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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Masimo Corporation
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(Exact Name of Registrant as Specified in its Charter)
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Delaware
|
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33-0368882
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(State or Other Jurisdiction of
Incorporation or Organization)
|
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(I.R.S. Employer
Identification Number)
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40 Parker
Irvine, California
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92618
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Class
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Number of Shares Outstanding as of March 29, 2014
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Common stock, $0.001 par value
|
|
56,737,132
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|
|
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Item 1.
|
|
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 6.
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Item 1.
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Financial Statements
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March 29,
2014 |
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December 28,
2013 |
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
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$
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117,529
|
|
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$
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95,466
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Accounts receivable, net of allowance for doubtful accounts of $1,868 and $1,833 at March 29, 2014 and December 28, 2013, respectively
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74,065
|
|
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76,759
|
|
||
Royalties receivable
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7,500
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|
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7,300
|
|
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Inventories
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55,538
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|
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56,813
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|
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Prepaid expenses
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10,437
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9,243
|
|
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Prepaid income taxes
|
908
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|
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3,740
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|
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Deferred tax assets
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16,718
|
|
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19,636
|
|
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Other current assets
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3,986
|
|
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2,841
|
|
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Total current assets
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286,681
|
|
|
271,798
|
|
||
Deferred cost of goods sold
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64,401
|
|
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61,714
|
|
||
Property and equipment, net
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25,486
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|
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24,866
|
|
||
Intangible assets, net
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28,169
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|
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28,104
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|
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Goodwill
|
22,847
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|
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22,793
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|
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Deferred tax assets
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22,552
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22,565
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|
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Other assets
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8,517
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|
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6,822
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|
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Total assets
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$
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458,653
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|
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$
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438,662
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LIABILITIES AND EQUITY
|
|
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|
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Current liabilities
|
|
|
|
||||
Accounts payable
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$
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33,685
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$
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28,004
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Accrued compensation
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22,487
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|
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29,486
|
|
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Accrued liabilities
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16,448
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|
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23,028
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|
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Income taxes payable
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2,533
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|
|
2,406
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|
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Deferred revenue
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21,680
|
|
|
20,755
|
|
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Current portion of capital lease obligations
|
102
|
|
|
111
|
|
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Total current liabilities
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96,935
|
|
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103,790
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|
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Deferred revenue
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569
|
|
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566
|
|
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Capital lease obligations, less current portion
|
156
|
|
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225
|
|
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Other liabilities
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7,550
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|
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7,680
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|
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Total liabilities
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105,210
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112,261
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|
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Commitments and contingencies
|
|
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Equity
|
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|
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Masimo Corporation stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding at March 29, 2014 and December 28, 2013
|
|
|
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—
|
|
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Common stock, $0.001 par value; 100,000 shares authorized; 56,737 and 56,623 shares outstanding at March 29, 2014 and December 28, 2013, respectively
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57
|
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57
|
|
||
Treasury stock, 4,156 and 4,156 shares at March 29, 2014 and December 28, 2013, respectively
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(83,454
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)
|
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(83,454
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)
|
||
Additional paid-in capital
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277,702
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|
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273,129
|
|
||
Accumulated other comprehensive income
|
4,014
|
|
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3,995
|
|
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Retained earnings
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155,374
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|
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132,742
|
|
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Total Masimo Corporation stockholders’ equity
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353,693
|
|
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326,469
|
|
||
Noncontrolling interest
|
(250
|
)
|
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(68
|
)
|
||
Total equity
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353,443
|
|
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326,401
|
|
||
Total liabilities and equity
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$
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458,653
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$
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438,662
|
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Three Months Ended
|
||||||
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March 29,
2014 |
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March 30,
2013 |
||||
Revenue:
|
|
|
|
|
||||
Product
|
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$
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132,232
|
|
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$
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128,635
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Royalty
|
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7,582
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7,307
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|
||
Total revenue
|
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139,814
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|
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135,942
|
|
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Cost of goods sold
|
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47,513
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46,361
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|
||
Gross profit
|
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92,301
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|
|
89,581
|
|
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Operating expenses:
|
|
|
|
|
||||
Selling, general and administrative
|
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56,122
|
|
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52,273
|
|
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Research and development
|
|
13,996
|
|
|
14,167
|
|
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Litigation award and defense costs
|
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(8,010
|
)
|
|
—
|
|
||
Total operating expenses
|
|
62,108
|
|
|
66,440
|
|
||
Operating income
|
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30,193
|
|
|
23,141
|
|
||
Non-operating income (expense)
|
|
200
|
|
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(2,326
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)
|
||
Income before provision for income taxes
|
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30,393
|
|
|
20,815
|
|
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Provision for income taxes
|
|
7,902
|
|
|
4,413
|
|
||
Net income including noncontrolling interest
|
|
22,491
|
|
|
16,402
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|
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Net loss attributable to the noncontrolling interest
|
|
141
|
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26
|
|
||
Net income attributable to Masimo Corporation stockholders
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22,632
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|
|
16,428
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|
||
Other comprehensive income, net of tax:
|
|
|
|
|
||||
Foreign currency translation adjustments
|
|
19
|
|
|
153
|
|
||
Comprehensive income attributable to Masimo Corporation stockholders
|
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$
|
22,651
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$
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16,581
|
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|
|
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|
||||
Net income per share attributable to Masimo Corporation stockholders:
|
|
|
|
|
||||
Basic
|
|
$
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0.40
|
|
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$
|
0.29
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Diluted
|
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$
|
0.39
|
|
|
$
|
0.28
|
|
|
|
|
|
|
||||
Weighted average shares used in per share calculations:
|
|
|
|
|
||||
Basic
|
|
56,705
|
|
|
57,240
|
|
||
Diluted
|
|
58,047
|
|
|
58,011
|
|
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Three Months Ended
|
||||||
|
March 29,
2014 |
|
March 30,
2013 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income including noncontrolling interest
|
$
|
22,491
|
|
|
$
|
16,402
|
|
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,043
|
|
|
2,783
|
|
||
Share-based compensation
|
2,601
|
|
|
3,413
|
|
||
Loss on disposal of property and equipment
|
2
|
|
|
78
|
|
||
Provision for doubtful accounts
|
232
|
|
|
142
|
|
||
Provision for deferred income taxes
|
2,926
|
|
|
—
|
|
||
Income tax benefit from exercise of stock options granted prior to January 1, 2006
|
24
|
|
|
12
|
|
||
Excess tax (benefit) deficit from share-based compensation arrangements
|
(31
|
)
|
|
164
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
(Increase) decrease in accounts receivable
|
2,469
|
|
|
(72
|
)
|
||
Increase in royalties receivable
|
(200
|
)
|
|
(70
|
)
|
||
(Increase) decrease in inventories
|
1,288
|
|
|
(1,109
|
)
|
||
Increase in deferred cost of goods sold
|
(2,687
|
)
|
|
(2,741
|
)
|
||
Increase in prepaid expenses
|
(1,186
|
)
|
|
(425
|
)
|
||
Decrease in prepaid income taxes
|
2,832
|
|
|
1,492
|
|
||
(Increase) decrease in other assets
|
(2,831
|
)
|
|
1,128
|
|
||
Increase in accounts payable
|
5,676
|
|
|
3,874
|
|
||
Decrease in accrued compensation
|
(6,996
|
)
|
|
(3,405
|
)
|
||
Increase (decrease) in accrued liabilities
|
(6,587
|
)
|
|
341
|
|
||
Increase in income taxes payable
|
156
|
|
|
1,779
|
|
||
Increase in deferred revenue
|
929
|
|
|
1,102
|
|
||
Increase (decrease) in other liabilities
|
(130
|
)
|
|
213
|
|
||
Net cash provided by operating activities
|
24,021
|
|
|
25,101
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(2,840
|
)
|
|
(1,839
|
)
|
||
Increase in intangible assets
|
(886
|
)
|
|
(1,107
|
)
|
||
Net cash used in investing activities
|
(3,726
|
)
|
|
(2,946
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayments of capital lease obligations
|
(77
|
)
|
|
(84
|
)
|
||
Proceeds from issuance of common stock
|
1,918
|
|
|
463
|
|
||
Excess tax benefit (deficit) from share-based compensation arrangements
|
31
|
|
|
(164
|
)
|
||
Repurchases of common stock
|
—
|
|
|
(12,431
|
)
|
||
Repurchases of equity by noncontrolling interest
|
(42
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
1,830
|
|
|
(12,216
|
)
|
||
Effect of foreign currency exchange rates on cash
|
(62
|
)
|
|
82
|
|
||
Net increase in cash and cash equivalents
|
22,063
|
|
|
10,021
|
|
||
Cash and cash equivalents at beginning of period
|
95,466
|
|
|
71,554
|
|
||
Cash and cash equivalents at end of period
|
$
|
117,529
|
|
|
$
|
81,575
|
|
●
|
Le
vel 1—Quoted prices in active markets for
identical
assets or liabilities.
|
●
|
Level
2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for
similar
assets or liabilities; quoted prices i
n markets that are not active; or other inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
●
|
Level
3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of
the assets or liabiliti
es.
|
|
Fair Value Measurement as of
March 29, 2014 using: |
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasuries
|
$
|
36,998
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
36,998
|
|
Money Market funds
|
1,792
|
|
|
—
|
|
|
—
|
|
|
1,792
|
|
||||
Total
|
$
|
38,790
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,790
|
|
|
Fair Value Measurement as of
December 28, 2013 using: |
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasuries
|
$
|
25,997
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,997
|
|
Money Market funds
|
1,793
|
|
|
—
|
|
|
—
|
|
|
1,793
|
|
||||
Total
|
$
|
27,790
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,790
|
|
|
Three Months Ended
|
||||||
|
March 29,
2014 |
|
March 30,
2013 |
||||
Warranty accrual, beginning of period
|
$
|
1,161
|
|
|
$
|
838
|
|
Provision for warranty costs
|
467
|
|
|
777
|
|
||
Warranty expenditures
|
(480
|
)
|
|
(600
|
)
|
||
Warranty accrual, end of period
|
$
|
1,148
|
|
|
$
|
1,015
|
|
|
Three Months Ended
March 29, 2014 |
||
Accumulated other comprehensive income, beginning of period
|
$
|
3,995
|
|
Foreign currency translation adjustments
|
19
|
|
|
Accumulated other comprehensive income, end of period
|
$
|
4,014
|
|
|
Three Months Ended
|
||||||
|
March 29,
2014 |
|
March 30,
2013 |
||||
Net income attributable to Masimo Corporation stockholders:
|
|
|
|
||||
Net income including noncontrolling interest
|
$
|
22,491
|
|
|
$
|
16,402
|
|
Net loss attributable to the noncontrolling interest
|
141
|
|
|
26
|
|
||
Net income attributable to Masimo Corporation stockholders
|
$
|
22,632
|
|
|
$
|
16,428
|
|
Basic net income per share attributable to Masimo Corporation stockholders:
|
|
|
|
||||
Net income attributable to Masimo Corporation stockholders
|
$
|
22,632
|
|
|
$
|
16,428
|
|
Weighted average shares outstanding - basic
|
56,705
|
|
|
57,240
|
|
||
Basic net income per share attributable to Masimo Corporation stockholders
|
$
|
0.40
|
|
|
$
|
0.29
|
|
Diluted net income per share attributable to Masimo Corporation stockholders:
|
|
|
|
||||
Weighted average shares outstanding
|
56,705
|
|
|
57,240
|
|
||
Diluted share equivalent: stock options
|
1,342
|
|
|
771
|
|
||
Weighted average shares outstanding - diluted
|
58,047
|
|
|
58,011
|
|
||
Diluted net income per share attributable to Masimo Corporation stockholders
|
$
|
0.39
|
|
|
$
|
0.28
|
|
|
Three Months Ended
March 29, 2014 |
||
Noncontrolling interest, beginning of period
|
$
|
(68
|
)
|
Increase in additional paid-in capital of noncontrolling interest
|
(41
|
)
|
|
Net loss attributable to noncontrolling interest
|
(141
|
)
|
|
Noncontrolling interest, end of period
|
$
|
(250
|
)
|
|
March 29,
2014 |
|
December 28,
2013
|
||||
Raw materials
|
$
|
27,533
|
|
|
$
|
26,758
|
|
Work in-process
|
6,189
|
|
|
6,310
|
|
||
Finished goods
|
21,816
|
|
|
23,745
|
|
||
Total
|
$
|
55,538
|
|
|
$
|
56,813
|
|
|
March 29,
2014 |
|
December 28,
2013 |
||||
Cost
|
|
|
|
||||
Patents
|
$
|
19,536
|
|
|
$
|
18,750
|
|
Customer relationships
|
7,669
|
|
|
7,669
|
|
||
Acquired technology
|
5,580
|
|
|
5,580
|
|
||
Trademarks
|
3,366
|
|
|
3,338
|
|
||
Capitalized software development costs
|
1,611
|
|
|
1,612
|
|
||
Other
|
991
|
|
|
969
|
|
||
Total cost
|
$
|
38,753
|
|
|
37,918
|
|
|
Accumulated amortization
|
|
|
|
||||
Patents
|
(5,931
|
)
|
|
(5,679
|
)
|
||
Customer relationships
|
(1,278
|
)
|
|
(1,086
|
)
|
||
Acquired technology
|
(973
|
)
|
|
(834
|
)
|
||
Trademarks
|
(705
|
)
|
|
(653
|
)
|
||
Capitalized software development costs
|
(1,315
|
)
|
|
(1,270
|
)
|
||
Other
|
(382
|
)
|
|
(292
|
)
|
||
Total accumulated amortization
|
(10,584
|
)
|
|
(9,814
|
)
|
||
Net carrying amount
|
$
|
28,169
|
|
|
$
|
28,104
|
|
Fiscal year
|
Amount
|
||
2014 (balance of year)
|
$
|
3,033
|
|
2015
|
2,820
|
|
|
2016
|
2,561
|
|
|
2017
|
2,491
|
|
|
2018
|
2,333
|
|
|
Thereafter
|
14,931
|
|
|
Total
|
$
|
28,169
|
|
|
Three Months Ended
March 29, 2014 |
|||||
|
Shares
|
|
Average
Exercise Price
|
|||
Options outstanding, beginning of period
|
8,911
|
|
|
$
|
22.76
|
|
Granted
|
824
|
|
|
$
|
28.14
|
|
Canceled
|
(65
|
)
|
|
$
|
24.42
|
|
Exercised
|
(114
|
)
|
|
$
|
16.63
|
|
Options outstanding, end of period
|
9,556
|
|
|
$
|
23.28
|
|
Options exercisable, end of period
|
5,598
|
|
|
$
|
23.01
|
|
Options available for grant, end of period
|
6,472
|
|
|
|
|
Three Months Ended
|
||
|
March 29,
2014 |
|
March 30,
2013 |
Risk-free interest rate
|
1.53% to 1.6%
|
|
0.9% to 1.0%
|
Expected term
|
5.1 years
|
|
5.5 years
|
Estimated volatility
|
32.5% to 32.8%
|
|
37.3% to 39.6%
|
Expected dividends
|
0%
|
|
0%
|
Weighted-average fair value of options granted
|
$8.89
|
|
$7.34
|
|
As of March 29, 2014
|
||||||||||
|
Operating
Leases
|
|
Capital
Leases
|
|
Total
|
||||||
2014 (balance of year)
|
$
|
6,874
|
|
|
$
|
37
|
|
|
$
|
6,911
|
|
2015
|
7,272
|
|
|
87
|
|
|
7,359
|
|
|||
2016
|
3,777
|
|
|
80
|
|
|
3,857
|
|
|||
2017
|
1,698
|
|
|
75
|
|
|
1,773
|
|
|||
2018
|
1,516
|
|
|
—
|
|
|
1,516
|
|
|||
Thereafter
|
2,174
|
|
|
—
|
|
|
2,174
|
|
|||
Total
|
$
|
23,311
|
|
|
$
|
279
|
|
|
$
|
23,590
|
|
|
Three Months Ended
|
||||||||||||
|
March 29, 2014
|
|
March 30, 2013
|
||||||||||
Geographic Area by Destination
|
|
|
|
|
|
|
|
||||||
North and South America
|
$
|
92,652
|
|
|
70.1
|
%
|
|
$
|
98,722
|
|
|
76.7
|
%
|
Europe, Middle East and Africa
|
27,012
|
|
|
20.4
|
|
|
18,836
|
|
|
14.6
|
|
||
Asia and Australia
|
12,568
|
|
|
9.5
|
|
|
11,077
|
|
|
8.6
|
|
||
Total product revenue
|
$
|
132,232
|
|
|
100
|
%
|
|
$
|
128,635
|
|
|
100
|
%
|
United States
|
$
|
88,047
|
|
|
|
|
$
|
94,269
|
|
|
|
1)
|
be the leading choice for pulse oximetry in traditionally monitored areas, in and out of the hospital;
|
2)
|
expand the use of pulse oximetry beyond the critical care settings, including to the general floor of the hospital;
|
3)
|
create demand for the use of breakthrough rainbow
®
measurements by our hospital customers;
|
4)
|
offer rainbow
®
measurements to new markets such as EMS, and the physician office;
|
5)
|
penetrate existing noninvasive specialty monitoring markets such as capnography, gas, brain function, and other modalities with technologies that offer clinical and financial advantages; and
|
6)
|
leverage the revolutionary Root
™
platform to provide open access to third-party developers for additional measurements, as well as connectivity to electronic health record systems and for third-party devices.
|
|
Three Months Ended
|
||||||||||||
|
March 29,
2014 |
|
% of
Revenue
|
|
March 30,
2013 |
|
% of
Revenue
|
||||||
Revenue:
|
|
|
|
|
|
|
|
||||||
Product
|
$
|
132,232
|
|
|
94.6
|
%
|
|
$
|
128,635
|
|
|
94.6
|
%
|
Royalty
|
7,582
|
|
|
5.4
|
|
|
7,307
|
|
|
5.4
|
|
||
Total revenue
|
139,814
|
|
|
100.0
|
|
|
135,942
|
|
|
100.0
|
|
||
Cost of goods sold
|
47,513
|
|
|
34.0
|
|
|
46,361
|
|
|
34.1
|
|
||
Gross profit
|
92,301
|
|
|
66.0
|
|
|
89,581
|
|
|
65.9
|
|
||
Operating expenses:
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative
|
56,122
|
|
|
40.1
|
|
|
52,273
|
|
|
38.5
|
|
||
Research and development
|
13,996
|
|
|
10.0
|
|
|
14,167
|
|
|
10.4
|
|
||
Litigation award and defense costs
|
(8,010
|
)
|
|
(5.7
|
)
|
|
—
|
|
|
—
|
|
||
Total operating expenses
|
62,108
|
|
|
44.4
|
|
|
66,440
|
|
|
48.9
|
|
||
Operating income
|
30,193
|
|
|
21.6
|
|
|
23,141
|
|
|
17.0
|
|
||
Non-operating income (expense)
|
200
|
|
|
0.1
|
|
|
(2,326
|
)
|
|
(1.7
|
)
|
||
Income before provision for income taxes
|
30,393
|
|
|
21.7
|
|
|
20,815
|
|
|
15.3
|
|
||
Provision for income taxes
|
7,902
|
|
|
5.6
|
|
|
4,413
|
|
|
3.2
|
|
||
Net income including noncontrolling interest
|
22,491
|
|
|
16.1
|
|
|
16,402
|
|
|
12.1
|
|
||
Net loss attributable to the noncontrolling interest
|
141
|
|
|
0.1
|
|
|
26
|
|
|
0.0
|
|
||
Net income attributable to Masimo Corporation stockholders
|
$
|
22,632
|
|
|
16.2
|
%
|
|
$
|
16,428
|
|
|
12.1
|
%
|
•
|
perceived advantages of our products and their sales prices;
|
•
|
perceived safety and effectiveness of our products;
|
•
|
reimbursement available through Centers for Medicare and Medicaid Services (CMS) programs for using our products; and
|
•
|
introduction and acceptance of competing products or technologies.
|
•
|
an exclusive, perpetual and worldwide license, with sublicense rights, to use all Masimo SET
®
owned by us, including all improvements on this technology, for the monitoring of non-vital signs parameters and to develop and sell devices incorporating Masimo SET
®
for monitoring non-vital signs parameters in any product market in
|
•
|
a non-exclusive, perpetual and worldwide license, with sublicense rights, to use all Masimo SET
®
for measurement of vital signs in the Cercacor Market.
|
•
|
controls on reimbursement for health care services and price controls on medical products and services;
|
•
|
limitations on coverage and reimbursement for new medical technologies and procedures; and
|
•
|
the introduction of managed care and prospective payment systems in which health care providers contract to provide comprehensive health care for a fixed reimbursement amount per person or per procedure.
|
•
|
increase the cost of our products;
|
•
|
be expensive and time consuming to defend;
|
•
|
result in us being required to pay significant damages to third parties;
|
•
|
force us to cease making or selling products that incorporate the challenged intellectual property;
|
•
|
require us to redesign, reengineer or rebrand our products, product candidates and technologies;
|
•
|
require us to enter into royalty or licensing agreements in order to obtain the right to use a third-party’s intellectual property on terms that may not be favorable or acceptable to us;
|
•
|
require us to indemnify third parties pursuant to contracts in which we have agreed to provide indemnification for intellectual property infringement claims;
|
•
|
divert the attention of our management and other key employees;
|
•
|
result in our customers or potential customers deferring or limiting their purchase or use of the affected products impacted by the claims until the claims are resolved; and
|
•
|
otherwise have a material adverse effect on our business, financial condition and results of operations.
|
•
|
warning letters or untitled letters issued by the FDA;
|
•
|
fines, civil penalties, injunctions and criminal prosecution;
|
•
|
unanticipated expenditures to address or defend such actions;
|
•
|
delays in clearing or approving, or refusal to clear or approve, our products;
|
•
|
withdrawal or suspension of clearance or approval of our products or those of our third-party suppliers by the FDA or other regulatory bodies;
|
•
|
product recall or seizure;
|
•
|
orders for physician notification or device repair, replacement or refund;
|
•
|
interruption of production or inability to export to certain foreign countries; and
|
•
|
operating restrictions.
|
•
|
the Federal Health Care Programs’ Anti-Kickback Law, which prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving any bribe, kickback or other remuneration intended to induce the purchase, order or recommendation of an item or service reimbursable under a federal health care program (such as the Medicare or Medicaid programs);
|
•
|
federal false claims laws which prohibit, among other things, knowingly and willfully presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent;
|
•
|
the federal provisions of the HIPAA established federal crimes for knowingly and willfully executing a scheme to defraud any health care benefit program or making false statements in connection with the delivery of or payment for health care benefits, items or services; and
|
•
|
state laws analogous to each of the above federal laws, such as state anti-kickback and false claims laws that may apply to items or services reimbursed by non-governmental third-party payers, including commercial insurers, and state laws governing the privacy of certain PHI.
|
•
|
delays or interruptions in manufacturing and shipping of our products;
|
•
|
varying demand for and market acceptance of our technologies and products;
|
•
|
delayed acceptance of our new products, negatively impacting the carrying value of our inventory;
|
•
|
design, technology or other market changes that could negatively impact the carrying value of our inventory;
|
•
|
the effect of competing technological and market developments resulting in lower selling prices or significant promotional costs;
|
•
|
changes in the timing of product orders and the volume of sales to our OEM partners;
|
•
|
actions taken by GPOs;
|
•
|
delays in hospital conversions to our products and declines in hospital patient census;
|
•
|
our legal expenses, particularly those related to litigation matters;
|
•
|
changes in our product or customer mix;
|
•
|
market seasonality of our sales;
|
•
|
ability to renew existing long-term sensor contract commitments;
|
•
|
changes in the total dollar amount of annual contract renewal activities;
|
•
|
changes in the mix, and therefore, the related costs of products that we supply at no upfront costs to our customers as part of their long-term sensor commitments;
|
•
|
changes in hospital and other alternative care admission levels;
|
•
|
inability to efficiently scale operations and establish processes to accommodate business growth;
|
•
|
unanticipated delays or problems in the introduction of new products, including delays in obtaining clearance or approval from the FDA;
|
•
|
high levels of returns and repairs; and
|
•
|
change in reimbursement rates for SpHb
®
, SpCO
®
and SpMet
®
parameters.
|
•
|
difficulties in integrating any acquired companies, personnel, products and other assets into our existing business;
|
•
|
delays in realizing the benefits of the acquired company, products or other assets;
|
•
|
diversion of our management’s time and attention from other business concerns;
|
•
|
limited or no direct prior experience in new markets or countries we may enter;
|
•
|
higher costs of integration than we anticipated;
|
•
|
difficulties in retaining key employees of the acquired business who are necessary to manage these acquisitions; and
|
•
|
changes in the overall financial model as certain acquired companies may have a different revenue, gross profit margin or operating expense profile.
|
•
|
the imposition of additional U.S. and foreign governmental controls or regulations;
|
•
|
the imposition of costly and lengthy new export licensing requirements;
|
•
|
a shortage of high-quality sales people and distributors;
|
•
|
loss of any key personnel that possess proprietary knowledge, or who are otherwise important to our success in certain international markets;
|
•
|
changes in duties and tariffs, license obligations and other non-tariff barriers to trade;
|
•
|
the imposition of new trade restrictions;
|
•
|
the imposition of restrictions on the activities of foreign agents, representatives and distributors;
|
•
|
scrutiny of foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us;
|
•
|
pricing pressure that we may experience internationally;
|
•
|
laws and business practices favoring local companies;
|
•
|
political instability and actual or anticipated military or political conflicts;
|
•
|
financial and civil unrest worldwide;
|
•
|
longer payment cycles; and
|
•
|
difficulties in enforcing or defending intellectual property rights.
|
•
|
actual or anticipated fluctuations in our operating results or future prospects;
|
•
|
our announcements or our competitors’ announcements of new products;
|
•
|
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
|
•
|
strategic actions by us or our competitors, such as acquisitions or restructurings;
|
•
|
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
•
|
changes in accounting standards, policies, guidance, interpretations or principles;
|
•
|
changes in our growth rates or our competitors’ growth rates;
|
•
|
developments regarding our patents or proprietary rights or those of our competitors;
|
•
|
ongoing legal proceedings;
|
•
|
our inability to raise additional capital as needed;
|
•
|
concerns or allegations as to the safety or efficacy of our products;
|
•
|
changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad;
|
•
|
sales of stock by us or members of our management team, our board of directors or certain institutional stockholders; and
|
•
|
changes in stock market analyst recommendations or earnings estimates regarding our stock, other comparable companies or our industry generally.
|
|
|
|
|
M
ASIMO
C
ORPORATION
|
||
|
|
|
|
|||
Date: April 30, 2014
|
|
|
|
By:
|
|
/s/ J
OE
K
IANI
|
|
|
|
|
|
|
Joe Kiani
|
|
|
|
|
|
|
Chief Executive Officer and Chairman
|
|
|
|
|
|||
Date: April 30, 2014
|
|
|
|
By:
|
|
/s/ M
ARK
P.
DE
R
AAD
|
|
|
|
|
|
|
Mark P. de Raad
|
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Exhibit
Number
|
|
|
|
Description of Document
|
3.1
|
|
(1)
|
|
Amended and Restated Certificate of Incorporation (Exhibit 3.2)
|
3.2
|
|
(2)
|
|
Certificate of Designation of Series A Junior Participating Preferred Stock (Exhibit 3.1)
|
3.3
|
|
(3)
|
|
Amended and Restated Bylaws adopted on October 20, 2011 (Exhibit 3.2)
|
4.1
|
|
(1)
|
|
Form of Common Stock Certificate (Exhibit 4.1)
|
4.2
|
|
(1)
|
|
Fifth Amended and Restated Registration Rights Agreement made and entered into as of September 14, 1999, between the Company and certain of its stockholders (Exhibit 4.2)
|
4.3
|
|
(2)
|
|
Rights Agreement, dated November 9, 2007, between the Company and Computershare Trust Company, N.A., as Rights Agent (Exhibit 4.1)
|
4.4#
|
|
(4)
|
|
Masimo Retirement Savings Plan (Exhibit 4.7)
|
10.1
|
|
|
|
Agreement of Purchase and Sale and Escrow Instructions, dated as of November 1, 2013, by and between the Company and Nikken, Inc.
|
10.2
|
|
|
|
First Amendment to Purchase and Sale Agreement, made and entered into effective as of January 8, 2014, by and between the Company and Nikken, Inc.
|
10.3
|
|
|
|
Second Amendment to Purchase and Sale Agreement, made and entered into effective as of January 10, 2014, by and between the Company and Nikken, Inc.
|
10.4
|
|
|
|
Third Amendment to Purchase and Sale Agreement, made and entered into effective as of March 10, 2014, by and between the Company and Nikken, Inc.
|
10.5
|
|
|
|
Fourth Amendment to Purchase and Sale Agreement, made and entered into effective as of March 12, 2014, by and between the Company and Nikken, Inc.
|
12.1
|
|
|
|
Statement Regarding the Computation of Ratio of Earnings to Fixed Charges
|
31.1
|
|
|
|
Certification of Joe Kiani, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
|
31.2
|
|
|
|
Certification of Mark P. de Raad, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
|
32.1
|
|
|
|
Certification of Joe Kiani, Chief Executive Officer, and Mark P. de Raad, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended
|
101.INS
|
|
|
|
XBRL Instance Document
|
101.SCH
|
|
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
(1)
|
Incorporated by reference to the exhibits to the Company’s Registration Statement on Form S-1 (No. 333-142171), originally filed on April 17, 2007. The number given in parentheses indicates the corresponding exhibit number in such Form S-1, as amended.
|
(2)
|
Incorporated by reference to the exhibits to the Company’s Current Report on Form 8-K filed on November 9, 2007. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(3)
|
Incorporated by reference to the exhibit to the Company’s Current Report on Form 8-K filed on October 26, 2011. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(4)
|
Incorporated by reference to the exhibit to the Company’s Registration Statement on Form S-8 filed on February 11, 2008. The number given in parentheses indicates the corresponding exhibit number in such Form S-8.
|
__________________________
|
__________________________
|
SELLER’S INITIALS
|
BUYER’S INITIALS
|
|
|
__________________________
|
__________________________
|
SELLER’S INITIALS
|
BUYER’S INITIALS
|
|
|
__________________________
|
__________________________
|
BUYER’S INITIALS
|
SELLER’S INITIALS
|
|
|
•
|
Shrink wrap machines in the warehouse
|
•
|
Scale in the warehouse
|
•
|
Forklift chargers in the warehouse
|
•
|
All racking and shipping equipment
|
•
|
Retail Store – counter top and kiosk
|
•
|
All servers within racks will be removed
|
•
|
Portable make up air unit – AIR PAC INC.
|
•
|
All artwork throughout the building and all display cases
|
•
|
All furniture that is not affixed to the property
|
A.
|
Federal FIRPTA Certificate
|
1.
|
Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder);
|
2.
|
Transferor’s U.S. tax identification number is [__________] and
|
3.
|
Transferor’s office address is c/o [__________________]
|
B.
|
State of California-California Resident/Non-Resident Affidavit
|
Vendor Name
|
Service Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agreement
|
Service
|
Terminable/Non-Terminable
|
1.
|
Contractor Agreement by and between Nikken, Inc. and PermaCity Solar, Inc., dated July 15, 2010
|
Solar System
|
Non-terminable
10 Years |
2.
|
Critical Power Equipment Service Agreement by and between Nikken, Inc. and Eaton Corporation, dated July 4, 2012
|
UPS
|
Terminable 30
Days |
3.
|
Support Services Agreement by and between Nikken, Inc. and Control Technologies West Inc., dated June 12, 2013
|
BAS
|
Non-terminable 2
Years |
4.
|
Inspection, Testing and Maintenance Agreement by and between Nikken and Pyro-Comm Systems, Inc., dated January 2, 2001
|
Fire Alarm System
|
Non-terminable 2
Years |
5.
|
Vertical Transportation Maintenance Agreement by and between Nikken, Inc. and Mitsubishi Electronics America, Inc., dated October 1, 2000
|
Elevators
|
Non-terminable 5
Years |
6.
|
Landscape Management Services Agreement by and between Nikken, Inc. and Critical Environments, Inc., dated October 2, 2012
|
Landscape
|
Terminable 30
Days |
7.
|
Service Agreement by and between Nikken and Ontario Refrigeration Service, Inc., dated January 1, 2012
|
HVAC (SCE)
|
Non-terminable 3
Years |
8.
|
Security Services Agreement by and between Nikken, Inc. and Securitas Security Services USA, Inc., dated, 2010
|
Guard Systems
|
Terminable 30
Days |
9.
|
Commercial Pest Control Agreement by and between Nikken USA, Inc. and Terminix, dated October 22,1999
|
Pest Control
|
Terminable 30
Days |
10.
|
Service Agreement by and between Nikken Inc. and Innovative Cleaning Services, Inc., dated November 17, 2009
|
Janitorial
|
Terminable 30
Days |
11.
|
Plant Maintenance Agreement by and between Nikken and Inside Plants, Inc., dated July 1, 2011
|
Interior Landscape
|
Terminable 30
Days |
12.
|
Parking Lot Lease by and between Nikken, Inc. and Thales Avionics, Inc., dated September 16, 2005, as amended by that certain First Amendment to lease (undated), as further amended by that certain Second Amendment to Lease, dated August 1, 2008 and further amended Third Amendment to Lease, dated August 15, 2011
|
Leased Parking
|
Terminable 30
Days |
13.
|
Commercial Security/Fire Alarm Agreement by and between Nikken and JMG Security, dated May 24, 2012
|
Security Systems
|
Non-Terminable
5 Years |
|
Agreement
|
|
|
1.
|
Contractor Agreement by and between Nikken, Inc. and PermaCity Solar, Inc., dated July 15, 2010
|
|
|
2.
|
Critical Power Equipment Service Agreement by and between Nikken, Inc. and Eaton Corporation, dated July 4, 2012
|
|
|
3.
|
Support Services Agreement by and between Nikken, Inc. and Control Technologies West Inc., dated June 12, 2013
|
|
|
4.
|
Inspection, Testing and Maintenance Agreement by and between Nikken and Pyro-Comm Systems, Inc., dated January 2, 2001
|
|
|
5.
|
Vertical Transportation Maintenance Agreement by and between Nikken, Inc. and Mitsubishi Electronics America, Inc., dated October 1, 2000
|
|
|
6.
|
Landscape Management Services Agreement by and between Nikken, Inc. and Critical Environments, Inc., dated October 2, 2012
|
|
|
7.
|
Service Agreement by and between Nikken and Ontario Refrigeration Service, Inc., dated January 1, 2012
|
|
|
8.
|
Security Services Agreement by and between Nikken, Inc. and Securitas Security Services USA, Inc., dated ________, 2010
|
|
|
9.
|
Commercial Pest Control Agreement by and between Nikken USA, Inc. and Terminix, dated October 22, 1999
|
|
|
10.
|
Service Agreement by and between Nikken Inc. and Innovative Cleaning Services, Inc., dated November 17, 2009
|
|
|
11.
|
Plant Maintenance Agreement by and between Nikken and Inside Plants, Inc., dated July 1, 2011
|
|
|
12.
|
Commerical Security/Fire Alarm Agreement by and between Nikken and JMG Security, dated May 24, 2012
|
|
|
13.
|
Parking Lot Lease dated September 16, 2005, by and between Seller and Thales Avionics, Inc.
|
||
14.
|
First Amendment to Parking Lot Lease (undated)
|
||
15.
|
Second Amendment to Parking Lot Lease dated August 1, 2008
|
||
16.
|
Third Amendment to Parking Lot Lease dated August 15, 2011.
|
||
17.
|
CAAD drawings provided to buyer, all other as-built plans are located at the property and will be made available for buyer’s inspection.
|
||
18.
|
Payments for Specific Energy Property In Lieu of Tax Credits under the American Recovery and Reinvestment Act of 2009 (Terms and Conditions)
|
||
19.
|
Permission to Operate Net Energy Metering and Generating Facility and Interconnection Agreement from South California Edison and Nikken Inc. dated March 8, 2011
|
SELLER:
|
NIKKEN, Inc.,
a California corporation By: /s/ Kurt H. Fulle_ __________________ Name: Kurt H. Fulle Its: President and CEO |
|
|
|
|
|
|
BUYER:
|
Masimo Corporation,
a Delaware corporation By: /s/ Yongsam Lee____ ___________ Name: Yongsam Lee Its: EVP, Operations and CIO |
SELLER:
|
NIKKEN, Inc.,
a California corporation By: /s/ Kurt H. Fulle___ ________________ Name: Kurt H. Fulle Its: President and CEO |
|
|
|
|
|
|
BUYER:
|
Masimo Corporation,
a Delaware corporation By: /s/ Yongsam Lee___ ____________ Name: Yongsam Lee Its: EVP, Operations and CIO |
A.
|
Seller and Buyer have entered into that certain Agreement of Purchase and Sale Agreement and Escrow Instructions dated November 1, 2013 (“
Original Purchase Agreement
”), as amended by that certain First Amendment to Purchase and Sale Agreement dated January 8, 2014 (the “
First Amendment
”), and further amended by that certain Second Amendment to Purchase and Sale Agreement dated January 10, 2014 (the “
Second Amendment
”, and collectively with the Original Purchase Agreement and the First Amendment, referred to as the “
Agreement
”), relative to the sale/purchase of that certain real property located at 52 Discovery Way, Irvine, California (the “
Property
”).
|
SELLER:
|
NIKKEN, Inc.,
a California corporation By: /s/ Kurt H. Fulle_ __________________ Name: Kurt H. Fulle Its: President and CEO |
|
|
|
|
|
|
BUYER:
|
Masimo Corporation,
a Delaware corporation By: /s/ Yongsam Lee____ ___________ Name: Yongsam Lee Its: EVP, Operations and CIO |
SELLER:
|
NIKKEN, Inc.,
a California corporation
By:
/s/ Kurt H. Fulle_
__________________
Name: Kurt H. Fulle
Its: President and CEO
|
|
|
|
|
|
|
BUYER:
|
Masimo Corporation,
a Delaware corporation
By:
/s/ Yongsam Lee
_______________
Name: Yongsam Lee
Its: EVP, Operations and CIO
|
Masimo Corporation
Ratio of Earnings to Fixed Charges
(Dollars in thousands)
|
||||||||||||||||||||||||
|
|
Three months ended
|
|
Fiscal Year Ended
|
||||||||||||||||||||
|
|
March 29,
2014 |
|
December 28,
2013 |
|
December 29,
2012 |
|
December 31,
2011 |
|
January 1,
2011 |
|
January 2,
2010 |
||||||||||||
Ratio of earnings to fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income before provision for income taxes
|
$
|
30,393
|
|
|
$
|
75,726
|
|
|
$
|
83,821
|
|
|
$
|
86,531
|
|
|
$
|
107,569
|
|
|
$
|
82,180
|
|
|
Fixed charges
|
2,678
|
|
|
2,705
|
|
|
2,514
|
|
|
1,910
|
|
|
1,941
|
|
|
1,768
|
|
|||||||
Noncontrolling interests in pre-tax (income) loss
|
141
|
|
|
607
|
|
|
744
|
|
|
(58
|
)
|
|
(676
|
)
|
|
(1,159
|
)
|
|||||||
Total earnings
|
$
|
33,212
|
|
|
$
|
79,038
|
|
|
$
|
87,079
|
|
|
$
|
88,383
|
|
|
$
|
108,834
|
|
|
$
|
82,789
|
|
|
Fixed charges
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Interest expensed
|
$
|
15
|
|
|
$
|
28
|
|
|
44
|
|
|
$
|
116
|
|
|
$
|
23
|
|
|
$
|
75
|
|
|
|
Estimated of interest within rental expense
|
2,663
|
|
|
2,677
|
|
|
2,470
|
|
|
1,794
|
|
|
1,918
|
|
|
1,693
|
|
||||||
Total fixed charges
|
$
|
2,678
|
|
|
$
|
2,705
|
|
|
$
|
2,514
|
|
|
$
|
1,910
|
|
|
$
|
1,941
|
|
|
$
|
1,768
|
|
|
Ratio of earnings to fixed charges
|
12.40
|
|
|
29.22
|
|
|
34.64
|
|
|
46.27
|
|
|
56.07
|
|
|
46.83
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
/s/ J
OE
K
IANI
|
Dated: April 30, 2014
|
|
Joe Kiani
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
/s/ M
ARK
P.
DE
R
AAD
|
Dated: April 30, 2014
|
|
Mark P. de Raad
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
/s/ J
OE
K
IANI
|
Date: April 30, 2014
|
Joe Kiani
|
|
Chairman of the Board and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ M
ARK
P.
DE
R
AAD
|
Date: April 30, 2014
|
Mark P. de Raad
|
|
Executive Vice President and Chief Financial Officer
|
|
(Principal Financial Officer)
|