Masimo Reports Third Quarter 2010 Financial Results / Product revenue grew 18% as rainbow revenue nearly doubled

IRVINE, Calif., Nov. 2, 2010 /PRNewswire-FirstCall/ --

Q3 2010 Highlights (compared to Q3 2009): -- Total revenue rose 15.5% to $101.0 million -- Product revenue rose 18.2% to $88.8 million -- Masimo SET and Masimo rainbow SET unit shipments rose 43.1% to 37,500 -- Masimo rainbow revenue rose 98.7% to $11.9 million -- GAAP EPS rose 22.7% to $0.27. Excluding $0.01 in one-time expenses, adjusted EPS rose 27.3% to $0.28

Masimo Corporation today announced its financial results for the third quarter of 2010.

Masimo's total revenue for the third quarter rose 15.5% to $101.0 million, compared to $87.4 million for the third quarter of 2009. Masimo's third quarter product revenue rose 18.2% to $88.8 million, compared to $75.1 million for the third quarter of 2009. Revenue from Masimo rainbow products rose 98.7% to $11.9 million in the third quarter, compared to $6.0 million for the third quarter of 2009.

Net income for the third quarter was $16.4 million, or $0.27 per diluted share, including $0.01 per diluted share in one-time marketing-related expenses that Masimo had previously planned and announced after receiving $30.1 million in proceeds in the first quarter of 2010 from an antitrust lawsuit against Covidien. Excluding these one-time expenses, adjusted net income for the third quarter was $16.9 million, or $0.28 per diluted share, compared to net income of $13.1 million, or $0.22 per diluted share, in the third quarter of 2009.

During the third quarter, the company shipped approximately 37,500 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, up 43.1% compared to approximately 26,200 in the same period last year. Masimo estimates its worldwide installed base as of October 2, 2010 to be 821,000 units, up 17.8% from 697,000 units as of October 3, 2009.

Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "Masimo continues to pursue its mission to improve patient outcomes and reduce healthcare costs by taking noninvasive monitoring to new sites and applications. Our third-quarter results demonstrate the strength of our technology and mission."

As of October 2, 2010, cash, cash equivalents and short-term investments totaled $125.4 million, compared to $189.0 million as of January 2, 2010. The decline was due primarily to the March 31, 2010 dividend payment of $117.5 million, partially offset by the net proceeds from the antitrust lawsuit and operating cash flow in the first nine months of 2010.

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 [phone] for domestic callers and [phone] for international callers. The reservation code for both dial-in numbers is 17706796. After the live webcast, the call will be available on Masimo's website through December 2, 2010. In addition, a telephonic replay of the call will be available through November 16, 2010. The replay dial-in numbers are [phone] for domestic callers and [phone] for international callers. Please use reservation code 17706796.

About Masimo

Masimo 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(TM) technology, allowing noninvasive and continuous monitoring of blood constituents that previously required invasive procedures, including total hemoglobin (SpHb®), oxygen content (SpOC(TM)), 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(TM), 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(TM), the first-ever noninvasive and continuous monitoring of acoustic respiration rate (RRa(TM)). 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 http://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. 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 the 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 http://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.

Investor Contact: Sheree Aronson Media Contact: Dana Banks Vice President, Investor Relations, Manager, Public Relations, Masimo Masimo Corporation Corporation [phone] [phone] [e-mail] [e-mail]

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) October 2, January 2, 2010 2010 ---- ---- ASSETS Current assets Cash and cash equivalents $125,407 $132,054 Short-term investments - 56,989 Accounts receivable, net of allowance for doubtful accounts 49,330 38,897 Royalties receivable 11,500 11,500 Inventories 43,401 31,559 Prepaid expenses 4,966 5,447 Deferred tax assets 11,586 11,585 Other current assets 1,729 1,357 --- --- Total current assets 247,919 289,388 Deferred cost of goods sold 35,334 28,163 Property and equipment, net 13,822 11,682 Deferred tax assets 11,380 11,500 Intangible assets, net 10,294 9,829 Other assets 8,117 5,783 --- --- Total assets $326,866 $356,345 ======== ======== LIABILITIES AND EQUITY Current liabilities Accounts payable $23,892 $16,716 Accrued compensation 19,478 17,793 Accrued liabilities 10,814 9,754 Income taxes payable 1,021 477 Deferred revenue 14,624 14,641 Current portion of capital lease obligations 54 60 --- --- Total current liabilities 69,883 59,441 Deferred revenue 1,979 270 Capital lease obligations, less current portion 134 171 Other liabilities 7,490 6,775 --- --- Total liabilities 79,486 66,657 ---- ---- Equity Masimo Corporation stockholders' equity: Common stock 59 58 Treasury stock (1,209) (1,209) Additional paid-in capital 211,882 195,690 Accumulated other comprehensive income 775 63 Retained earnings 34,022 94,112 ---- ---- Total Masimo Corporation stockholders' equity 245,529 288,714 Noncontrolling interest 1,851 974 --- - Total equity 247,380 289,688 ----- ----- Total liabilities and equity $326,866 $356,345 ======== ======== MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited, in thousands, except per share amounts) Three Months Ended ------------------ October 2, October 3, 2010 2009 ---- ---- Revenue: Product $88,823 $75,146 Royalty 12,165 12,295 ---- ---- Total revenue 100,988 87,441 Cost of goods sold 29,376 25,198 ---- ---- Gross profit 71,612 62,243 Operating expenses: Research and development 9,227 7,742 Selling, general and administrative 39,547 33,476 Antitrust litigation expense (proceeds) - 185 - - Total operating expenses 48,774 41,403 ---- ---- Operating income 22,838 20,840 Non-operating income 1,232 295 --- - Income before provision for income taxes 24,070 21,135 Provision for income taxes 7,376 7,814 --- --- Net income including noncontrolling interests 16,694 13,321 Net (income) loss attributable to the noncontrolling interests (275) (266) ---- ---- Net income attributable to Masimo Corporation $16,419 $13,055 ======= ======= Net income per share attributable to Masimo Corporation stockholders: Basic $0.28 $0.23 ===== ===== Diluted $0.27 $0.22 ===== ===== Weighted average shares used in per share calculations: Basic 58,866 57,666 ==== ==== Diluted 60,572 60,157 ==== ==== Cash dividend declared per share $- $- === === The 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 Ended ------------------ October 2, October 3, 2010 2009 ---- ---- Cost of goods sold $140 $102 Research and development $651 $645 Selling, general and administrative $1,777 $1,683 Nine Months Ended ----------------- October October 2, 3, 2010 2009 ---- ---- Revenue: Product $262,647 $219,690 Royalty 37,186 36,812 ---- ---- Total revenue 299,833 256,502 Cost of goods sold 88,379 73,517 ---- ---- Gross profit 211,454 182,985 Operating expenses: Research and development 27,688 22,761 Selling, general and administrative 129,862 99,122 Antitrust litigation expense (proceeds) (30,728) 228 ------- - Total operating expenses 126,822 122,111 ----- ----- Operating income 84,632 60,874 Non-operating income 1,194 376 --- - Income before provision for income taxes 85,826 61,250 Provision for income taxes 29,052 21,414 ---- ---- Net income including noncontrolling interests 56,774 39,836 Net (income) loss attributable to the noncontrolling interests 642 (668) --- ---- Net income attributable to Masimo Corporation $57,416 $39,168 ======= ======= Net income per share attributable to Masimo Corporation stockholders: Basic $0.98 $0.68 ===== ===== Diluted $0.95 $0.65 ===== ===== Weighted average shares used in per share calculations: Basic 58,644 57,542 ==== ==== Diluted 60,527 60,127 ==== ==== Cash dividend declared per share $2.00 $- ===== === The 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): Nine Months Ended ----------------- October October 2, 3, 2010 2009 ---- ---- Cost of goods sold $351 $273 Research and development $2,022 $1,878 Selling, general and administrative $6,514 $5,752 MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Nine Months Ended ----------------- October October 2, 3, 2010 2009 ---- ---- Cash flows from operating activities: Net income including noncontrolling interests $56,774 $39,836 Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities: Depreciation and amortization 4,755 4,512 Share-based compensation 8,887 7,903 Loss on disposal of property and equipment - 3 Provision for doubtful accounts 129 682 Provision for obsolete inventory 448 346 Provision for warranty costs 1,790 1,582 Provision for deferred income taxes 133 - Income tax benefit from exercise of stock options granted prior to 2,072 1,403 January 1, 2006 Excess tax benefit from share-based payment arrangements (494) (185) Changes in operating assets and liabilities: Increase in accounts receivable (10,561) (9,377) Increase in royalties receivable - (59) Increase in inventories (12,290) (4,233) (Increase) decrease in deferred cost of goods sold (7,201) 891 (Increase) decrease in prepaid expenses 522 (2,407) Increase in other assets (2,717) (1,165) Increase (decrease) in accounts payable 7,189 (2,124) Increase in accrued compensation 1,650 1,191 Decrease in accrued liabilities (734) (48) Increase (decrease) in income taxes payable 1,036 (9,781) Increase (decrease) in deferred revenue 1,691 (99) Increase in other liabilities 677 833 - - Net cash provided by operating activities 53,756 29,704 ------ ------ Cash flows from investing activities: Purchase of short-term investments (75,986) - Proceeds from sale and maturities of short-term investments 132,975 - Purchases of property and equipment (5,942) (2,889) Increase in intangible assets (1,381) (1,100) (Increase) decrease in restricted cash 42 (15) - --- Net cash provided by (used in) investing activities 49,708 (4,004) ------ ------ Cash flows from financing activities: Repayments on long-term debt (43) (268) Proceeds from issuance of common stock 6,277 1,834 Excess tax benefit from share-based payment arrangements 494 185 Dividends paid (117,506) - -------- - Net cash provided by (used in) financing activities (110,778) 1,751 Effect of foreign currency exchange rates on cash 667 325 --- --- Net increase (decrease) in cash and cash equivalents (6,647) 27,776 Cash and cash equivalents at beginning of period 132,054 146,910 ------- ------- Cash and cash equivalents at end of period $125,407 $174,686 ======== ========

Masimo Corporation

CONTACT: investors, Sheree Aronson, Vice President, Investor Relations,
[phone], [e-mail], or media, Dana Banks, Manager, Public
Relations, [phone], [e-mail], both of Masimo Corporation

Web Site: http://www.masimo.com/