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Masimo Reports Fourth Quarter and Full Year 2013 Financial Results

Companies mentioned in this article: Masimo

IRVINE, CA -- (Marketwired) -- 02/13/14 -- Masimo (NASDAQ: MASI) today announced its financial results for the fourth quarter and year ended December 28, 2013.

Q4 2013 Highlights (compared to Q4 2012):

  • Total revenue, including royalties, rose 8% to $142.4 million
  • Product revenue rose 8% to $134.7 million
  • Masimo rainbow revenue rose 34% to $14.8 million
  • SET® and rainbow® SET® unit shipments were 42,000
  • GAAP earnings per share was $0.16 including charges of $0.15 per share

Full Year 2013 Highlights (compared to 2012):

  • Total revenue, including royalties, rose 11% to $547.2 million
  • Product revenue rose 11% to $517.4 million
  • Masimo rainbow revenue rose 21% to $48.8 million
  • Shipped 168K Masimo SET® and rainbow® SET® units
  • GAAP earnings per share was $1.02, including Q4 charges of $0.15 per share

Masimo's total fourth quarter revenue, including royalties, rose 8% to $142.4 million, compared to $132.2 million for the fourth quarter of 2012. Fourth quarter 2013 product revenue rose 8% to $134.7 million, compared to $125.3 million for the fourth quarter of 2012. The company's worldwide direct product revenue grew 9% in the fourth quarter of 2013 and represented 86% of product revenue. OEM sales, which accounted for 14% of product revenue, declined by 1% compared to the same period in 2012. Revenue from sales of Masimo rainbow products rose 34% to $14.8 million in the fourth quarter, compared to $11.1 million in the year-ago period.

Net income for the fourth quarter of 2013 was $9.3 million, or $0.16 per diluted share, compared to net income of $15.0 million, or $0.26 per diluted share, in the fourth quarter of 2012. Net income for the fourth quarter of 2013 included pre-tax charges of $4.6 million related to selected inventory and equipment related write-downs related to accelerated technology transitions and $8.0 million in various charges related to the previously announced arbitration award ruling. Together, these combined charges reduced fourth quarter GAAP earnings per share by $0.15.

During the fourth quarter of 2013, the company shipped approximately 42,000 SET® pulse oximetry and rainbow® Pulse CO-Oximetry™ units, excluding handheld units, approximately level with the same prior-year period. Masimo estimates its worldwide installed base as of December 28, 2013 to be 1,205,000 units, up 11% from 1,088,000 units as of December 29, 2012.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Masimo achieved many important objectives in 2013, including an 11% increase in our global installed base, increased adoption of pulse oximetry across the U.S. which helps clinicians screen for congenital heart disease in newborns, and the launch of Root™, which includes open architecture monitoring and connectivity features in CE Mark countries. We have begun 2014 with the CE Mark for O3™, our new tissue and cerebral oximetry device, and expect to announce other new products this year. In addition, we are confident that value engineering initiatives that we have put in place since 2012 will begin to result in increased product margin and improved product performance throughout 2014 and beyond."

As of December 28, 2013, Masimo's cash and cash equivalents were $95.5 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 2013.

2014 Financial Guidance
Masimo today is providing 2014 financial guidance. Masimo expects fiscal 2014 total revenues to be approximately $578 million to $598 million, including product revenues of $570 million and royalty revenues ranging between $8 million to $28 million. Included in the 2014 product revenue guidance is a rainbow revenue expectation of $60 million. In addition, Masimo expects fiscal 2014 GAAP earnings per share to range between $1.13 and $1.28. 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 call will be available online from the investor relations page of the company's 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 54039233. After the live webcast, the call will be available on Masimo's website through March 15, 2014. In addition, a telephonic replay of the call will be available through February 27, 2014. The replay dial-in numbers are (800) 585-8367 for domestic callers and +1 (855) 859-2056 for international callers. Please use reservation code 54039233.

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 expectations for full fiscal year 2014 total, product, rainbow and royalty revenues and GAAP earnings per share; 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; 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)

                                                December 28,   December 29,
                                                    2013           2012
                                               -------------  -------------
ASSETS
Current assets
  Cash and cash equivalents                    $      95,466  $      71,554
  Accounts receivable, net of allowance for
   doubtful accounts                                  76,759         67,911
  Royalties receivable                                 7,300          7,130
  Inventories                                         56,813         47,358
  Prepaid expenses                                     9,243          6,507
  Prepaid income taxes                                 3,740          2,080
  Deferred tax assets                                 19,636         12,911
  Other current assets                                 2,841          3,896
                                               -------------  -------------
      Total current assets                           271,798        219,347
Deferred cost of goods sold                           61,714         52,103
Property and equipment, net                           24,866         23,924
Intangible assets, net                                28,104         27,363
Goodwill                                              22,793         22,824
Deferred tax assets                                   22,565         21,078
Other assets                                           6,822          8,022
                                               -------------  -------------
    Total assets                               $     438,662  $     374,661
                                               =============  =============
LIABILITIES AND EQUITY
Current liabilities
  Accounts payable                             $      28,004  $      27,033
  Accrued compensation                                29,486         25,021
  Accrued liabilities                                 23,028         16,648
  Income taxes payable                                 2,406          1,504
  Deferred revenue                                    20,755         19,278
  Current portion of capital lease obligations           111             55
                                               -------------  -------------
      Total current liabilities                      103,790         89,539
Deferred revenue                                         566            576
Capital lease obligations, less current
 portion                                                 225             60
Other liabilities                                      7,680          8,818
                                               -------------  -------------
      Total liabilities                              112,261         98,993
Commitments and contingencies
Equity
  Masimo Corporation stockholders' equity:
    Common stock                                          57             57
    Treasury stock                                   (83,454)       (63,664)
    Additional paid-in capital                       273,129        258,783
    Accumulated other comprehensive income             3,995          3,542
    Retained earnings                                132,742         74,361
                                               -------------  -------------
      Total Masimo Corporation stockholders'
       equity                                        326,469        273,079
  Noncontrolling interest                                (68)         2,589
                                               -------------  -------------
      Total equity                                   326,401        275,668
                                               -------------  -------------
      Total liabilities and equity             $     438,662  $     374,661
                                               =============  =============



                             MASIMO CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            (unaudited) (in thousands, except per share amounts)

                         Three Months Ended          Twelve Months Ended
                     --------------------------  --------------------------
                     December 28,  December 29,  December 28,  December 29,
                         2013          2012          2013          2012
                     ------------  ------------  ------------  ------------
Revenue:
  Product            $    134,704  $    125,284  $    517,429  $    464,928
  Royalty                   7,731         6,877        29,816        28,305
                     ------------  ------------  ------------  ------------
Total revenue             142,435       132,161       547,245       493,233
Cost of goods sold         51,899        44,980       188,418       166,982
                     ------------  ------------  ------------  ------------
Gross profit               90,536        87,181       358,827       326,251
Operating expenses:
  Selling, general
   and
   administrative          55,933        51,567       215,469       193,948
  Research and
   development             13,940        13,341        55,631        47,077
  Litigation award
   and defense costs        8,010            --         8,010            --
                     ------------  ------------  ------------  ------------
Total operating
 expenses                  77,883        64,908       279,110       241,025
                     ------------  ------------  ------------  ------------
Operating income           12,653        22,273        79,717        85,226
Non-operating
 expense                     (751)       (1,273)       (3,991)       (1,405)
                     ------------  ------------  ------------  ------------
Income before
 provision for
 income taxes              11,902        21,000        75,726        83,821
Provision for income
 taxes                      2,717         6,159        20,005        21,883
                     ------------  ------------  ------------  ------------
Net income including
 noncontrolling
 interest                   9,185        14,841        55,721        61,938
Net loss
 attributable to
 noncontrolling
 interest                     128           166         2,660           334
                     ------------  ------------  ------------  ------------
Net income
 attributable to
 Masimo Corporation
 stockholders        $      9,313  $     15,007  $     58,381  $     62,272
                     ============  ============  ============  ============

Net income per share
 attributable to
 Masimo Corporation
 stockholders:
  Basic              $       0.16  $       0.26  $       1.03  $       1.08
                     ============  ============  ============  ============
  Diluted            $       0.16  $       0.26  $       1.02  $       1.07
                     ============  ============  ============  ============

Weighted average
 shares used in per
 share calculations:
  Basic                    56,578        57,260        56,690        57,445
                     ============  ============  ============  ============
  Diluted                  57,824        58,145        57,480        58,374
                     ============  ============  ============  ============

Cash dividend
 declared per share  $         --  $       1.00  $         --  $       1.00
                     ============  ============  ============  ============



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

                            Three Months Ended        Twelve Months Ended
                        -------------------------  -------------------------
                        December 28, December 29,  December 28, December 29,
                            2013         2012          2013         2012
                        ------------ ------------  ------------ ------------
Cost of goods sold      $         30 $         (6) $        354 $        480
Selling, general and
 administrative                2,210        2,315         9,407       10,775
Research and development         414          755         1,913        2,842
                        ------------ ------------  ------------ ------------
Total                   $      2,654 $      3,064  $     11,674 $     14,097
                        ============ ============  ============ ============



                             MASIMO CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (unaudited) (in thousands)

                                                 Year ended     Year ended
                                                December 28,   December 29,
                                                    2013           2012
                                               -------------  -------------
Cash flows from operating activities:
  Net income including noncontrolling interest $      55,721  $      61,938
  Adjustments to reconcile net income
   including noncontrolling interest to net
   cash provided by operating activities:
    Depreciation and amortization                     11,421          9,369
    Share-based compensation                          11,674         14,097
    Loss on disposal of property and equipment           249             --
    Provision for doubtful accounts                      728            231
    Benefit from deferred income taxes                (8,613)        (6,806)
    Income tax benefit from exercise of stock
     options granted prior to January 1, 2006            693            338
    Excess tax deficit from share-based
     compensation arrangements                         1,308            748
    Realized foreign exchange gain on forward
     contracts                                            --           (586)
    Changes in operating assets and
     liabilities:
      Increase in accounts receivable                 (9,576)       (10,130)
      Increase in royalties receivable                  (170)           (28)
      (Increase) decrease in inventories              (9,453)           539
      Increase in deferred cost of goods sold         (9,594)          (409)
      (Increase) decrease in prepaid expenses         (2,792)           186
      (Increase) decrease in prepaid income
       taxes                                          (1,660)         1,255
      Decrease (increase) in other assets              2,206         (2,193)
      Increase (decrease) in accounts payable            968         (1,726)
      Increase in accrued compensation                 4,557          4,827
      Increase in accrued liabilities                  6,406          2,939
      (Decrease) increase in income taxes
       payable                                          (381)           198
      Increase in deferred revenue                     1,467          2,850
      Decrease in other liabilities                     (842)        (2,203)
                                               -------------  -------------
Net cash provided by operating activities             54,317         75,434
                                               -------------  -------------
Cash flows from investing activities:
    Purchases of property and equipment               (9,090)       (10,828)
    Increase in intangible assets                     (3,926)        (3,664)
    Cash paid for acquisitions, net of cash
     acquired                                             --        (37,399)
                                               -------------  -------------
Net cash used in investing activities                (13,016)       (51,891)
                                               -------------  -------------
Cash flows from financing activities:
  Repayments on capital lease obligations               (132)           (26)
  Proceeds from issuance of common stock               3,289          1,642
  Excess tax deficit from share-based
   compensation arrangements                          (1,308)          (748)
  Dividends paid                                          --        (57,275)
  Repurchases of common stock                        (19,790)       (26,268)
  Net proceeds from settlement of forward
   contracts                                              --            586
                                               -------------  -------------
Net cash used in financing activities                (17,941)       (82,089)
                                               -------------  -------------
Effect of foreign currency exchange rates on
 cash                                                    552            218
                                               -------------  -------------
Net increase (decrease) in cash and cash
 equivalents                                          23,912        (58,328)
Cash and cash equivalents at beginning of
 period                                               71,554        129,882
                                               -------------  -------------
Cash and cash equivalents at end of period     $      95,466  $      71,554
                                               =============  =============

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Contact:

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

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