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Masimo Reports Third Quarter 2011 Financial Results

IRVINE, Calif., Oct. 25, 2011 /PRNewswire/ -- Masimo (NASDAQ: MASI) today announced its financial results for the third quarter ended October 1, 2011.

Masimo’s total third quarter revenue, including royalties, rose 3% to $104.0 million, compared to $101.0 million for 2010’s third quarter.  The company’s third quarter product revenue rose 10% to $97.6 million, compared to $88.8 million for the third quarter of 2010.  For the third quarter of 2011, the company’s worldwide end-user business grew 18%, while OEM sales were down 20%.  Revenue from Masimo rainbow products declined 35% to $7.8 million in the quarter, compared to $11.9 million for the third quarter of 2010 when Masimo received an approximately $4 million rainbow order from the U.S. Marine Corps.  

Net income for the third quarter was $14.8 million, or $0.24 per diluted share, compared to reported net income of $16.4 million, or $0.27 per diluted share, in the third quarter of 2010, which included $0.01 per diluted share in one-time expenses.  

During the third quarter, the company shipped approximately 33,400 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, down 11% compared to approximately 37,500 in the same prior year period.  Masimo estimates its worldwide installed base as of October 1, 2011 to be 950,000 units, up 16% from 821,000 units as of October 2, 2010.As of October 1, 2011, cash and cash equivalents were $143.2 million, compared to $88.3 million as of January 1, 2011.Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Masimo product revenue grew 10% in the period as strong SET performance was partially offset by declines in rainbow and OEM revenue.  The 18% rise in our end-user, or direct, business was fueled by strong performance from our U.S. acute care business and even stronger performance from our international business. While we are disappointed with total rainbow revenue in the quarter, we remain confident in the power of rainbow parameters such as SpHb and RAM, which experienced strong year-over-year adhesive sensor unit and revenue growth in the quarter.  We expect rainbow to not only help improve the quality and cost of patient care, but to be a catalyst for Masimo's revenue growth over the long term."Revised Financial Guidance Masimo now expects fiscal 2011 total revenue to be between $436 million and $439 million, including product revenue between $404 million and $407 million, and royalty revenue between $31.5 million and $32.5 million.  Included within the revised 2011 product revenue range is a rainbow revenue expectation of $33 million to $35 million.  The company now expects fiscal 2011 GAAP earnings per share to be between $1.04 and $1.06.  Each of the components of Masimo’s guidance set forth above is an estimate only and actual performance could differ.

Previously, the company’s guidance was for fiscal 2011 total revenue to be between $446 million and $463 million, including product revenue at the lower end of the $415 million to $430 million range, and royalty revenue between $31 million and $33 million.  Included within the previous product revenue range was a rainbow revenue expectation at the lower end of the $40 million to $50 million range.  The company previously expected fiscal 2011 GAAP earnings per share to be at the lower end of the $1.17 and $1.25 range.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 18542610. After the live webcast, the call will be available on Masimo's website through November 25, 2011.  In addition, a telephonic replay of the call will be available through November 8, 2011. The replay dial-in numbers are (800) 585-8367 for domestic callers and +1 (855) 859-2056 for international callers.  Please use reservation code 18542610.

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™ 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.  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

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; our revised expectations for total revenue, royalty revenue and product revenue, including rainbow revenue, and GAAP earnings per share for the full fiscal year 2011; 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 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 AronsonMedia Contact: Dana BanksVice President, Investor Relations, Masimo CorporationManager, Public Relations, Masimo Corporation (949) 297-7043 (949) 297-7348 saronson@masimo.comdbanks@masimo.comMasimo, 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) October 1,January 1,20112011ASSETSCurrent assetsCash and cash equivalents



88,305Accounts receivable, net of allowance for doubtful accounts 53,52649,694Royalties receivable6,73612,000Inventories45,52345,028Prepaid expenses13,3627,887Deferred tax assets12,58812,555Other current assets1,7032,136Total current assets276,630217,605Deferred cost of goods sold51,50847,184Property and equipment, net15,09615,951Intangible assets, net10,99210,497Deferred tax assets12,54212,560Other assets7,3366,438Total assets



310,235LIABILITIES AND EQUITYCurrent liabilitiesAccounts payable



22,150Accrued compensation18,42121,074Accrued liabilities10,7649,832Income taxes payable1,923722Deferred revenue14,87616,369Current portion of capital lease obligations4850Total current liabilities66,03870,197Deferred revenue1,1201,554Capital lease obligations, less current portion87122Other liabilities9,4888,323Total liabilities76,73380,196EquityMasimo Corporation stockholders’ equity:Common stock6059Treasury stock(1,209)(1,209)Additional paid-in capital239,218222,206Accumulated other comprehensive income1,294925Retained earnings55,5445,664Total Masimo Corporation stockholders’ equity294,907227,645Noncontrolling interest2,4642,394Total equity297,371230,039Total liabilities and equity



310,235MASIMO CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited, in thousands, except per share amounts) Three Months EndedNine Months EndedOctober 1,October 2,October 1,October 2,2011201020112010Revenue:Product$




262,647Royalty6,40112,16524,87637,186Total revenue104,040100,988326,647299,833Cost of goods sold35,60129,376106,12588,379Gross profit68,43971,612220,522211,454Operating expenses:Selling, general and administrative40,13439,547125,275129,862Research and development9,3729,22728,79327,688Antitrust litigation proceeds———(30,728)Total operating expenses49,50648,774154,068126,822Operating income18,93322,83866,45484,632Non-operating income (expense)(240)1,2324821,194Income before provision for income taxes18,69324,07066,93685,826Provision for income taxes3,8697,37617,04929,052Net income including noncontrolling interests14,82416,69449,88756,774Net (income) loss attributable to the noncontrolling interests5(275)(7)642Net income attributable to Masimo Corporation$




57,416Net income per share attributable to Masimo Corporation stockholders:Basic$








0.95Weighted average shares used in per share calculations:Basic59,97158,86659,80458,644Diluted61,08660,57261,08260,527Cash dividend declared per share$




2.00The 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 EndedNine Months EndedOctober 1,October 2,October 1,October 2,2011201020112010Cost of goods sold$




351Selling, general and administrative1,9121,7787,5596,514Research and development5436512,1892,022Total$




8,887 MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Nine Months Ended October 1, October 2, 2011 2010 Cash flows from operating activities:Net income including noncontrolling interests$


56,774Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:Depreciation and amortization5,6084,755Share-based compensation10,1678,887Provision for doubtful accounts184129Provision for obsolete inventory1,879448Provision for warranty costs1,9191,790Provision for deferred income taxes—133Income tax benefit from exercise of stock options granted prior to January 1, 20061,2902,072Excess tax benefit from share-based payment arrangements(58)(494)Changes in operating assets and liabilities:Increase in accounts receivable(4,016)(10,561)Decrease in royalties receivable5,264—Increase in inventories(2,374)(12,290)Increase in deferred cost of goods sold(4,321)(7,201)(Increase) decrease in prepaid expenses(5,459)522Increase in other assets(436)(2,675)Increase (decrease) in accounts payable(2,146)7,189Increase (decrease) in accrued compensation(2,744)1,650Decrease in accrued liabilities(1,001)(734)Increase in income taxes payable1,2491,036Increase (decrease) in deferred revenue(1,927)1,691Increase in other liabilities1,101677Net cash provided by operating activities54,06653,798Cash flows from investing activities:Purchase of short-term investments—(75,986)Proceeds from sale and maturities of short-term investments—132,975Purchases of property and equipment(3,508)(5,942)Increase in intangible assets(1,719)(1,381)Net cash provided by (used in) investing activities(5,227)49,666Cash flows from financing activities:Repayments of capital lease obligations(37)(43)Proceeds from issuance of common stock5,5686,277Excess tax benefit from share-based payment arrangements58494Dividends paid—(117,506)Net cash provided by (used in) financing activities5,589(110,778)Effect of foreign currency exchange rates on cash459667Net increase (decrease) in cash and cash equivalents54,887(6,647)Cash and cash equivalents at beginning of period88,305132,054Cash and cash equivalents at end of period$



SOURCE Masimo Corporation
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