Masimo Reports Second Quarter 2008 Financial Results

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IRVINE, Calif., Aug. 4 /PRNewswire-FirstCall/ -- Masimo Corporation , the inventor of Pulse CO-Oximetry and Measure-Through-Motion-and-Low-Perfusion pulse oximetry, today announced its financialresults for the 2008 second fiscal quarter.
For the second quarter of 2008, Masimo reported product revenues of$61.9 million representing a 30% increase over $47.6 million forthe second quarter of 2007. Including royalty revenues, Masimoreported total 2008 second quarter revenues of $74.8 millioncompared to $63.7 million for the second quarter of 2007. Netincome for the 2008 second quarter was $10.6 million or $0.18 percommon share compared to $10.6 million or $0.13 per common sharefor the second quarter of 2007.
During the second quarter of 2008, Masimo also reported that itshipped 29,000 Masimo SET and Masimo Rainbow SET oximetry units,excluding handheld units, compared to 29,700 units in the sameprior year quarter. For the first half of 2008, Masimo shipped57,600 new units representing an annualized increase of 24% overthe estimated 471,000 Masimo units in the market as of December2007 and has now increased its total worldwide net installed baseto 515,000 units. In the second quarter of 2008, revenues fromMasimo Rainbow SET products increased 40% from the same prior yearquarter.
Joe E. Kiani, Chairman and Chief Executive Officer of Masimo, said,"We believe that the benefit to patients, clinicians andhospitals of our life saving Masimo SET and Masimo Rainbow SETtechnologies continue to create momentum for the adoption of ourproducts. Despite the generally difficult economic environment, webelieve our business model continues to resonate with hospitals whodemand the best technology for their patients. In addition, after astrong first quarter, we are pleased that sales of our Rainbow SETproducts have continued to gain momentum and set a new record inthe second quarter of 2008."
As of June 28, 2008, cash and cash equivalents totaled $102.9million-an increase from both December 29, 2007 of $96.7 millionand from March 29, 2008 of $86.3 million. As previously announced,during the 2008 first fiscal quarter, Masimo repaid in full a $26.7million debt obligation, the majority of which was established inearly fiscal 2007.
Financial Guidance
Based on the results of the first half of fiscal year 2008, Masimonow expects its total fiscal year 2008 product revenues to beapproximately $253 million and total revenues, including royalties,to be approximately $300 million. These figures are up from theprevious guidance of $246 million and $292 million, respectively.Masimo also now expects earnings per common share to beapproximately $0.64 per share, up from the prior guidance of $0.52per share.
Conference Call
Masimo will hold a conference call today at 2:00 p.m. PT (5:00 p.m.ET) to discuss the results. The dial-in numbers are (866) 356-3095for domestic callers and (617) 597-5391 for international callers.The reservation number for both dial-in numbers is 90085495. A liveweb cast of the conference call will be available online from the"Investor Relations" page of the Company's corporate website at http://www.masimo.com .
After the live web cast, the call will remain available on Masimo'swebsite through September 4, 2008. In addition, a telephonic replayof the call will be available until August 18, 2008. The replaydial-in numbers are (888) 286-8010 for domestic callers and (617)801-6888 for international callers. Please use reservation code86583404.
About Masimo
Masimo develops innovative monitoring technologies that significantlyimprove patient care-helping solve "unsolvable" problems.In 1995, the company debutedMeasure-Through-Motion-and-Low-Perfusion pulse oximetry, known asMasimo SET, which virtually eliminated false alarms and increasedpulse oximetry's ability to detect life-threatening events. Morethan 100 independent and objective studies demonstrate Masimo SETprovides the most reliable SpO2 and pulse rate measurements evenunder the most challenging clinical conditions, including patientmotion and low peripheral perfusion. In 2005, Masimo introducedMasimo Rainbow SET, a breakthrough noninvasive blood constituentmonitoring platform that can measure many blood constituents thatpreviously required invasive procedures. Rainbow SET continuouslyand noninvasively measures total hemoglobin (SpHb(TM)), oxygencontent (SpOC(TM)), carboxyhemoglobin (SpCO(R)), methemoglobin(SpMet(R)), and PVI(TM), in addition to oxyhemoglobin (SpO2), pulserate (PR), and perfusion index (PI), allowing early detection andtreatment of potentially life-threatening conditions. Founded in1989, Masimo has the mission of "Improving Patient Outcomesand Reducing Cost of Care by Taking Noninvasive Monitoring to NewSites and Applications." Additional information about Masimoand its products may be found at www.masimo.com .
Forward-Looking Statements
This press release includes forward-looking statements. Allstatements other than statements of historical facts included inthis press release that address activities, events or developmentsthat we expect, believe or anticipate will or may occur in thefuture are forward-looking statements including, in particular, thestatements about: our financial condition, results of operations,prospects and business generally; the market acceptance of ourtechnologies and products; the value of measuring new parameters;expectations regarding our ability to design and deliver innovativenew noninvasive technologies; and expectations for total revenues,product revenues, GAAP earnings per share, non-GAAP pro formaearnings per share and stock based compensation expenses for thefull fiscal year 2008. These forward-looking statements are basedon management's current expectations and beliefs and are subject touncertainties and factors, all of which are difficult to predictand many of which are beyond our control and could cause actualresults to differ materially from those described in the forward-looking statements. These risks include, but are not limited to,those related to: our reliance on Masimo SET and related productsand technologies for substantially all of our revenue; any failurein protecting our intellectual property exposure to competitors'assertions of intellectual property claims; the highly competitivenature of the markets in which we sell our products andtechnologies; the failure to continue developing innovativeproducts and technologies; the lack of acceptance of any newproducts and technologies of ours; obtaining regulatory approval ofour current and future products and technologies, including therecently announced total hemoglobin measurement; the loss of ourcustomers the failure to retain and recruit senior management;product liability claims exposure; a failure to obtain expectedreturns from the amount of intangible assets we have recorded; themaintenance of our brand; the amount and type of equity awards thatwe may grant to employees and service providers in the future; andother factors discussed in the "Risk Factors" section ofour Quarterly Report on Form 10-Q for the fiscal quarter endedMarch 29, 2008 filed with the Securities and Exchange Commission onMay 1, 2008. Although we believe that the expectations reflected inour forward- looking statements are reasonable, we do not knowwhether our expectations will prove correct. All forward-lookingstatements included in this press release are expressly qualifiedin their entirety by the foregoing cautionary statements. You arecautioned not to place undue reliance on these forward- lookingstatements, which speak only as of the date hereof. We do notundertake any obligation to update, amend or clarify theseforward-looking statements or the risk factors contained in ourQuarterly Report on Form 10-Q for the fiscal quarter ended March29, 2008, whether as a result of new information, future events orotherwise, except as may be required under the applicablesecurities laws.
Masimo, SET, Signal Extraction Technology, Improving Outcomes andReducing Cost of Care by Taking Noninvasive Monitoring to New Sitesand Applications, Rainbow, SpHb, SpCO, SpMet, PVI, PulseCO-Oximetry and Pulse CO-Oximeter are trademarks or registeredtrademarks of Masimo Corporation.
MASIMO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (inthousands) December 29, 2007 June 28, 2008 ASSETS (Unaudited)Current assets Cash and cash equivalents $96,733 $102,903 Accountsreceivable, net of allowance for doubtful accounts 26,970 29,576Royalties receivable 13,866 11,375 Inventories 23,110 29,256Prepaid expenses 7,084 7,079 Deferred tax assets 14,334 14,334Other current assets 1,543 1,156 Total current assets 183,640195,679 Deferred cost of goods sold 26,249 27,764 Property andequipment, net 11,164 11,837 Deferred tax assets 5,332 5,332Restricted cash 513 518 Intangible assets, net 5,589 6,793 Goodwill448 448 Other assets 2,576 2,539 Total assets $235,511 $250,910LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accountspayable $14,640 $16,810 Accrued compensation 12,409 13,059 Accruedliabilities 6,211 5,135 Dividends payable 183 183 Deferred revenue16,827 21,946 Current portion of long-term debt 11,539 647 Totalcurrent liabilities 61,809 57,780 Deferred revenue 366 336Long-term debt, less current portion 19,502 285 Other liabilities3,768 3,837 Total liabilities 85,445 62,238 Commitments andcontingencies Stockholders' equity Common stock 55 56 Treasurystock (1,209) (1,209) Additional paid-in capital 143,297 162,399Accumulated other comprehensive loss (1,034) (923) Retainedearnings 8,957 28,349 Total stockholders' equity 150,066 188,672Total liabilities and stockholders' equity $235,511 $250,910 MASIMOCORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (inthousands, except per share information) (unaudited) Three MonthsEnded Six Months Ended June 30, June 28, June 30, June 28, 20072008 2007 2008 Revenue: Product $47,627 $61,850 $93,391 $121,523Royalty and license fee 16,053 12,916 29,243 24,353 Total revenue63,680 74,766 122,634 145,876 Cost of goods sold 17,919 21,40334,820 42,524 Gross profit 45,761 53,363 87,814 103,352 Operatingexpenses: Research and development 5,460 5,980 10,914 12,278Selling, general and administrative 21,577 30,366 42,979 59,895Antitrust litigation 465 277 475 445 Total operating expenses27,502 36,623 54,368 72,618 Operating income 18,259 16,740 33,44630,734 Non-operating income (expense): Interest income 189 625 5441,584 Interest expense (685) (60) (1,112) (703) Other 170 75 211178 Total non-operating income (expense) (326) 640 (357) 1,059Income before provision for income taxes 17,933 17,380 33,08931,793 Provision for income taxes 7,377 6,779 13,436 12,401 Netincome 10,556 10,601 19,653 19,392 Accretion of preferred stock(1,956) - (3,913) - Undistributed income attributable to preferredstockholders (5,802) - (10,630) - Net income attributable to commonstockholders $2,798 $10,601 $5,110 $19,392 Net income per commonshare: Basic $0.17 $0.19 $0.31 $0.35 Diluted $0.13 $0.18 $0.25$0.32 The following table presents details of the stock basedcompensation expense that is included in each functional line itemin the condensed consolidated statements of income above (inthousands): Three Months Ended Six Months Ended June 30, June 28,June 30, June 28, 2007 2008 2007 2008 Cost of goods sold $45 $75$78 $104 Research and development 164 607 275 1,019 Selling,general and administrative $849 $1,487 $1,295 $2,624 MASIMOCORPORATION Reconciliation of GAAP to Non-GAAP Earnings per Share(unaudited) The following tables provide a comparison of ourearnings per share calculated under Emerging Issues Task ForceIssue No. 03-6, "Participating Securities and the Two-ClassMethod under FASB Statement No. 128", or EITF 03-6, and SFASNo. 128 "Earnings per Share", or SFAS 128, in accordancewith GAAP and the non-GAAP if-converted method based solely uponSFAS No. 128. The non-GAAP if-converted method assumes conversionof all shares of our preferred stock into common stock as ofDecember 31, 2006. Upon closing of the Company's initial publicoffering on August 13, 2007, all of the outstanding convertiblepreferred shares were converted into common shares. Therefore,subsequent to this stock conversion the Company uses theif-converted method under SFAS No. 128 to calculate earnings pershare. We believe that the following non-GAAP earnings per shareinformation for the three and six months ended June 30, 2007 isrelevant and useful information that can be used by analysts,investors and other interested parties to assess our performance ona comparable basis to the three and six months ended June 28, 2008and future reported earnings per share. Accordingly, we aredisclosing this information to permit additional analysis of ourperformance (in thousands, except share data): 2007 2008 AsReported Non-GAAP As Reported Three Six Three Six Three Six monthsmonths months months months months ended ended ended ended endedended June 30, June 30, June 30, June 30, June 28, June 28, 20072007 2007 2007 2008 2008 Numerator: Net income as rep- orted$10,556 $19,653 $10,556 $19,653 $10,601 $19,392 Accretion ofpreferred stock (1,956) (3,913) - - - - Undistributed incomeattributable to preferred stock- holders (5,802) (10,630) - - - -Net income attributable to common stock- holders $2,798 $5,110$10,556 $19,653 $10,601 $19,392 Denominator: Weighted averagecommon shares outstanding - number of shares used in per sharecalculation - Basic 16,692,547 16,642,779 Options to purchasecommon stock 4,039,467 4,056,332 Weighted average number of sharesused in per common share calculation - Dil- uted 20,732,01420,699,111 Weighted average common shares outstanding 16,692,54716,642,779 Weighted average preferred shares outstanding 34,612,50334,612,503 Number of shares used in per share calculation - Basic51,305,050 51,255,282 56,166,934 55,637,976 Options to purchasecommon stock 4,039,467 4,056,332 3,883,688 4,413,349 Weightedaverage number of shares used in per share calculation - Diluted55,344,517 55,311,614 60,050,622 60,051,325 Net income per share:Basic $0.17 $0.31 $0.21 $0.38 $0.19 $0.35 Diluted $0.13 $0.25 $0.19$0.36 $0.18 $0.32 Masimo Corporation
CONTACT: Investors, Mark P. de Raad, Executive Vice President andChief
Financial Officer, +1-949-297-7080, mderaad@masimo.com , or Media, Dana
Banks, Manager, Public Relations, +1-949-297-7348, dbanks@masimo.com , both
of Masimo Corporation
Web site: http://www.masimo.com//