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Masimo Reports Fourth Quarter 2007 and Full Year 2007 Financial Results

Record results mark 18th consecutive quarter of revenue growth

2007 Highlights:

* Product revenues increased 29% to a record $199.7 million

* Masimo SET pulse oximeter units increase 20% to 116,300 units

IRVINE, Calif., Feb. 26 /PRNewswire-FirstCall/ -- Masimo Corporation (Nasdaq: MASI), the inventor of Pulse CO-Oximetry and Measure-Through Motion & Low Perfusion pulse oximetry, today announced its financial results for both the quarter and year ended December 29, 2007.

For the fiscal fourth quarter, Masimo reported product revenues of $55.2 million representing a 29% increase over $42.9 million for the fourth quarter of 2006. Including royalty revenues, Masimo reported total fourth quarter revenues of $69.3 million compared to $61.6 million for the fourth quarter of 2006. Net income for the quarter was $12.1 million representing $0.20 earnings per common share, including $0.02 per common share relating to a year-to-date tax benefit recorded in the fourth quarter. Masimo also reported that it shipped 29,400 Masimo SET and Masimo Rainbow SET oximetry units, excluding handheld units, during the fourth quarter of 2007, up 10% from 26,700 in the comparable prior year period, resulting in a new estimated worldwide installed base of 470,000 Masimo SET pulse oximeters.

For the year ended December 29, 2007, Masimo's product revenues were $199.7 million, up 29% from $155.1 million in 2006. Including royalty revenues, Masimo's total revenues were $256.3 million for the year ended December 29, 2007, up from $224.3 million in 2006. In the year ended December 29, 2007, Masimo shipped 116,300 Masimo SET and Masimo Rainbow SET pulse oximeter units, excluding handheld pulse oximetelow.

The following tables provide a comparison of our diluted earnings per

share calculated under Emerging Issues Task Force Issue No. 03-6,

"Participating Securities and the Two-Class Method under FASB Statement

No. 128", or EITF 03-6, and Financial Accounting Standards Board No. 128

"Earnings per Share", or FASB 128, in accordance with GAAP and the

non-GAAP if converted method based upon FASB 128. The non-GAAP if

converted method assumes conversion of all shares of the Company's

preferred stock into common stock as of December 31, 2005.

Upon the closing of our initial public offering on August 13, 2007, all

outstanding shares of our prior Series A through Series G convertible

preferred stock were converted into an aggregate of 34,612,503 shares of

common stock. Therefore, effective August 13, 2007, we transitioned from

computing diluted earnings per share from the two class method in

accordance with EITF 03-6 to the if converted method in accordance with

FASB 128. Net income for the year ended December 29, 2007 was allocated

between the periods during which two classes of equity securities were

outstanding and during which a single class of equity securities was

outstanding based on the respective number of days. For the year ended

December 29, 2007, two classes of equity securities were outstanding for

224 days and a single class of equity securities was outstanding for 139

days, or 61.7% and 38.3% of the total days in the twelve month reporting

period, respectively. For the three months ended December 29, 2007, a

single class of equity securities was outstanding for the entire period.

We believe that the following non-GAAP diluted earnings per share

information is relevant and useful information that can be used by

analysts, investors and other interested parties to assess our performance

on a comparable basis to future reported diluted earnings per share.

Accordingly, we are disclosing this information to permit additional

analysis of our performance (in thousands, except share data):

Three Months Ended Year Ended

December 31, December 29, December 31, December 29,

2006 2007 2006 2007


GAAP: Net income



to common

stockholders $(10,261) $12,055 $61,781 $23,079

Less: Net income



to common


during which

two classes

of equity

securities were

outstanding (A) (10,261) - 61,781 6,899

Net income


to common


during which a

single class of


securities was

outstanding (B) $- $12,055 $- $16,180

GAAP: Net income


attributable to


stockholders (2) $(10,261) $12,055 $61,781 $23,079

Preferred stock

dividend (2) 19,215 - 77,785 -

Accretion of

preferred stock 1,956 - 7,985 4,837



attributable to


stockholders - - 34,275 14,339


Net income

attributable to


stockholders (C) $10,910 $12,055 $181,826 $42,255


Weighted average

number of common



under the two

class method -

Diluted (D) 16,549,901 - 20,302,872 20,732,872

Weighted average

number of common

shares outstanding

under the single

class method -

Diluted (E) - 59,985,371 - 59,829,198



average common


outstanding -

Diluted (F) 55,135,822 59,985,371 54,915,375 57,227,507

Earnings (loss)

per share -


Earnings (loss)

per share -

Two class

(A)/(D) (2) $(0.62) $- $3.04 $0.33

Earnings per

share -


class (B)/(E) - 0.20 - 0.27

GAAP: Earnings

(loss) per

share -

Diluted $(0.62) $0.20 $3.04 $ 0.60


Earnings per

share -


(C)/(F) (1) $0.20 $0.20 $3.31 $0.74

(1) For the three months ended December 29, 2007, the amount indicated as

Non-GAAP: Earnings per share is equal to the GAAP: Earnings per share,

and is shown here for comparison purposes only.

(2) In December 2006, we declared a dividend to preferred stockholders

that was more than the net income for the three months ended

December 31, 2006. This resulted in a net loss attributable to common

stockholders during the three months ended December 31, 2006. As a

result, for the three months ended December 31, 2006, the earnings

(loss) per share reported herein is different from amounts previously

reported due to a correction of a prior period calculation.

rs, compared to 96,600 in 2006, representing a 20% increase in new pulse oximeter and Pulse CO- Oximeter shipments.

Net income for the year ended December 29, 2007, was $42.3 million compared to $181.8 million in 2006, which included $262.6 million in net patent litigation settlement proceeds and various one-time stock option based bonus payments related to a January 2006 patent litigation settlement. For the year ended December 29, 2007, Masimo's reported net income attributable to common stockholders was $23.1 million, or $0.60 per common share, as compared to $3.04 per common share for the year ended December 31, 2006.

Cash, cash equivalents and short-term investments rose to $96.7 million at December 29, 2007 up from $88.6 million at September 29, 2007 and from $55.4 million at December 31, 2006.

Financial Guidance

For the full year 2008, Masimo expects total revenues to be approximately $292 million and total product revenues to be approximately $246 million. Masimo also expects full year 2008 earnings per common share to be approximately $0.52 per share. Included in the $0.52 per common share projection is approximately $11.0 million in expected 2008 non cash stock based compensation charges, up from $3.9 million in 2007. Stock based compensation charges are expected to increase due principally to the increase in the market price of our common stock and to due to the increase in the number of options granted consistent with the increase in our total employee headcount. The projections and guidance set forth above are estimates only and actual performance could differ.

Conference Call

Masimo will hold a conference call today at 2:00 p.m. PT (5:00 p.m. ET) to discuss the results. The dial-in numbers are (800) 295-4740 for domestic callers and (617) 614-3925 for international callers. The reservation number for both dial-in numbers is 39491099. A live web cast of the conference call will be available online from the "investor relations" page of the Company's corporate web site at

After the live web cast, the call will remain available on Masimo's web site through March 26, 2008. In addition, a telephonic replay of the call will be available until March 10, 2008. The replay dial-in numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use reservation code 89834871.

The financials results included in this release are unaudited. The complete audited financial statements of the company for the year ended December 29, 2007 will be included in the Masimo Annual Report on Form 10-K, to be filed with the SEC early next month.

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, and with it 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 trustworthy SpO2 and pulse rate measurements even under the most difficult clinical conditions, including patient motion and low peripheral perfusion. In 2005, Masimo introduced Masimo Rainbow SET, a breakthrough noninvasive blood constituent monitoring platform that can measure many blood constituents that previously required invasive procedures. Rainbow SET continuously and noninvasively measures total hemoglobin (SpHb(TM)), pending regulatory approval, carboxyhemoglobin (SpCO(TM)) and methemoglobin (SpMet(TM)), pleth variability index (PVI(TM)), in addition to oxyhemoglobin (SpO2), perfusion index (PI) and pulse rate, allowing early detection and treatment of potentially life-threatening conditions. 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

Forward-Looking Statements

This press release includes 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 plans, objectives and prospects regarding, among other things, our financial condition, results of operations, prospects and business generally; the market acceptance of our technologies and products; the value of measuring new parameters; expectations regarding our ability to design and deliver innovative new noninvasive technologies, such as the recently introduced total hemoglobin measurement, and our assumption of total hemoglobin's timely regulatory clearing by appropriate regulatory bodies, if ever, and our assumption to expand into additional areas of vital signs monitoring and measurements; and expectations for total revenues, product revenues, GAAP earnings per share, non-GAAP earnings per share and stock based compensation expenses for the full fiscal year 2008. 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 from those described in the forward-looking statements. These risks include, but are not limited to, those related to: our reliance on Masimo SET and related 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; the failure to continue developing innovative products and technologies; the introduction of competing products; the lack of acceptance of any new products and technologies, including the recently announced total hemoglobin measurement and including whether regulatory clearances will be obtained, the loss of our customers; increases in prices for raw materials or the loss of key supplier contracts; the failure to retain and recruit senior management and manage expected growth; 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 quarterly report on Form 10-Q for the quarter ended September 29, 2007, filed with the Securities and Exchange Commission on November 1, 2007. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. All forward-looking statements included in this press release are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update, amend or clarify these forward-looking statements or the risk factors contained in our quarterly report on Form 10-Q for the quarter ended September 29, 2007, whether as a result of new information, future events or otherwise, except as may be required under the applicable securities laws.

Masimo, SET, Signal Extraction Technology, Improving Outcomes and Reducing Cost of Care by Taking Noninvasive Monitoring to New Sites and Applications, Rainbow, SpHb, SpCO, SpMet, PVI and Pulse CO-Oximeter are trademarks or registered trademarks of Masimo Corporation.



(in thousands)


December 31, 2006 December 29, 2007


Current assets

Cash and cash equivalents $55,382 $96,733

Accounts receivable, net of allowance

for doubtful accounts 22,350 26,970

Royalties receivable 1,289 13,866

Inventories 17,135 23,110

Prepaid expenses 2,021 3,837

Prepaid income taxes - 3,247

Deferred tax assets 18,116 14,334

Other current assets 1,022 1,543

Total current assets 117,315 183,640

Deferred cost of goods sold 21,899 26,249

Property and equipment, net 10,290 11,164

Deferred tax assets 3,163 5,332

Restricted cash 507 513

Intangible assets, net 4,592 5,589

Goodwill 448 448

Other assets 859 2,576

Total assets $159,073 $235,511


Current liabilities

Accounts payable $10,142 $14,640

Accrued compensation 12,207 12,409

Accrued liabilities 4,655 6,211

Dividends payable 37,533 183

Income taxes payable 1,245 -

Deferred revenue 13,880 16,827

Current portion of long-term debt 7,528 11,539

Total current liabilities 87,190 61,809

Deferred revenue 490 366

Long-term debt, less current portion 13,514 19,502

Other liabilities 918 3,768

Total liabilities 102,112 85,445

Commitments and contingencies - -

Stockholders' equity

Convertible preferred stock 88,328 -

Common stock 17 55

Treasury stock (628) (1,209)

Additional paid-in capital - 143,297

Accumulated other comprehensive loss (317) (1,034)

Retained earnings (deficit) (30,439) 8,957

Total stockholders' equity 56,961 150,066

Total liabilities and

stockholders' equity $159,073 $235,511



(in thousands, except per share information)


Three Months Ended Year Ended

December 31, December 29, December 31, December 29,

2006 2007 2006 2007


Product $42,852 $55,171 $155,131 $199,684

Royalty and license

fee 18,760 14,105 69,207 56,602

Total revenue 61,612 69,276 224,338 256,286

Cost of goods sold 15,842 19,976 61,640 73,606

Gross profit 45,770 49,300 162,698 182,680

Operating expenses:

Research and

development 5,608 5,505 24,875 22,960

Selling, general

and administrative 21,922 26,659 91,384 91,234

Patent litigation

proceeds (4) - (262,605) -


litigation 6 555 109 1,537

Total operating

expenses 27,532 32,719 (146,237) 115,731

Operating income 18,238 16,581 308,935 66,949


income (expense):

Interest income 805 1,091 6,741 2,361

Interest expense (411) (644) (1,824) (2,475)

Other 230 517 551 1,287

Total non-operating

income 624 964 5,468 1,173

Income before

provision for

income taxes 18,862 17,545 314,403 68,122

Provision for

income taxes 7,952 5,490 132,577 25,867

Net income 10,910 12,055 181,826 42,255

Preferred stock

dividend (19,215) - (77,785) -

Accretion of

preferred stock (1,956) - (7,985) (4,837)



attributable to


stockholders - - (34,275) (14,339)

Net income (loss)

attributable to


stockholders $(10,261) $12,055 $61,781 $23,079

Net income (loss)

per common share:

Basic $(0.62) $0.22 $3.79 $0.71

Diluted $(0.62) $0.20 $3.04 $0.60

The following table presents details of the stock-based compensation

expense that is included in each functional line item in the condensed

consolidated statement of operations above (in thousands):

Three Months Ended Year Ended

December 31, December 29, December 31, December 29,

2006 2007 2006 2007

Cost of goods sold $364 $130 $2,379 $264

Research and development 887 204 9,378 670

Selling, general and

administrative 1,612 966 23,313 2,958


Reconciliation of GAAP to Non-GAAP Diluted Earnings per Share


We prepare our consolidated financial statements in conformity with

accounting principles generally accepted in the United States of America,

or U.S. GAAP. In an effort to provide investors with additional

information regarding our results of operations and to provide a

meaningful period-over-period comparison of our financial performance, we

use non-GAAP financial measures as defined by the Securities and Exchange

Commission. The differences between the U.S. GAAP and non-GAAP financial

measures are reconciled be

SOURCE Masimo Corporation
Copyright©2008 PR Newswire.
All rights reserved

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