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Masimo Reports Second Quarter 2008 Financial Results
Date:8/4/2008

Record results mark 20th consecutive quarter of revenue growth

Q2 2008 Highlights:

* Product revenues increased 30% to a record $61.9 million * Direct (Non-OEM) Business revenues increased by 46% * Shipped 29,000 new pulse

oximeters and Pulse CO-Oximeters

IRVINE, Calif., Aug. 4 /PRNewswire-FirstCall/ -- Masimo Corporation (Nasdaq: MASI), the inventor of Pulse CO-Oximetry and Measure-Through-Motion- and-Low-Perfusion pulse oximetry, today announced its financial results for the 2008 second fiscal quarter.

For the second quarter of 2008, Masimo reported product revenues of $61.9 million representing a 30% increase over $47.6 million for the second quarter of 2007. Including royalty revenues, Masimo reported total 2008 second quarter revenues of $74.8 million compared to $63.7 million for the second quarter of 2007. Net income for the 2008 second quarter was $10.6 million or $0.18 per common share compared to $10.6 million or $0.13 per common share for the second quarter of 2007.

During the second quarter of 2008, Masimo also reported that it shipped 29,000 Masimo SET and Masimo Rainbow SET oximetry units, excluding handheld units, compared to 29,700 units in the same prior year quarter. For the first half of 2008, Masimo shipped 57,600 new units representing an annualized increase of 24% over the estimated 471,000 Masimo units in the market as of December 2007 and has now increased its total worldwide net installed base to 515,000 units. In the second quarter of 2008, revenues from Masimo Rainbow SET products increased 40% from the same prior year quarter.

Joe E. Kiani, Chairman and Chief Executive Officer of Masimo, said, "We believe that the benef0,556 $19,653 $10,556 $19,653 $10,601 $19,392

Accretion of

preferred

stock (1,956) (3,913) - - - -

Undistributed

income

attributable

to preferred

stock-

holders (5,802) (10,630) - - - -

Net income

attributable

to common

stock-

holders $2,798 $5,110 $10,556 $19,653 $10,601 $19,392

Denominator:

Weighted average

common shares

outstanding

- number of

shares used

in per share

calculation -

Basic 16,692,547 16,642,779

Options to

purchase

common

stock 4,039,467 4,056,332

Weighted

average

number of

shares used

in per

common share

calculation -

Dil-

uted 20,732,014 20,699,111

Weighted

average

common

shares

outstanding 16,692,547 16,642,779

Weighted

average

preferred

shares

outstanding 34,612,503 34,612,503

Number of

shares used

in per share

calculation

- Basic 51,305,050 51,255,282 56,166,934 55,637,976

Options to

purchase

common

stock 4,039,467 4,056,332 3,883,688 4,413,349

Weighted

average

number of

shares used

in per share

calculation

- Diluted 55,344,517 55,311,614 60,050,622 60,051,325

Net income

per share:

Basic $0.17 $0.31 $0.21 $0.38 $0.19 $0.35

Diluted $0.13 $0.25 $0.19 $0.36 $0.18 $0.32

it to patients, clinicians and hospitals of our life saving Masimo SET and Masimo Rainbow SET technologies continue to create momentum for the adoption of our products. Despite the generally difficult economic environment, we believe our business model continues to resonate with hospitals who demand the best technology for their patients. In addition, after a strong first quarter, we are pleased that sales of our Rainbow SET products have continued to gain momentum and set a new record in the second quarter of 2008."

As of June 28, 2008, cash and cash equivalents totaled $102.9 million-an increase from both December 29, 2007 of $96.7 million and from March 29, 2008 of $86.3 million. As previously announced, during the 2008 first fiscal quarter, Masimo repaid in full a $26.7 million debt obligation, the majority of which was established in early fiscal 2007.

Financial Guidance

Based on the results of the first half of fiscal year 2008, Masimo now expects its total fiscal year 2008 product revenues to be approximately $253 million and total revenues, including royalties, to be approximately $300 million. These figures are up from the previous guidance of $246 million and $292 million, respectively. Masimo also now expects earnings per common share to be approximately $0.64 per share, up from the prior guidance of $0.52 per share.

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 (866) 356-3095 for domestic callers and (617) 597-5391 for international callers. The reservation number for both dial-in numbers is 90085495. 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 http://www.masimo.com.

After the live web cast, the call will remain available on Masimo's website through September 4, 2008. In addition, a telephonic replay of the call will be available until August 18, 2008. The replay dial-in numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. Please use reservation code 86583404.

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, 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 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)), oxygen content (SpOC(TM)), carboxyhemoglobin (SpCO(R)), methemoglobin (SpMet(R)), and PVI(TM), in addition to oxyhemoglobin (SpO2), pulse rate (PR), and perfusion index (PI), 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 http://www.masimo.com.

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 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; and expectations for total revenues, product revenues, GAAP earnings per share, non-GAAP pro forma 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 lack of acceptance of any new products and technologies of ours; obtaining regulatory approval of our current and future products and technologies, including the recently announced total hemoglobin measurement; 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 Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008 filed with the Securities and Exchange Commission on May 1, 2008. 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 fiscal quarter ended March 29, 2008, 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, Pulse CO-Oximetry and Pulse CO-Oximeter are trademarks or registered trademarks of Masimo Corporation.

MASIMO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 29, 2007 June 28, 2008

ASSETS (Unaudited)

Current assets

Cash and cash equivalents $96,733 $102,903

Accounts receivable, net of allowance for

doubtful accounts 26,970 29,576

Royalties receivable 13,866 11,375

Inventories 23,110 29,256

Prepaid expenses 7,084 7,079

Deferred tax assets 14,334 14,334

Other current assets 1,543 1,156

Total current assets 183,640 195,679

Deferred cost of goods sold 26,249 27,764

Property and equipment, net 11,164 11,837

Deferred tax assets 5,332 5,332

Restricted cash 513 518

Intangible assets, net 5,589 6,793

Goodwill 448 448

Other assets 2,576 2,539

Total assets $235,511 $250,910

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable $14,640 $16,810

Accrued compensation 12,409 13,059

Accrued liabilities 6,211 5,135

Dividends payable 183 183

Deferred revenue 16,827 21,946

Current portion of long-term debt 11,539 647

Total current liabilities 61,809 57,780

Deferred revenue 366 336

Long-term debt, less current portion 19,502 285

Other liabilities 3,768 3,837

Total liabilities 85,445 62,238

Commitments and contingencies

Stockholders' equity

Common stock 55 56

Treasury stock (1,209) (1,209)

Additional paid-in capital 143,297 162,399

Accumulated other comprehensive loss (1,034) (923)

Retained earnings 8,957 28,349

Total stockholders' equity 150,066 188,672

Total liabilities and stockholders' equity $235,511 $250,910

MASIMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share information)

(unaudited)

Three Months Ended Six Months Ended

June 30, June 28, June 30, June 28,

2007 2008 2007 2008

Revenue:

Product $47,627 $61,850 $93,391 $121,523

Royalty and license fee 16,053 12,916 29,243 24,353

Total revenue 63,680 74,766 122,634 145,876

Cost of goods sold 17,919 21,403 34,820 42,524

Gross profit 45,761 53,363 87,814 103,352

Operating expenses:

Research and development 5,460 5,980 10,914 12,278

Selling, general and administrative 21,577 30,366 42,979 59,895

Antitrust litigation 465 277 475 445

Total operating expenses 27,502 36,623 54,368 72,618

Operating income 18,259 16,740 33,446 30,734

Non-operating income (expense):

Interest income 189 625 544 1,584

Interest expense (685) (60) (1,112) (703)

Other 170 75 211 178

Total non-operating income (expense) (326) 640 (357) 1,059

Income before provision for income

taxes 17,933 17,380 33,089 31,793

Provision for income taxes 7,377 6,779 13,436 12,401

Net income 10,556 10,601 19,653 19,392

Accretion of preferred stock (1,956) - (3,913) -

Undistributed income attributable to

preferred stockholders (5,802) - (10,630) -

Net income attributable to common

stockholders $2,798 $10,601 $5,110 $19,392

Net income per common share:

Basic $0.17 $0.19 $0.31 $0.35

Diluted $0.13 $0.18 $0.25 $0.32

The following table presents details of the stock based compensation

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

consolidated statements of income above (in thousands):

Three Months Ended Six Months Ended

June 30, June 28, June 30, June 28,

2007 2008 2007 2008

Cost of goods sold $45 $75 $78 $104

Research and development 164 607 275 1,019

Selling, general and administrative $849 $1,487 $1,295 $2,624

MASIMO CORPORATION

Reconciliation of GAAP to Non-GAAP Earnings per Share

(unaudited)

The following tables provide a comparison of our 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 SFAS No. 128 "Earnings per Share", or SFAS

128, in accordance with GAAP and the non-GAAP if-converted method based

solely upon SFAS No. 128. The non-GAAP if-converted method assumes

conversion of all shares of our preferred stock into common stock as of

December 31, 2006.

Upon closing of the Company's initial public offering on August 13, 2007,

all of the outstanding convertible preferred shares were converted into

common shares. Therefore, subsequent to this stock conversion the Company

uses the if-converted method under SFAS No. 128 to calculate earnings per

share.

We believe that the following non-GAAP earnings per share information for

the three and six months ended June 30, 2007 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 the three and

six months ended June 28, 2008 and future reported earnings per share.

Accordingly, we are disclosing this information to permit additional

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

2007 2008

As Reported Non-GAAP As Reported

Three Six Three Six Three Six

months months months months months months

ended ended ended ended ended ended

June 30, June 30, June 30, June 30, June 28, June 28,

2007 2007 2007 2007 2008 2008

Numerator:

Net income

as rep-

orted $1
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SOURCE Masimo Corporation
Copyright©2008 PR Newswire.
All rights reserved

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