EX-99.1 2 masi-20150217xex991.htm EXHIBIT 99.1 MASI-2015.02.17-EX 99.1


Exhibit 99.1
Masimo Reports Fourth Quarter and Full Year 2014 Financial Results
Q4 2014 Highlights (compared to Q4 2013):
 
■
 
Product revenue rose 14% to $153.9 million
 
■
 
Total revenue, including royalties, rose 14% to $161.8 million
 
■
 
Masimo rainbow® revenue declined 4% to $14.1 million
 
■
 
SET® and rainbow® SET® unit shipments were 44,100
 
■
 
Earnings per share was $0.40 versus $0.16 in the year-ago period
FY 2014 Highlights (compared to 2013):
 
■
 
Product revenue rose 8% to $556.8 million
 
■
 
Total revenue, including royalties, rose 7% to $586.6 million
 
■
 
Masimo rainbow® revenue rose by 6% to $51.8 million
 
■
 
SET® and rainbow® SET® unit shipments were 171,000
 
■
 
Earnings per share was $1.30 versus $1.02 in the year-ago period
Irvine, California, February 17, 2015 - Masimo (NASDAQ: MASI) today announced its financial results for the fiscal fourth quarter and full fiscal year ended January 3, 2015.
Fourth quarter 2014 product revenues rose 14% to $153.9 million, compared to $134.7 million for the fourth quarter of fiscal year 2013, and total revenue, including royalties, rose 14% to $161.8 million, up from $142.4 million for the fourth quarter of fiscal year 2013. The unfavorable effect of foreign currency movements adversely impacted fourth quarter product revenues by approximately $3.4 million.
The company’s worldwide direct product revenue in the fourth quarter of 2014 rose by 14% compared to the same period in 2013 and represented 86% of total product revenue. OEM sales, which accounted for 14% of total product revenue, rose by 18% compared to the same period in 2013. Revenue from sales of Masimo rainbow® products declined by 4% to $14.1 million in the fourth quarter of 2014, compared to $14.8 million in the prior year period.
Net income for the fourth quarter of 2014 was $21.2 million, or $0.40 per diluted share, compared to net income of $9.3 million, or $0.16 per diluted share, in the fourth quarter of 2013. Fourth quarter 2013 results were negatively impacted by $0.15 per diluted share charges related to selected inventory and equipment write-downs, as well as an arbitration award ruling that was subsequently vacated on appeal and reversed in the first quarter of 2014. During the fourth quarter of 2014, the company shipped approximately 44,100 SET® pulse oximetry and rainbow® Pulse CO-Oximetry™ units, excluding handheld units. Masimo estimates its worldwide installed base as of January 3, 2015 to be 1,313,000 units, up 9% from 1,205,000 units as of December 28, 2013.
Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, “We are happy that the fourth quarter product revenue growth reflected a continuation of the recovery in our core business that began in the third quarter. I am also happy that our value engineering efforts are, as we expected, continuing to result in higher sequential gross profit margins. Both of these factors, coupled with our continued focus on overall operating expense control, have begun to show the operating leverage opportunity that exists within our business model.”
As of January 3, 2015, Masimo’s cash and cash equivalents were $134.5 million, compared to $95.5 million as of December 28, 2013. During the fourth quarter, the company repurchased 27,659 shares of stock for $0.6 million, resulting in total 2014 stock repurchases of approximately 4.5 million shares for $102.5 million.




2015 Financial Guidance
Masimo today is providing 2015 financial guidance. Due to the significant movement in foreign exchange rates over the last four months, and the assumption that those rates will continue throughout 2015, Masimo is, for the first time, providing an estimate of the impact of these foreign exchange rates on its 2015 GAAP financial guidance. Masimo expects fiscal 2015 GAAP total revenues to be approximately $605 million. Masimo expects fiscal 2015 GAAP total product revenues to be $577 million, including an estimated $20 million revenue reduction due to unfavorable 2015 foreign exchange rate assumptions impacting product revenues compared to 2014 actual foreign exchange rates. In addition, Masimo expects approximately $28 million in fiscal 2015 royalty revenues. Masimo also expects fiscal 2015 GAAP earnings per diluted share of approximately $1.30, including an estimated $0.15 reduction due to the more unfavorable 2015 foreign exchange rate assumptions impacting revenues, cost of sales and operating expenses compared to the 2014 actual foreign exchange rates. Masimo will provide additional financial information during the conference call today. 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 76075657. After the live webcast, the call will be available on Masimo's website through March 10, 2015. In addition, a telephonic replay of the call will be available through March 3, 2015. The replay dial-in numbers are (800) 585-8367 for domestic callers and +1 (855) 859-2056 for international callers. Please use reservation code 76075657.
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 could only be measured invasively, 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). 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 2015 total, product and royalty revenues and GAAP earnings per share; estimates regarding the impact of foreign exchange rates on our financial performance for full fiscal year 2015; statements regarding the recovery in our core business; statements regarding higher sequential gross profit margins and expense control; 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: actual foreign currency exchange rates in fiscal year 2015; 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; our ongoing litigation and related matters; 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.







# # #
 
 
 
Investor Contact: Eli Kammerman
 
Media Contact: Mike Drummond
(949) 297-7077
 
(949) 297-7434
ekammerman@masimo.com
 
mdrummond@masimo.com
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 are trademarks or registered trademarks of Masimo Corporation






MASIMO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (in thousands)

 
January 3,
2015
 
December 28,
2013
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
134,453

 
$
95,466

Accounts receivable, net of allowance for doubtful accounts
71,017

 
76,759

Inventories
69,718

 
56,813

Prepaid income taxes
417

 
3,740

Other current assets
21,471

 
19,384

Deferred income taxes, current
18,065

 
19,636

Total current assets
315,141

 
271,798

Deferred cost of goods sold
67,485

 
61,714

Property and equipment, net
101,952

 
24,866

Intangible assets, net
27,771

 
28,104

Goodwill
20,979

 
22,793

Deferred income taxes, noncurrent
24,193

 
22,565

Other assets
7,485

 
6,822

Total assets
$
565,006

 
$
438,662

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
38,045

 
$
28,004

Accrued compensation
33,600

 
29,486

Accrued liabilities
24,541

 
23,028

Income taxes payable
6,562

 
2,406

Deferred revenue
21,067

 
20,755

Current portion of capital lease obligations
79

 
111

Total current liabilities
123,894

 
103,790

Deferred revenue
453

 
566

Long term debt
125,145

 
225

Other liabilities
7,773

 
7,680

Total liabilities
257,265

 
112,261

Commitments and contingencies
 
 
 
Equity
 
 
 
Masimo Corporation stockholders’ equity:
 
 
 
 Common stock
52

 
57

 Treasury stock
(185,906
)
 
(83,454
)
Additional paid-in capital
288,686

 
273,129

Accumulated other comprehensive (loss) income
(2,093
)
 
3,995

Retained earnings
205,260

 
132,742

Total Masimo Corporation stockholders’ equity
305,999

 
326,469

Noncontrolling interest
1,742

 
(68
)
Total equity
307,741

 
326,401

Total liabilities and equity
$
565,006

 
$
438,662






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

 
Three Months Ended
 
Twelve Months Ended
 
January 3,
2015
 
December 28,
2013
 
January 3,
2015
 
December 28,
2013
Revenue:
 
 
 
 
 
 
 
Product
$
153,897

 
$
134,704

 
$
556,764

 
$
517,429

Royalty
7,891

 
7,731

 
29,879

 
29,816

Total revenue
161,788

 
142,435

 
586,643

 
547,245

Cost of goods sold
52,629

 
51,899

 
195,864

 
188,418

Gross profit
109,159

 
90,536

 
390,779

 
358,827

Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative
61,483

 
55,933

 
241,016

 
215,469

Research and development
15,029

 
13,940

 
56,581

 
55,631

Litigation award and defense costs
—

 
8,010

 
(10,331
)
 
8,010

Total operating expenses
76,512

 
77,883

 
287,266

 
279,110

Operating income
32,647

 
12,653

 
103,513

 
79,717

Non-operating expense
1,429

 
751

 
1,472

 
3,991

Income before provision for income taxes
31,218

 
11,902

 
102,041

 
75,726

Provision for income taxes
9,432

 
2,717

 
27,678

 
20,005

Net income including noncontrolling interest
21,786

 
9,185

 
74,363

 
55,721

Net income (loss) attributable to noncontrolling interest
565

 
(128
)
 
1,845

 
(2,660
)
Net income attributable to Masimo Corporation stockholders
$
21,221

 
$
9,313

 
$
72,518

 
$
58,381

 
 
 
 
 
 
 
 
Net income per share attributable to Masimo Corporation stockholders:
 
 
 
 
 
 
 
Basic
$
0.40

 
$
0.16

 
$
1.33

 
$
1.03

Diluted
$
0.40

 
$
0.16

 
$
1.30

 
$
1.02

 
 
 
 
 
 
 
 
Weighted-average shares used in per share calculations:
 
 
 
 
 
 
 
Basic
52,438

 
56,678

 
54,708

 
56,690

Diluted
53,142

 
57,824

 
55,571

 
57,480

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 (in thousands):
 
Three Months Ended
 
Twelve Months Ended
 
January 3,
2015
 
December 28,
2013
 
January 3,
2015
 
December 28,
2013
Cost of goods sold
$
103

 
$
30

 
$
436

 
$
354

Selling, general and administrative
2,498

 
2,210

 
8,812

 
9,407

Research and development
614

 
414

 
1,757

 
1,913

Total
$
3,215

 
$
2,654

 
$
11,005

 
$
11,674







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

 
Year ended
 
January 3,
2015
 
December 28,
2013
Cash flows from operating activities:
 
 
 
Net income including noncontrolling interest
$
74,363

 
$
55,721

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
 
 
 
Depreciation and amortization
12,818

 
11,421

Share-based compensation
11,005

 
11,674

Loss on disposal of property and equipment
368

 
249

Provision for doubtful accounts
583

 
728

Benefit from deferred income taxes
(320
)
 
(8,613
)
Income tax benefit from exercise of stock options granted prior to January 1, 2006
264

 
693

Excess tax deficit from share-based compensation arrangements
396

 
1,308

Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in accounts receivable
4,862

 
(9,576
)
Increase in inventories
(13,434
)
 
(9,453
)
Increase in deferred cost of goods sold
(5,888
)
 
(9,594
)
Decrease (increase) in prepaid income taxes
3,316

 
(1,660
)
Increase in other assets
(2,619
)
 
(756
)
(Decrease) increase in accounts payable
(1,375
)
 
1,238

Increase in accrued compensation
4,948

 
4,557

Increase in accrued liabilities
1,837

 
6,406

Increase (decrease) in income taxes payable
3,909

 
(381
)
Increase in deferred revenue
199

 
1,467

Increase (decrease) in other liabilities
227

 
(842
)
Net cash provided by operating activities
95,459

 
54,587

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(75,061
)
 
(9,360
)
Increase in intangible assets
(3,353
)
 
(3,926
)
Net cash used in investing activities
(78,414
)
 
(13,286
)
Cash flows from financing activities:
 
 
 
Borrowings under revolving line of credit
125,000

 
—

Debt issuance costs
(436
)
 
—

Repayments on capital lease obligations
(111
)
 
(132
)
Proceeds from issuance of common stock
4,680

 
3,289

Excess tax deficit from share-based compensation arrangements
(396
)
 
(1,308
)
Repurchases of common stock
(102,453
)
 
(19,790
)
Repurchases of equity by noncontrolling interest, net of equity issued
(38
)
 
—

Net cash provided by (used in) financing activities
26,246

 
(17,941
)
Effect of foreign currency exchange rates on cash
(4,304
)
 
552

Net increase in cash and cash equivalents
38,987

 
23,912

Cash and cash equivalents at beginning of period
95,466

 
71,554

Cash and cash equivalents at end of period
$
134,453

 
$
95,466