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Masimo Reports Fourth Quarter and Full Year 2010 Financial Results; Provides 2011 Guidance

02/15/2011

Q4 2010 Highlights (compared to Q4 2009):
-- Total revenue rose 14.0% to $105.6 million
-- Product revenue rose 16.6% to $93.8 million
-- Masimo SET and Masimo rainbow SET unit shipments rose 37.5% to 41,800
-- Masimo rainbow revenue rose 44.4% to $8.4 million
-- GAAP EPS rose 13.0% to $0.26. Excluding one-time expenses, adjusted EPS rose 26.1% to $0.29.
Full Year 2010 Highlights (compared to 2009)
-- Total revenue rose 16.1% to $405.4 million
-- Product revenue rose 18.8% to $356.4 million
-- Masimo SET and Masimo rainbow SET unit shipments rose 37.5% to 153,200
-- Masimo rainbow revenue rose 69.0% to $32.9 million
-- GAAP EPS rose 37.5% to $1.21. Excluding one-time items, adjusted EPS rose 17.1% to $1.03.

IRVINE, Calif., Feb. 15, 2011 /PRNewswire via COMTEX/ -- Masimo (Nasdaq: MASI) today announced its financial results for the fourth quarter and year ended January 1, 2011.

Masimo's total revenue for the fourth quarter rose 14.0% to $105.6 million, compared to $92.6 million for the fourth quarter of 2009. Masimo's fourth quarter product revenue rose 16.6% to $93.8 million, compared to $80.5 million for the fourth quarter of 2009. Revenue from Masimo rainbow products rose 44.4% to $8.4 million in the fourth quarter, compared to $5.8 million for the fourth quarter of 2009.

Net income for the fourth quarter was $16.1 million, or $0.26 per diluted share, including $0.02 per diluted share in one-time marketing and other related expenses that Masimo had previously planned and announced after receiving $30.8 million in proceeds in 2010 from an antitrust lawsuit against Covidien. Excluding these one-time marketing and other related expenses, adjusted net income for the fourth quarter was $17.5 million, or $0.29 per diluted share, compared to net income of $14.1 million, or $0.23 per diluted share, in the fourth quarter of 2009. Due to rounding, the impact of excluding $0.02 per diluted share in one-time marketing and other related expenses added $0.03 per diluted share to the adjusted earnings per share calculation in the fourth quarter of 2010.

For 2010, Masimo's total revenue rose 16.1% to $405.4 million, compared to $349.1 million for 2009. The company's product revenue rose 18.8% in 2010 to $356.4 million, compared to $300.1 million in 2009. Revenue from Masimo rainbow products rose 69.0% to $32.9 million in 2010, compared to $19.5 million in 2009.

Masimo's net income for 2010 was $73.5 million, or $1.21 per diluted share, including $0.18 per diluted share from the net of a one-time gain related to the $30.8 million in antitrust proceeds from Covidien and offset by $14.7 million in marketing and other related expenses that Masimo had previously planned and announced after receiving the proceeds. Excluding these one-time items, adjusted net income for 2010 was $62.5 million, or $1.03 per diluted share, compared to net income of $53.2 million, or $0.88 per diluted share, in 2009.

During the fourth quarter, the company shipped approximately 41,800 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, up 37.5% compared to approximately 30,400 in the same prior year period. For 2010, Masimo shipped approximately 153,200 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, up 37.5% compared to approximately 111,400 in 2009. Masimo estimates its worldwide installed base as of January 1, 2011 to be 855,000 units, up 18.0% from 724,000 units as of January 2, 2010.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Our strong fourth quarter and fiscal 2010 performance was driven by increasing global demand for our breakthrough Masimo SET and Masimo rainbow SET technologies, allowing us to advance our mission to improve patient outcomes and reduce the cost of care by taking noninvasive monitoring to new sites and applications."

As of January 1, 2011, cash, cash equivalents and short-term investments totaled $88.3 million, compared to $189.0 million as of January 2, 2010. The decline was due primarily to special dividend payments of $117.5 million and $44.5 million, made on March 31, 2010 and December 21, 2010, respectively. Total 2010 dividend payments of $162.0 million were partially offset by the net proceeds from the Covidien antitrust lawsuit and operating cash flow during the year.

2011 Financial Guidance

Masimo expects fiscal 2011 total revenue to be between $446 million and $463 million, including product revenue in the range of $415 million to $430 million, and royalty revenue in the range of $31 million and $33 million. Included within these product revenue ranges are 2011 rainbow revenue expectations of $40 million to $50 million. As a result, the company expects fiscal 2011 GAAP earnings per share to be between $1.17 and $1.25. Each of the components of Masimo's guidance set forth above is an estimate 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 38781834. After the live webcast, the call will be available on Masimo's website through March 15, 2011. In addition, a telephonic replay of the call will be available through March 1, 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 38781834.

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; expectations regarding our ability to design and deliver innovative new noninvasive technologies; and expectations for total revenue, royalty revenue and product revenue, including rainbow revenue, and GAAP earnings per share for the full fiscal year 2011. 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

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)










January1,


January2,


2011


2010

ASSETS




Current assets




Cash and cash equivalents

$ 88,305


$ 132,054

Short-term investments

--


56,989

Accountsreceivable,netofallowancefordoubtfulaccounts

49,694


38,897

Royalties receivable

12,000


11,500

Inventories

45,028


31,559

Prepaid expenses

4,535


3,742

Prepaid income taxes

3,352


1,705

Deferred tax assets

12,555


11,585

Other current assets

2,136


1,357

Total current assets

217,605


289,388

Deferred cost of goods sold

47,184


28,163

Property and equipment, net

15,951


11,682

Intangible assets, net

10,497


9,829

Goodwill

448


448

Deferred tax assets

12,560


11,500

Other assets

5,990


5,335

Total assets

$ 310,235


$ 356,345





LIABILITIES AND EQUITY




Current liabilities




Accounts payable

$ 22,150


$ 16,716

Accrued compensation

21,074


17,793

Accrued liabilities

9,832


9,754

Income taxes payable

722


477

Deferred revenue

16,369


14,641

Current portion of capital lease obligation

50


60

Total current liabilities

70,197


59,441

Deferred revenue

1,554


270

Capital lease obligation, less current portion

122


171

Other liabilities

8,323


6,775

Total liabilities

80,196


66,657





Equity




Masimo Corporation stockholders' equity:




Common stock

59


58

Treasury stock

(1,209)


(1,209)

Additional paid-in capital

222,206


195,690

Accumulated other comprehensive income

925


63

Retained earnings

5,664


94,112

Total Masimo Corporation stockholders' equity

227,645


288,714

Noncontrolling interest

2,394


974

Total equity

230,039


289,688

Total liabilities and equity

$ 310,235


$ 356,345

MASIMO CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in thousands, except per share information)


















Three Months Ended


Twelve Months Ended


January1,


January2,


January1,


January2,


2011


2010


2011


2010

Revenue:








Product

$ 93,775


$ 80,453


$ 356,422


$ 300,143

Royalty

11,799


12,160


48,985


48,972

Total revenue

105,574


92,613


405,407


349,115

Cost of goods sold

31,446


26,796


119,825


100,313

Gross profit

74,128


65,817


285,582


248,802

Operating expenses:








Selling, general and administrative

44,227


35,455


174,089


134,577

Research and development

8,312


8,940


36,000


31,701

Antitrust litigation expense (proceeds)

--


70


(30,728)


298

Total operating expenses

52,539


44,465


179,361


166,576

Operating income

21,589


21,352


106,221


82,226

Non-operating income (expense)

154


(422)


1,348


(46)

Income before provision for income taxes

21,743


20,930


107,569


82,180

Provision for income taxes

5,112


6,744


34,164


28,158

Net income including noncontrolling interests

16,631


14,186


73,405


54,022

Net(income) lossattributabletononcontrollinginterests

(517)


(126)


125


(794)

Net income attributable to Masimo Corporation

$ 16,114


$ 14,060


$ 73,530


$ 53,228









Net income per share attributable to Masimo








Corporation stockholders:








Basic

$ 0.27


$ 0.24


$ 1.25


$ 0.92

Diluted

$ 0.26


$ 0.23


$ 1.21


$ 0.88









Weighted average shares used in per share calculations:








Basic

59,145


57,785


58,769


57,603

Diluted

60,839


60,289


60,609


60,171









Cash dividend declared per share

$ 0.75


$ --


$ 2.75


$ --

















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










Three Months Ended


Twelve Months Ended


January1,


January2,


January1,


January2,


2011


2010


2011


2010

Cost of goods sold

$ 132


$ 140


$ 483


$ 413

Selling, general and administrative

2,519


1,968


9,033


7,720

Research and development

765


663


2,787


2,541

Total

$ 3,416


$ 2,771


$ 12,303


$ 10,674

MASIMO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)










Yearended


Yearended


January1,


January2,


2011


2010

Cash flows from operating activities:




Net income including noncontrolling interests

$ 73,405


$ 54,022

Adjustmentstoreconcilenetincomeincludingnoncontrollinginte reststonetcashprovidedbyoperatingactivities:




Depreciation and amortization

6,584


5,979

Share-based compensation

12,303


10,674

Loss on disposal of property and equipment

--


5

Provision for doubtful accounts

108


733

Provision for obsolete inventory

619


232

Provision for warranty costs

2,355


2,220

Benefit from deferred income taxes

(2,231)


(3,566)

Income tax benefit from exercise of stock options granted prior to January1, 2006

4,851


2,758

Excess tax benefits from share-based compensation arrangements

(707)


(215)

Changes in operating assets and liabilities:




Increase in accounts receivable

(10,905)


(8,982)

Increase in royalties receivable

(500)


(125)

Increase in inventories

(14,088)


(3,929)

(Increase) decrease in deferred cost of goods sold

(19,080)


309

(Increase) decrease in prepaid expenses

(743)


197

Increase in prepaid income taxes

(1,648)


(833)

Increase in other assets

(1,396)


(3,080)

Increase in accounts payable

5,474


777

Increase in accrued compensation

3,219


1,926

Increase (decrease) in accrued liabilities

(2,281)


1,935

Increase (decrease) in income taxes payable

940


(10,169)

Increase (decrease) in deferred revenue

3,012


(2,518)

Increase (decrease) in other liabilities

1,729


(1,244)

Net cash provided by operating activities

61,020


47,106





Cash flows from investing activities:




Purchase of short-term investments

(75,986)


(56,989)

Proceeds from sale and maturities of short-term investments

132,975


--

Purchases of property and equipment

(9,561)


(3,636)

Increase in intangible assets

(1,937)


(1,851)

Cash paid for acquisitions

--


(1,981)

Net cash provided by (used in) investing activities

45,491


(64,457)





Cash flows from financing activities:




Repayments on long-term debt

(60)


(450)

Proceeds from issuance of common stock

10,239


2,575

Excess tax benefits from share-based compensation arrangements

707


215

Dividends paid

(161,978)


--

Net cash provided by (used in) financing activities

(151,092)


2,340

Effect of foreign currency exchange rates on cash

832


155

Net decrease in cash and cash equivalents

(43,749)


(14,856)

Cash and cash equivalents at beginning of period

132,054


146,910

Cash and cash equivalents at end of period

$ 88,305


$ 132,054

SOURCE Masimo Corporation

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