5,664

Total Masimo Corporation stockholders' equity

252,121


227,645

Noncontrolling interest

2,555


2,394

Total equity

254,676


230,039

Total liabilities and equity

$ 327,988


$ 310,235

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands, except per share amounts)










Three Months Ended


April 2,


April 3,


2011


2010

Revenue:




Product

$ 101,577


$ 85,866

Royalty

11,465


12,899

Total revenue

113,042


98,765

Cost of goods sold

36,210


29,228

Gross profit

76,832


69,537

Operating expenses:




Selling, general and administrative

41,468


49,311

Research and development

9,975


9,410

Antitrust litigation proceeds

--


(29,968)

Total operating expenses

51,443


28,753

Operating income

25,389


40,784

Non-operating income (expense)

194


(347)

Income before provision for income taxes

25,583


40,437

Provision for income taxes

7,429


14,273

Net income including noncontrolling interests

18,154


26,164

Net (income) loss attributable to the noncontrolling interests

(141)


546

Net income attributable to Masimo Corporation

$ 18,013


$ 26,710





Net income per share attributable to Masimo Corporation stockholders:




Basic

$ 0.30


$ 0.46

Diluted

$ 0.30


$ 0.44





Weighted average shares used in per share calculations:




Basic

59,598


58,267

Diluted

60,991


60,464





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


April 2,


April 3,


2011


2010

Cost of goods sold

$ 146


$ 93

Selling, general and administrative

2,515


2,077

Research and development

772


648

Total

$ 3,433


$ 2,818

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)










Three Months Ended


April 2, 2011


April 3, 2010

Cash flows from operating activities:




Net income including noncontrolling interests

$ 18,154


$ 26,164

Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:




Depreciation and amortization

2,044


1,577

Share-based compensation

3,433


2,818

Provision for doubtful accounts

72


233

Provision for obsolete inventory

376


249

Provision for warranty costs

699


619

Income tax benefit from exercise of stock options granted prior to January 1, 2006

751


555

Excess tax deficit (benefit) from share-based payment arrangements

198


(1,383)

Changes in operating assets and liabilities:




Increase in accounts receivable

(2,263)


(7,375)

(Increase) decrease in royalties receivable

228


(500)

(Increase) decrease in inventories

2,489


(2,388)

Increase in deferred cost of goods sold

(4,673)


(1,902)

Decrease in prepaid expenses

3,028


1,375

Increase in other assets

(356)


(1,013)

Increase (decrease) in accounts payable

(4,375)


4,256

Decrease in accrued compensation

(6,981)


(2,646)

Decrease in accrued liabilities

(721)


(724)

Increase in income taxes payable

3,555


11,401

Increase in deferred revenue

161


4,429

Increase in other liabilities

361


313

Net cash provided by operating activities

16,180


36,058





Cash flows from investing activities:




Purchase of short-term investments

--


(75,986)

Proceeds from sale and maturities of short-term investments

--


56,989

Purchases of property and equipment

(808)


(1,885)

Increase in intangible assets

(498)


(264)

Net cash used in investing activities

(1,306)


(21,146)





Cash flows from financing activities:




Repayments of capital lease obligations

(16)


(15)

Proceeds from issuance of common stock

2,628


5,354

Excess tax (deficit) benefit from share-based payment arrangements

(198)


1,383

Dividends paid

--


(117,506)

Net cash provided by (used in) financing activities

2,414


(110,784)

Effect of foreign currency exchange rates on cash

11


(29)

Net increase (decrease) in cash and cash equivalents

17,299


(95,901)

Cash and cash equivalents at beginning of period

88,305


132,054

Cash and cash equivalents at end of period

$ 105,604


$ 36,153

SOURCE Masimo Corporation

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