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Masimo Corp. Reports Operating Results (10-K)

February 17, 2012 | About:
10qk

10qk

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Masimo Corp. (MASI) filed Annual Report for the period ended 2011-12-31.

Masimo Corp. has a market cap of $1.28 billion; its shares were traded at around $22.4 with a P/E ratio of 20 and P/S ratio of 3.2.

Highlight of Business Operations:

Product revenue increased $50.1 million, or 14.0%, to $406.5 million for the year ended December 31, 2011 from $356.4 million in the year ended January 1, 2011. This increase was primarily due to an increase in our installed base of pulse oximeter circuit boards and pulse oximeters to 979,000 units at December 31, 2011, from 855,000 units at January 1, 2011, based on an estimated 10 year field life assumption. Product revenue generated by our direct and distribution sales channels increased $59.3 million, or 20.9%, to $342.9 million for the year ended December 31, 2011 from $283.6 million in the year ended January 1, 2011, while revenues from our OEM channel decreased $9.2 million, or 12.7%, to $63.6 million for the year ended December 31, 2011 from $72.8 million in the year ended January 1, 2011. Our U.S. product revenue increased $30.1 million, or 11.7%, to $287.1 million for the year ended December 31, 2011 from $257.0 million in the year ended January 1, 2011. Additionally, our non-U.S. product revenue increased $19.9 million, or 20.0%, to $119.4 million for the year ended December 31, 2011 from $99.5 million in the year ended January 1, 2011. Rainbow® technology product revenues were $34.1 million and $32.9 million for the years ending December 31, 2011 and January 1, 2011, respectively.

Cost of Goods Sold. Cost of goods sold increased $25.1 million, or 20.9%, to $144.9 million for the year ended December 31, 2011 from $119.8 million for the year ended January 1, 2011. Our gross margin decreased to 67.0% for the year ended December 31, 2011 from 70.4% for the year ended January 1, 2011. Excluding royalties, product gross profit margins decreased by 2.0% to 64.4% for the year ended December 31, 2011 from 66.4% for the year ended January 1, 2011. This decrease was primarily due to increased amortization costs associated with increased equipment placed at hospitals and selected inventory charge-offs related to product redesign and transition activities. We incurred $5.0 million in Cercacors royalty expenses for each of the years ended December 31, 2011 and January 1, 2011, respectively, which have been eliminated in our consolidated financial results for the periods presented. Had these royalty expenses not been eliminated, our reported product gross profit margin would have been 63.1% and 65.0% for the years ended December 31, 2011 and January 1, 2011, respectively.

Selling, General and Administrative. Selling, general and administrative expenses decreased $4.9 million, or 2.8%, to $169.2 million for the year ended December 31, 2011 from $174.1 million for the year ended January 1, 2011, which included $14.7 million of one-time marketing related expenses related to the establishment of the Masimo Foundation and various one-time grants and marketing initiatives. Excluding the impact of these one-time expenses, total selling, general and administrative expenses increased $9.8 million, or 6.1%, to $169.2 million for the year ended December 31, 2011 compared to $159.4 million for the year ended January 1, 2011. This increase was primarily due to an increase in commission and payroll costs of $8.0 million, associated with higher product sales and increased staffing levels. Also, expenses related to legal fees increased by $2.2 million due to additional legal activity and travel related expenses increased by $1.3 million. These increases in expense were offset by a decrease of $1.3 million in sample related expenses. Included in these total selling, general and administrative expenses are $1.9 million and $2.7 million of direct expenses incurred by our VIEs for the years ended December 31, 2011 and January 1, 2011, respectively.

Selling, General and Administrative. Selling, general and administrative expenses increased $39.5 million, or 29.4%, to $174.1 million for the year ended January 1, 2011 from $134.6 million for the year ended January 2, 2010. The increase was primarily due to $14.7 million of one-time marketing related expenses related to the decision to reinvest a portion of the $30.1 million payment we received in January 2010, following the Ninth Circuit Court of Appeals October 2009 affirmance of a Federal District Court judgment in our favor that Tyco Healthcare, now Covidien, violated the antitrust laws through anticompetitive business practices related to the sale of its pulse oximetry products. Excluding the impact of these one-time expenses, total selling, general and administrative expenses increased $24.8 million, or 18.4%, to $159.4 million for the year ended January 1, 2011 compared to $134.6 million during the year ended January 2, 2010. This increase was primarily due to increased payroll and related expenses of $13.7 million as a result of an increase in selling, general and administrative staffing levels. In addition, travel and related expenses increased $4.5 million primarily due to additional sales representatives and their increased travel activities and legal expense for ongoing litigation activity increased $4.2 million, during the year ended January 1, 2011. Included in these total selling, general and administrative expenses are $2.7 million and $1.2 million of direct expenses incurred by our variable interest entities for the years ended January 1, 2011 and January 2, 2010, respectively.

Cash Flows from Investing Activities. Cash used in investing activities for 2011 was $7.5 million consisting of $5.1 million of cash to purchase property and equipment to support our manufacturing operations and $2.5 million for the increase in intangible assets related primarily to capitalized patent costs. Cash provided by investing activities for 2010 was $45.5 million consisting of sales and maturities of short-term investments of $133.0 million, offset by purchases of short-term investments of $76.0 million. This activity is consistent with our investment goal focused primarily on preserving capital through investments in U.S. Treasury bills with maturities of three months or less. Additionally, we used $9.6 million of cash to purchase property and equipment to support our manufacturing operations.

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