Masimo Reports Third Quarter 2012 Financial Results; Board Declares Special Cash Dividend of $1.00 per Share PR Newswire IRVINE, Calif., Nov. 1, 2012 IRVINE, Calif., Nov. 1, 2012 /PRNewswire/ -- Q3 2012 Highlights (compared to Q3 2011): oProduct revenue rose 15% to $112.1 million oMasimo rainbow^® revenue rose 41% to $11.0 million, including 92% increase in SpHb^® revenue oShipped 33,100 Masimo SET^® and Masimo rainbow^® SET units oNet income was $13.8 million, with EPS of $0.24 Masimo (NASDAQ: MASI) today announced its financial results for the third quarter ended September 29, 2012, and that its Board of Directors has declared a special cash dividend of $1.00 per share, payable on December 11, 2012 to stockholders of record as of the close of business on November 27, 2012. Masimo's total third quarter revenue, including royalties, rose 14% to $119.1 million, compared to $104.0 million for the third quarter of 2011. Third quarter 2012 product revenue rose 15% to $112.1 million, compared to $97.6 million for the third quarter of 2011. The company's worldwide end-user revenue grew 15% in the third quarter of 2012 and represented 85% of product revenue. OEM sales, which accounted for 15% of product revenue, rose 13% compared to the same period in 2011. Excluding the impact of Masimo's 2012 acquisitions of PHASEIN AB and Spire Semiconductor, third quarter 2012 product revenue rose 12%. Revenue from sales of Masimo rainbow products rose 41% to $11.0 million in the third quarter, compared to $7.8 million for the third quarter of 2011. Third quarter 2012 rainbow revenue included a 92% increase in total hemoglobin (SpHb) sales compared to the third quarter of 2011. Net income for the third quarter of 2012 was $13.8 million, or $0.24 per diluted share, compared to net income of $14.8 million, or $0.24 per diluted share, in the third quarter of 2011. The third quarter 2012 operating results included a $0.02 per share loss attributed to Masimo's 2012 acquisitions of PHASEIN AB and Spire Semiconductor. During the third quarter of 2012, the company shipped approximately 33,100 Masimo SET pulse oximetry and Masimo rainbow SET Pulse CO-Oximetry units, excluding handheld units, essentially unchanged from the same prior-year period. Masimo estimates its worldwide installed base as of September 29, 2012 to be 1,056,000 units, up 11% from 950,000 units as of October 1, 2011. Joe Kiani, Chairman and Chief Executive Officer of Masimo, said, "During the third quarter, we continued to leverage Masimo's innovation leadership and recurring-revenue business model to seize multiple growth opportunities across a range of patient care settings. Our third quarter product revenue and global installed base growth continued to outpace the industry, and third quarter rainbow product sales were among the highest yet." Mr. Kiani continued, "We are happy to announce the Board's decision to declare a special cash dividend, which reflects not only the strength of our financial position and confidence in our long-term outlook, but also demonstrates our commitment to enhance stockholder value. In addition, by declaring the dividend now, Masimo stockholders can take advantage of current dividend tax rates, which may increase in 2013. Today's action marks the fourth instance of a special dividend paid by Masimo in the past six years, and the third since we became a public company in 2007. In fact, including the dividend announced today, since becoming a public company, we have returned approximately $220 million to stockholders in the form of special cash dividends and another $62.5 million in the form of repurchases of our common stock. This total of $282.5 million represents a return of approximately 88% of the cash generated from operations between 2008 and September 2012." As of September 29, 2012, Masimo's cash and cash equivalents were $113.0 million, compared to $129.9 million as of December 31, 2011. The change reflects primarily net cash generated from operations, offset by $37.4 million in cash used to acquire PHASEIN AB and Spire Semiconductor, and $26.3 million in cash used to repurchase shares of Masimo common stock in the first half of 2012. The payout for the special $1.00 per share cash dividend announced today is expected to be about $57.2 million, based on the current shares outstanding, and will be reflected in the company's fourth quarter and full year 2012 financial statements. The special dividend payout represents only a portion of the company's cash reserves, which the Board believes is sufficient to cover operational needs, and fund continued research and development investments and strategic initiatives. While dividends are not routine for the company, Masimo has previously paid special dividends to shareholders totaling $4.09 per share related to the 2006 intellectual property patent suit settlement agreement with a competitor, $2.00 per share in March 2010 and $0.75 per share in December 2010. Although there can be no guarantees of future dividends, the Board remains committed to enhancing stockholder value based on its consideration of various factors, including the company's operating results, financial condition and anticipated capital requirements. 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 conference call will be available online from the investor relations page of the company's corporate 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 38439591. After the live webcast, the call will be available on Masimo's website through December 1, 2012. In addition, a telephonic replay of the call will be available through November 15, 2012. The replay dial-in numbers are (800) 585-8367 for domestic callers and +1 (855) 859-2056 for international callers. Please use reservation code 38439591. 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^TM), carboxyhemoglobin (SpCO^®), methemoglobin (SpMet^®), and Pleth Variability Index (PVI^®), in addition to SpO, 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^TM, 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 financial condition, results of operations and business generally; expectations regarding our ability to design and deliver innovative new noninvasive technologies; 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 impact of the decline in the worldwide credit markets on us and our customers; the integration of acquisitions; 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. Investor Contact: Media Contact: Sheree Aronson Mike Drummond (949) 297-7043 (949) 297-7434 email@example.com firstname.lastname@example.org 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) September 29, December 31, 2012 2011 ASSETS Current assets Cash and cash equivalents $ 112,988 $ 129,882 Accounts receivable, net of allowance for doubtful 62,998 57,013 accounts Royalties receivable 7,169 7,102 Inventories 48,981 45,944 Prepaid expenses 12,934 9,410 Deferred tax assets 11,574 11,576 Other current assets 3,554 2,008 Total current assets 260,198 262,935 Deferred cost of goods sold 51,539 51,679 Property and equipment, net 23,028 15,239 Intangible assets, net 27,288 11,393 Goodwill 22,745 448 Deferred tax assets 17,308 16,766 Other assets 7,511 7,644 Total assets $ 409,617 $ 366,104 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 26,024 $ 27,302 Accrued compensation 22,559 19,717 Accrued liabilities 16,580 12,297 Income taxes payable 492 570 Deferred revenue 18,784 16,019 Current portion of capital lease obligations 55 48 Total current liabilities 84,494 75,953 Deferred revenue 709 984 Capital lease obligations, less current portion 74 74 Other liabilities 10,070 9,427 Total liabilities 95,347 86,438 Equity Masimo Corporation stockholders' equity: Common stock 57 58 Treasury stock (63,664) (37,396) Additional paid-in capital 255,465 243,528 Accumulated other comprehensive income 3,053 1,274 Retained earnings 116,629 69,364 Total Masimo Corporation stockholders' equity 311,540 276,828 Noncontrolling interest 2,730 2,838 Total equity 314,270 279,666 Total liabilities and equity $ 409,617 $ 366,104 MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts) Three Months Ended NineMonths Ended September 29, October 1, September October 1, 29, 2012 2011 2012 2011 Revenue: Product $ 112,108 $ 97,639 $ 339,644 $ 301,771 Royalty 6,961 6,401 21,428 24,876 Total revenue 119,069 104,040 361,072 326,647 Cost of goods sold 40,736 35,601 122,002 106,125 Gross profit 78,333 68,439 239,070 220,522 Operating expenses: Selling, general and 48,260 40,134 142,831 125,275 administrative Research and 12,121 9,372 33,736 28,793 development Total operating 60,381 49,506 176,117 154,068 expenses Operating income 17,952 18,933 62,953 66,454 Non-operating income 912 (240) (132) 482 (expense) Income before provision for income 18,864 18,693 62,821 66,936 taxes Provision for income 5,301 3,869 15,724 17,049 taxes Net income including noncontrolling 13,563 14,824 47,097 49,887 interest Net (income) loss attributable to the 231 5 168 (7) noncontrolling interest Net income attributable to $ 13,794 $ 14,829 $ 47,265 $ 49,880 Masimo Corporation stockholders Net income per share attributable to Masimo Corporation stockholders: Basic $ 0.24 $ 0.25 $ 0.82 $ 0.83 Diluted $ 0.24 $ 0.24 $ 0.81 $ 0.82 Weighted average shares used in per share calculations: Basic 57,201 59,971 57,507 59,084 Diluted 58,145 61,086 58,454 61,082 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 Nine Months Ended September 29, October 1, September October 1, 29, 2012 2011 2012 2011 Cost of goods sold $ 155 $ 138 $ 485 $ 419 Selling, general and 2,405 1,912 8,461 7,559 administrative Research and 636 543 2,087 2,189 development Total $ 3,196 $ 2,593 $ 11,033 $ 10,167 MASIMO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Nine Months Ended September 29, October 1, 2012 2011 Cash flows from operating activities: Net income including noncontrolling interest $ 47,097 $ 49,887 Adjustments to reconcile net income including noncontrolling interestto net cash provided by operating activities: Depreciation and amortization 6,509 5,608 Share-based compensation 11,033 10,167 Provision (benefit) for doubtful accounts (5) 184 Provision for obsolete inventory 617 1,879 Provision for warranty costs 1,866 1,919 Benefit from deferred income taxes (319) — Income tax benefit from exercise of stock 259 1,290 options granted prior to January1, 2006 Excess tax (deficit) benefit from share-based 340 (58) payment arrangements Realized foreign exchange loss on forward 45 — contracts Changes in operating assets and liabilities: Increase in accounts receivable (4,982) (4,016) (Increase) decrease in royalties receivable (67) 5,264 Increase in inventories (1,700) (2,374) (Increase) decrease in deferred cost of goods 160 (4,321) sold Increase in prepaid expenses (2,888) (5,459) Increase in other assets (1,316) (436) Decrease in accounts payable (2,730) (2,146) Increase (decrease) in accrued compensation 2,344 (2,744) Increase (decrease) in accrued liabilities 820 (1,001) Increase (decrease) in income taxes payable (419) 1,249 Increase (decrease) in deferred revenue 2,490 (1,927) Increase (decrease) in other liabilities (2,196) 1,101 Net cash provided by operating activities 56,958 54,066 Cash flows from investing activities: Purchases of property and equipment (7,812) (3,508) Increase in intangible assets (2,904) (1,719) Cash paid for acquisition (37,399) — Net cash used in investing activities (48,115) (5,227) Cash flows from financing activities: Repayments of capital lease obligations (12) (37) Proceeds from issuance of common stock 1,034 5,568 Excess tax deficit (benefit) from share-based (340) 58 payment arrangements Repurchases of common stock (26,268) — Net proceeds from settlement of forward 88 — contracts Net cash provided by (used in) financing (25,498) 5,589 activities Effect of foreign currency exchange rates on (239) 459 cash Net increase (decrease) in cash and cash (16,894) 54,887 equivalents Cash and cash equivalents at beginning of 129,882 88,305 period Cash and cash equivalents at end of period $ 112,988 $ 143,192 SOURCE Masimo Website: http://www.masimo.com
Masimo Reports Third Quarter 2012 Financial Results; Board Declares Special Cash Dividend of $1.00 per Share
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