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Masimo Reports Third Quarter 2013 Financial Results

10/30/2013

IRVINE, CA -- (Marketwired) -- 10/30/13 -- Masimo (NASDAQ: MASI) today announced its financial results for the third quarter ended September 28, 2013.

Q3 2013 Highlights (compared to Q3 2012):

  • Total revenue, including royalties, rose 10% to $131.4 million
  • Product revenue rose 11% to $124.5 million
  • Revenue from rainbow® products rose 9% to $12.0 million
  • SET® and rainbow® SET unit shipments rose 33% to 44,000
  • GAAP earnings per share rose 13% to $0.27

Masimo's total third quarter revenue, including royalties, rose 10% to $131.4 million, compared to $119.1 million for the third quarter of 2012. Third quarter 2013 product revenue rose 11% to $124.5 million, compared to $112.1 million for the third quarter of 2012. The company's worldwide direct product revenue grew 12% in the third quarter of 2013 and represented 85% of product revenue. OEM sales, which accounted for 15% of product revenue, rose 7% compared to the same period in 2012. Revenue from sales of Masimo rainbow products rose 9% to $12.0 million in the third quarter, compared to $11.0 million in the year-ago period. Third quarter 2013 rainbow revenue included $3.9 million in sales of total hemoglobin products.

Net income for the third quarter of 2013 was $15.6 million, or $0.27 per diluted share, compared to net income of $13.8 million, or $0.24 per diluted share, in the third quarter of 2012.

During the third quarter of 2013, the company shipped approximately 44,000 SET pulse oximetry and rainbow Pulse CO-Oximetry units, excluding handheld units, up 33% compared to approximately 33,100 in the same prior-year period. Masimo estimates its worldwide installed base as of September 28, 2013 to be 1,180,000 units, up 12% from 1,056,000 units as of September 29, 2012.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Masimo's ability to innovate technology that improves care, increases patient safety and lowers overall healthcare costs is the key success factor driving our strong third quarter results. As evidenced by our strong quarterly pulse oximetry and Pulse CO-Oximetry shipments, we are consistently expanding our customer base and, as a result, we are optimistic about our future."

As of September 28, 2013, Masimo's cash and cash equivalents were $91.7 million, compared to $71.6 million as of December 29, 2012. The change reflects primarily net cash generated from operations, offset by $19.8 million in cash used to repurchase one million shares of Masimo common stock in the first nine months of 2013.

2013 Financial Guidance
Based on favorable year-to-date results and the outlook for the remainder of 2013, Masimo is providing updated 2013 financial guidance for earnings per share. The company now expects 2013 GAAP earnings per share to be $1.16, compared to prior guidance of $1.14. The company's fiscal 2013 guidance for its other financial components, including total and product revenues, royalties, gross profit margins, operating expenses and tax rate components remains unchanged. 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. A live webcast of the conference call will be available online from the investor relations page of the company's corporate website at www.masimo.com. 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 87025552. After the live webcast, the call will be available on Masimo's website through November 13, 2013. In addition, a telephonic replay of the call will be available through November 13, 2013. The replay dial-in numbers are (800) 585-8367 for domestic callers and +1 (855) 859-2056 for international callers. Please use reservation code 87025552.

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 have shown that Masimo SET® outperforms other pulse oximetry technologies, even under the most challenging clinical conditions, including patient motion and low peripheral perfusion. In 2005, Masimo introduced rainbow SET® Pulse CO-Oximetry technology, allowing noninvasive and continuous monitoring of blood constituents that previously required invasive procedures, including total hemoglobin (SpHb®), oxygen content (SpOC™), 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™, 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™, the first-ever noninvasive and continuous monitoring of acoustic respiration rate (RRa™). 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. And in 2012, Masimo acquired the assets of Spire Semiconductor, LLC, a maker of advanced light emitting diode (LED) and other advanced component-level technologies; and PHASEIN AB, a developer and manufacturer of ultra-compact mainstream and sidestream capnography, multigas analyzers, and handheld capnometry solutions. Masimo SET® and Masimo rainbow® SET® technologies also can 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 Outcome 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 and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies and reduce the cost of care; expectations for full fiscal year 2013 total and product revenues, royalties, gross profit margins, operating expenses, tax rate and GAAP earnings per share; and 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 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"), including our most recent Form 10-K and Form 10-Q, all of 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, 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)
September 28,
2013
December 29,
2012
ASSETS
Current assets
Cash and cash equivalents $ 91,717 $ 71,554
Accounts receivable, net of allowance for doubtful accounts 70,166 67,911
Royalties receivable 6,800 7,130
Inventories 59,460 47,358
Prepaid expenses 18,859 8,587
Deferred tax assets 12,003 12,911
Other current assets 2,928 3,896
Total current assets 261,933 219,347
Deferred cost of goods sold 61,214 52,103
Property and equipment, net 24,935 23,924
Intangible assets, net 28,032 27,363
Goodwill 22,959 22,824
Deferred tax assets 21,506 22,363
Other assets 7,190 8,022
Total assets $ 427,769 $ 375,946
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 38,134 $ 27,033
Accrued compensation 28,506 25,021
Accrued liabilities 15,943 16,648
Income taxes payable 1,042 1,504
Deferred revenue 19,644 19,278
Current portion of capital lease obligations 122 55
Total current liabilities 103,391 89,539
Deferred revenue 563 576
Capital lease obligations, less current portion 233 60
Other liabilities 9,683 10,103
Total liabilities 113,870 100,278
Equity
Masimo Corporation stockholders' equity:
Common stock 57 57
Treasury stock (83,454 ) (63,664 )
Additional paid-in capital 269,383 258,783
Accumulated other comprehensive income 4,425 3,542
Retained earnings 123,429 74,361
Total Masimo Corporation stockholders' equity 313,840 273,079
Noncontrolling interest 59 2,589
Total equity 313,899 275,668
Total liabilities and equity $ 427,769 $ 375,946
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited) (in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 28,
2013
September 29,
2012
September 28,
2013
September 29,
2012
Revenue:
Product $ 124,522 $ 112,108 $ 382,725 $ 339,644
Royalty 6,925 6,961 22,086 21,428
Total revenue 131,447 119,069 404,811 361,072
Cost of goods sold 43,968 40,736 136,519 122,002
Gross profit 87,479 78,333 268,292 239,070
Operating expenses:
Selling, general and administrative 53,090 48,260 159,536 142,381
Research and development 13,646 12,121 41,692 33,736
Total operating expenses 66,736 60,381 201,228 176,117
Operating income 20,743 17,952 67,064 62,953
Non-operating income (expense) (676 ) 912 (3,240 ) (132 )
Income before provision for income taxes 20,067 18,864 63,824 62,821
Provision for income taxes 4,581 5,301 17,288 15,724
Net income including noncontrolling interest 15,486 13,563 46,536 47,097
Net loss attributable to the noncontrolling interest 116 231 2,532 168
Net income attributable to Masimo Corporation stockholders $ 15,602 $ 13,794 $ 49,068 $ 47,265
Net income per share attributable to Masimo Corporation stockholders:
Basic $ 0.28 $ 0.24 $ 0.86 $ 0.82
Diluted $ 0.27 $ 0.24 $ 0.85 $ 0.81
Weighted average shares used in per share calculations:
Basic 56,501 57,201 56,727 57,507
Diluted 57,404 58,145 57,506 58,454
MASIMO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
Nine Months Ended
September 28,
2013
September 29,
2012
Cash flows from operating activities:
Net income including noncontrolling interest $ 46,536 $ 47,097
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
Depreciation and amortization 8,459 6,509
Share-based compensation 9,020 11,033
Loss on disposal of property and equipment 84 --
Provision for (benefit from) doubtful accounts 532 (5 )
Provision for obsolete inventory 957 617
Provision for warranty costs 2,134 1,866
Provision for (benefit from) deferred income taxes 1,687 (319 )
Income tax benefit from exercise of stock options granted prior to January 1, 2006 595 259
Excess tax deficit from share-based compensation arrangements 759 340
Realized foreign exchange loss on forward contracts -- 45
Changes in operating assets and liabilities:
Increase in accounts receivable (2,773 ) (4,982 )
(Increase) decrease in royalties receivable 330 (67 )
Increase in inventories (13,031 ) (1,700 )
(Increase) decrease in deferred cost of goods sold (9,100 ) 160
Increase in prepaid expenses (10,304 ) (2,888 )
(Increase) decrease in other assets 1,777 (1,316 )
Increase (decrease) in accounts payable 11,091 (2,730 )
Increase in accrued compensation 3,544 2,344
Increase (decrease) in accrued liabilities (2,807 ) 820
Decrease in income taxes payable (1,217 ) (419 )
Increase in deferred revenue 354 2,490
Decrease in other liabilities (417 ) (2,196) )
Net cash provided by operating activities 48,210 56,958
Cash flows from investing activities:
Purchases of property and equipment (6,910 ) (7,812 )
Increase in intangible assets (2,986 ) (2,904 )
Cash paid for acquisitions -- (37,399 )
Net cash used in investing activities (9,896 ) (48,115 )
Cash flows from financing activities:
Repayments of capital lease obligations (112 ) (12 )
Proceeds from issuance of common stock 1,746 1,034
Excess tax deficit from share-based compensation arrangements (759 ) (340 )
Repurchases of common stock (19,790 ) (26,268 )
Net proceeds from settlement of forward contracts -- 88
Net cash used in financing activities (18,915 ) (25,498 )
Effect of foreign currency exchange rates on cash 764 (239 )
Net increase (decrease) in cash and cash equivalents 20,163 (16,894 )
Cash and cash equivalents at beginning of period 71,554 129,882
Cash and cash equivalents at end of period $ 91,717 $ 112,988

Investor Contact:
Eli Kammerman
(949) 297-7077
ekammerman@masimo.com

Media Contact:
Mike Drummond
(949) 297-7434
mdrummond@masimo.com

Source: Masimo

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