|
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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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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52 Discovery
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 July 2, 2016
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Common stock, $0.001 par value
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|
49,351,459
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|
|
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Item 1.
|
|
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Item 2.
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||
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Item 3.
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Item 4.
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Item 1.
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||
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Item 1A.
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||
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Item 2.
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Item 6.
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July 2,
2016 |
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January 2,
2016 |
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
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$
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116,055
|
|
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$
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132,317
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,718 and $1,967 at July 2, 2016 and January 2, 2016, respectively.
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84,805
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|
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80,960
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Inventories
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62,312
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|
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62,038
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|
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Prepaid income taxes
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9,803
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|
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2,404
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|
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Other current assets
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22,995
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|
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21,423
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|
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Total current assets
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295,970
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|
|
299,142
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|
||
Deferred cost of goods sold
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73,362
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71,718
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|
||
Property and equipment, net
|
133,037
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132,466
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|
||
Intangible assets, net
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28,264
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27,556
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|
||
Goodwill
|
20,384
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|
|
20,394
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|
||
Deferred tax assets
|
39,410
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|
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44,320
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Other non-current assets
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12,256
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|
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6,139
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|
||
Total assets
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$
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602,683
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|
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$
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601,735
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LIABILITIES AND EQUITY
|
|
|
|
||||
Current liabilities
|
|
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|
||||
Accounts payable
|
$
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30,710
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|
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$
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25,865
|
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Accrued compensation
|
33,956
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|
|
38,415
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|
||
Accrued liabilities
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26,781
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|
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44,222
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|
||
Income taxes payable
|
2,304
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|
|
2,777
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|
||
Deferred revenue
|
26,622
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|
|
21,280
|
|
||
Current portion of capital lease obligations
|
75
|
|
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74
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|
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Total current liabilities
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120,448
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132,633
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|
||
Deferred revenue
|
219
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|
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298
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|
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Long term debt
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175,001
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185,071
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|
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Other non-current liabilities
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11,866
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|
|
8,021
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|
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Total liabilities
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307,534
|
|
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326,023
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|
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Commitments and contingencies
|
|
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|
||||
Equity
|
|
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|
||||
Masimo Corporation stockholders’ equity:
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|
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|
||||
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding at July 2, 2016 and January 2, 2016
|
—
|
|
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—
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Common stock, $0.001 par value; 100,000 shares authorized; 49,351 and 49,881 shares issued and outstanding at July 2, 2016 and January 2, 2016
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49
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50
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Treasury stock 14,255 and 12,759 at July 2, 2016 and January 2, 2016
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(404,276
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)
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(340,873
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)
|
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Additional paid-in capital
|
357,766
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|
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332,417
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|
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Accumulated other comprehensive loss
|
(4,549
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)
|
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(4,739
|
)
|
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Retained earnings
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346,159
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288,560
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|
||
Total Masimo Corporation stockholders’ equity
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295,149
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|
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275,415
|
|
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Noncontrolling interest
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—
|
|
|
297
|
|
||
Total equity
|
295,149
|
|
|
275,712
|
|
||
Total liabilities and equity
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$
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602,683
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|
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$
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601,735
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
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July 2,
2016 |
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July 4,
2015 |
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July 2,
2016 |
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July 4,
2015 |
||||||||
Revenue:
|
|
|
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|
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|
||||||||
Product
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$
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164,607
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$
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147,612
|
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$
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327,897
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$
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294,969
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Royalty
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8,029
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8,114
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15,906
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|
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15,294
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|
||||
Total revenue
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172,636
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|
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155,726
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343,803
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310,263
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|
||||
Cost of goods sold
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57,501
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52,825
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|
114,455
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|
|
104,257
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|
||||
Gross profit
|
115,135
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|
|
102,901
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|
|
229,348
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|
|
206,006
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|
||||
Operating expenses:
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|
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|
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|
||||||||
Selling, general and administrative
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63,888
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61,666
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126,399
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122,465
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|
||||
Research and development
|
14,818
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13,394
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29,183
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|
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28,323
|
|
||||
Total operating expenses
|
78,706
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|
|
75,060
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|
|
155,582
|
|
|
150,788
|
|
||||
Operating income
|
36,429
|
|
|
27,841
|
|
|
73,766
|
|
|
55,218
|
|
||||
Non-operating income (expense)
|
471
|
|
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(1,125
|
)
|
|
969
|
|
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(972
|
)
|
||||
Income before provision for income taxes
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36,900
|
|
|
26,716
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|
|
74,735
|
|
|
54,246
|
|
||||
Provision for income taxes
|
6,877
|
|
|
8,020
|
|
|
17,135
|
|
|
15,728
|
|
||||
Net income including noncontrolling interest
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30,023
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|
|
18,696
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|
|
57,600
|
|
|
38,518
|
|
||||
Net loss attributable to the noncontrolling interest
|
—
|
|
|
655
|
|
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—
|
|
|
1,356
|
|
||||
Net income attributable to Masimo Corporation stockholders
|
$
|
30,023
|
|
|
$
|
19,351
|
|
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$
|
57,600
|
|
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$
|
39,874
|
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|
|
|
|
|
|
|
|
||||||||
Net income per share attributable to Masimo Corporation stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.61
|
|
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$
|
0.38
|
|
|
$
|
1.17
|
|
|
$
|
0.77
|
|
Diluted
|
$
|
0.57
|
|
|
$
|
0.36
|
|
|
$
|
1.10
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used in per share calculations:
|
|
|
|
|
|
|
|
||||||||
Basic
|
49,256
|
|
|
51,300
|
|
|
49,340
|
|
|
51,993
|
|
||||
Diluted
|
52,703
|
|
|
53,675
|
|
|
52,404
|
|
|
53,908
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2016 |
|
July 4,
2015 |
|
July 2,
2016 |
|
July 4,
2015 |
||||||||
Net income including noncontrolling interest
|
$
|
30,023
|
|
|
$
|
18,696
|
|
|
$
|
57,600
|
|
|
$
|
38,518
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(1,209
|
)
|
|
584
|
|
|
190
|
|
|
(2,358
|
)
|
||||
Total comprehensive income
|
28,814
|
|
|
19,280
|
|
|
57,790
|
|
|
36,160
|
|
||||
Comprehensive loss attributable to noncontrolling interest
|
—
|
|
|
655
|
|
|
—
|
|
|
1,356
|
|
||||
Comprehensive income attributable to Masimo Corporation stockholders
|
$
|
28,814
|
|
|
$
|
19,935
|
|
|
$
|
57,790
|
|
|
$
|
37,516
|
|
|
Six Months Ended
|
||||||
|
July 2,
2016 |
|
July 4,
2015 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income including noncontrolling interest
|
$
|
57,600
|
|
|
$
|
38,518
|
|
Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
8,132
|
|
|
7,697
|
|
||
Stock-based compensation
|
6,204
|
|
|
5,429
|
|
||
Loss on disposal of property, equipment and intangibles
|
401
|
|
|
252
|
|
||
Gain on deconsolidation of variable interest entity
|
(273
|
)
|
|
—
|
|
||
Provision for doubtful accounts
|
(51
|
)
|
|
162
|
|
||
Provision for deferred income taxes
|
5,001
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Increase in accounts receivable
|
(3,739
|
)
|
|
(3,121
|
)
|
||
Increase in inventories
|
(297
|
)
|
|
(2,060
|
)
|
||
(Increase) decrease in deferred cost of goods sold
|
(1,566
|
)
|
|
1,987
|
|
||
Increase in prepaid income taxes
|
(7,462
|
)
|
|
(5,852
|
)
|
||
Increase in other assets
|
(6,596
|
)
|
|
(4,892
|
)
|
||
Increase (decrease) in accounts payable
|
8,084
|
|
|
(7,378
|
)
|
||
Decrease in accounts payable to related party
|
(1,092
|
)
|
|
—
|
|
||
Decrease in accrued compensation
|
(3,937
|
)
|
|
(4,271
|
)
|
||
(Decrease) increase in accrued liabilities
|
(12,534
|
)
|
|
3,805
|
|
||
Decrease in income tax payable
|
(322
|
)
|
|
(2,147
|
)
|
||
Increase in deferred revenue
|
5,263
|
|
|
836
|
|
||
Increase (decrease) in other liabilities
|
3,875
|
|
|
(342
|
)
|
||
Net cash provided by operating activities
|
56,691
|
|
|
28,623
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment, net
|
(10,734
|
)
|
|
(24,672
|
)
|
||
Increase in intangible assets
|
(1,349
|
)
|
|
(2,589
|
)
|
||
Reduction in cash resulting from deconsolidation of variable interest entity
|
(763
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(12,846
|
)
|
|
(27,261
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings under line of credit
|
45,000
|
|
|
65,000
|
|
||
Repayments on line of credit
|
(55,000
|
)
|
|
(12,500
|
)
|
||
Debt issuance costs
|
(621
|
)
|
|
—
|
|
||
Repayments of capital lease obligations
|
(69
|
)
|
|
(77
|
)
|
||
Proceeds from issuance of common stock
|
18,997
|
|
|
15,178
|
|
||
Payroll tax withholdings on behalf of employees for stock options
|
—
|
|
|
(472
|
)
|
||
Repurchases of common stock
|
(68,218
|
)
|
|
(81,700
|
)
|
||
Issuance of equity by noncontrolling interest, net of equity issued
|
—
|
|
|
3
|
|
||
Net cash used in financing activities
|
(59,911
|
)
|
|
(14,568
|
)
|
||
Effect of foreign currency exchange rates on cash
|
(196
|
)
|
|
(1,850
|
)
|
||
Net decrease in cash and cash equivalents
|
(16,262
|
)
|
|
(15,056
|
)
|
||
Cash and cash equivalents at beginning of period
|
132,317
|
|
|
134,453
|
|
||
Cash and cash equivalents at end of period
|
$
|
116,055
|
|
|
$
|
119,397
|
|
●
|
Level 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 in 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 liabilities.
|
July 2, 2016
|
Adjusted Basis
Cost |
|
Gross Unrealized
Gains |
|
Gross Unrealized
(Losses) |
|
Estimated
Fair Value |
|
Cash and Cash
Equivalents |
||||||||||
Cash
|
$
|
61,055
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
61,055
|
|
|
$
|
61,055
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
||||||||||
Bank Time Deposits
|
55,000
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
55,000
|
|
|||||
Money Market Funds
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Subtotal
|
55,000
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
55,000
|
|
|||||
Level 2:
|
|
|
|
|
|
|
|
|
|
||||||||||
None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Level 3:
|
|
|
|
|
|
|
|
|
|
||||||||||
None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total assets measured at fair value
|
$
|
116,055
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
116,055
|
|
|
$
|
116,055
|
|
January 2, 2016
|
Adjusted Basis
Cost |
|
Gross Unrealized
Gains |
|
Gross Unrealized
(Losses) |
|
Estimated
Fair Value |
|
Cash and Cash
Equivalents |
||||||||||
Cash
|
$
|
57,168
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,168
|
|
|
$
|
57,168
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
||||||||||
Bank Time Deposits
|
55,000
|
|
|
—
|
|
|
—
|
|
|
55,000
|
|
|
55,000
|
|
|||||
Money Market Funds
|
20,149
|
|
|
—
|
|
|
—
|
|
|
20,149
|
|
|
20,149
|
|
|||||
Subtotal
|
75,149
|
|
|
—
|
|
|
—
|
|
|
75,149
|
|
|
75,149
|
|
|||||
Level 2:
|
|
|
|
|
|
|
|
|
|
||||||||||
None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Level 3:
|
|
|
|
|
|
|
|
|
|
||||||||||
None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total assets measured at fair value
|
$
|
132,317
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
132,317
|
|
|
$
|
132,317
|
|
|
Useful Lives
|
Buildings
|
39 years
|
Building improvements
|
7 to 15 years
|
Leasehold improvements
|
Lesser of useful life or term of lease
|
Machinery and equipment
|
5 to 7 years
|
Vehicles
|
5 years
|
Tooling
|
3 years
|
Computer equipment
|
2 to 6 years
|
Furniture and office equipment
|
2 to 6 years
|
Demonstration units
|
3 years
|
|
Six Months Ended
|
||||||
|
July 2,
2016 |
|
July 4,
2015 |
||||
Warranty accrual, beginning of period
|
$
|
1,222
|
|
|
$
|
1,416
|
|
Accrual for warranties issued
|
521
|
|
|
585
|
|
||
Changes to pre-existing warranties (including changes in estimates)
|
(40
|
)
|
|
(134
|
)
|
||
Settlements made
|
(488
|
)
|
|
(490
|
)
|
||
Warranty accrual, end of period
|
$
|
1,215
|
|
|
$
|
1,377
|
|
|
Six Months Ended
July 2, 2016 |
||
Accumulated other comprehensive loss, beginning of period
|
$
|
(4,739
|
)
|
Foreign currency translation adjustments
|
190
|
|
|
Accumulated other comprehensive loss, end of period
|
$
|
(4,549
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2016 |
|
July 4,
2015 |
|
July 2,
2016 |
|
July 4,
2015 |
||||||||
Net income attributable to Masimo Corporation stockholders:
|
|
|
|
|
|
|
|
||||||||
Net income including noncontrolling interest
|
$
|
30,023
|
|
|
$
|
18,696
|
|
|
$
|
57,600
|
|
|
$
|
38,518
|
|
Net loss attributable to the noncontrolling interest
|
—
|
|
|
655
|
|
|
—
|
|
|
1,356
|
|
||||
Net income attributable to Masimo Corporation stockholders
|
$
|
30,023
|
|
|
$
|
19,351
|
|
|
$
|
57,600
|
|
|
$
|
39,874
|
|
Basic net income per share attributable to Masimo Corporation stockholders:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Masimo Corporation stockholders
|
$
|
30,023
|
|
|
$
|
19,351
|
|
|
$
|
57,600
|
|
|
$
|
39,874
|
|
Weighted-average shares outstanding - basic
|
49,256
|
|
|
51,300
|
|
|
49,340
|
|
|
51,993
|
|
||||
Basic net income per share attributable to Masimo Corporation stockholders
|
$
|
0.61
|
|
|
$
|
0.38
|
|
|
$
|
1.17
|
|
|
$
|
0.77
|
|
Diluted net income per share attributable to Masimo Corporation stockholders:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding - basic
|
49,256
|
|
|
51,300
|
|
|
49,340
|
|
|
51,993
|
|
||||
Diluted share equivalent: stock options and RSUs
|
3,447
|
|
|
2,375
|
|
|
3,064
|
|
|
1,915
|
|
||||
Weighted-average shares outstanding - diluted
|
52,703
|
|
|
53,675
|
|
|
52,404
|
|
|
53,908
|
|
||||
Diluted net income per share attributable to Masimo Corporation stockholders
|
$
|
0.57
|
|
|
$
|
0.36
|
|
|
$
|
1.10
|
|
|
$
|
0.74
|
|
|
Six Months Ended
|
||||||
|
July 2,
2016 |
|
July 4,
2015 |
||||
Cash paid during the year for:
|
|
|
|
||||
Interest (net of amounts capitalized)
|
$
|
2,603
|
|
|
$
|
952
|
|
Income taxes
|
19,292
|
|
|
23,523
|
|
||
Noncash investing and financing activities:
|
|
|
|
||||
Assets acquired under capital leases
|
$
|
—
|
|
|
$
|
36
|
|
Unpaid purchases of property, plant and equipment
|
1,168
|
|
|
6,251
|
|
||
Unsettled common stock proceeds from option exercises
|
187
|
|
|
25
|
|
||
Unsettled stock repurchases
|
—
|
|
|
—
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||||||||||||||||||
|
July 4, 2015
|
|
July 4, 2015
|
||||||||||||||||||||||||||||||||||||||||
Consolidating Statement of Operations:
|
Masimo
Corp |
|
Percentage
of Revenue |
|
Cercacor
|
|
Cercacor
Elim |
|
Total
|
|
Percentage
of Revenue |
|
Masimo
Corp |
|
Percentage
of Revenue |
|
Cercacor
|
|
Cercacor
Elim |
|
Total
|
|
Percentage
of Revenue |
||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Product
|
$
|
147,612
|
|
|
94.8
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
147,612
|
|
|
94.8
|
%
|
|
$
|
294,969
|
|
|
95.1
|
%
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
294,969
|
|
|
95.1
|
%
|
Royalty
|
8,114
|
|
|
5.2
|
|
|
1,470
|
|
|
(1,470
|
)
|
|
8,114
|
|
|
5.2
|
|
|
15,294
|
|
|
4.9
|
|
|
2,845
|
|
|
(2,845
|
)
|
|
15,294
|
|
|
4.9
|
|
||||||||
Total revenue
|
155,726
|
|
|
1.0
|
|
|
1,470
|
|
|
(1,470
|
)
|
|
155,726
|
|
|
1.0
|
|
|
310,263
|
|
|
100.0
|
|
|
2,845
|
|
|
(2,845
|
)
|
|
310,263
|
|
|
100.0
|
|
||||||||
Cost of goods sold
|
54,170
|
|
|
34.8
|
|
|
—
|
|
|
(1,345
|
)
|
|
52,825
|
|
|
33.9
|
|
|
106,852
|
|
|
34.4
|
|
|
—
|
|
|
(2,595
|
)
|
|
104,257
|
|
|
33.6
|
|
||||||||
Gross profit
|
101,556
|
|
|
65.2
|
|
|
1,470
|
|
|
(125
|
)
|
|
102,901
|
|
|
66.1
|
|
|
203,411
|
|
|
65.6
|
|
|
2,845
|
|
|
(250
|
)
|
|
206,006
|
|
|
66.4
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Selling, general and administrative
|
61,077
|
|
|
39.2
|
|
|
714
|
|
|
(125
|
)
|
|
61,666
|
|
|
39.6
|
|
|
121,353
|
|
|
39.1
|
|
|
1,362
|
|
|
(250
|
)
|
|
122,465
|
|
|
39.5
|
|
||||||||
Research and development
|
11,983
|
|
|
7.7
|
|
|
1,411
|
|
|
—
|
|
|
13,394
|
|
|
8.6
|
|
|
25,484
|
|
|
8.2
|
|
|
2,839
|
|
|
—
|
|
|
28,323
|
|
|
9.1
|
|
||||||||
Total operating expenses
|
73,060
|
|
|
43.6
|
|
|
2,125
|
|
|
(125
|
)
|
|
75,060
|
|
|
48.2
|
|
|
146,837
|
|
|
47.3
|
|
|
4,201
|
|
|
(250
|
)
|
|
150,788
|
|
|
48.6
|
|
||||||||
Operating income (loss)
|
28,496
|
|
|
(76.6
|
)
|
|
(655
|
)
|
|
—
|
|
|
27,841
|
|
|
17.9
|
|
|
56,574
|
|
|
18.2
|
|
|
(1,356
|
)
|
|
—
|
|
|
55,218
|
|
|
17.8
|
|
||||||||
Non-operating expense
|
(1,125
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(1,125
|
)
|
|
(0.7
|
)
|
|
(972
|
)
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
(972
|
)
|
|
(0.3
|
)
|
||||||||
Income (loss) before provision for income taxes
|
27,371
|
|
|
(76.5
|
)
|
|
(655
|
)
|
|
—
|
|
|
26,716
|
|
|
17.2
|
|
|
55,602
|
|
|
17.9
|
|
|
(1,356
|
)
|
|
—
|
|
|
54,246
|
|
|
17.5
|
|
||||||||
Provision for income taxes
|
8,020
|
|
|
3.6
|
|
|
—
|
|
|
—
|
|
|
8,020
|
|
|
5.2
|
|
|
15,728
|
|
|
5.1
|
|
|
—
|
|
|
—
|
|
|
15,728
|
|
|
5.1
|
|
||||||||
Net income (loss) including noncontrolling interest
|
19,351
|
|
|
(80.1
|
)
|
|
(655
|
)
|
|
—
|
|
|
18,696
|
|
|
12.0
|
|
|
39,874
|
|
|
12.9
|
|
|
(1,356
|
)
|
|
—
|
|
|
38,518
|
|
|
12.4
|
|
||||||||
Net loss attributable to the noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
655
|
|
|
655
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,356
|
|
|
1,356
|
|
|
0.4
|
|
||||||||
Net income (loss) attributable to Masimo Corporation stockholders
|
$
|
19,351
|
|
|
(80.1
|
)%
|
|
$
|
(655
|
)
|
|
$
|
655
|
|
|
$
|
19,351
|
|
|
12.4
|
%
|
|
$
|
39,874
|
|
|
12.9
|
%
|
|
$
|
(1,356
|
)
|
|
$
|
1,356
|
|
|
$
|
39,874
|
|
|
12.9
|
%
|
•
|
Cross-Licensing Agreement -
The Company is party to a cross-licensing agreement with Cercacor (the Cross-Licensing Agreement), which governs each party’s rights to certain intellectual property held by the two companies. The Company is subject to certain annual minimum aggregate royalty obligations for use of the rainbow
®
licensed technology. The current annual minimum royalty obligation is
$5.0 million
. Actual aggregate royalty liabilities to Cercacor under the license were
$1.6 million
and
$3.2 million
for the three and
six
months ended
July 2, 2016
, respectively. Actual aggregate royalty liabilities to Cercacor under the license were
$1.3 million
and
$2.6 million
for the three and
six
months ended
July 4, 2015
, respectively, which were eliminated in consolidation. The Company had
no
sales to Cercacor for the three months ended
July 2, 2016
, and less than
$0.1 million
for the
six
months ended
July 2, 2016
under the Cross-Licensing Agreement. There were
no
similar sales during the three and six months ended
July 4, 2015
.
|
•
|
Administrative Services Agreement
- The Company is a party to an administrative services agreement with Cercacor (G&A Services Agreement), which governs certain general and administrative services that the Company provides to Cercacor. Amounts charged by the Company pursuant to the G&A Services Agreement were less than
$0.1 million
for each of the three and
six
months ended
July 2, 2016
and
July 4, 2015
.
|
•
|
Consulting Services Agreement
- The Company is also a party to a consulting services agreement (Consulting Agreement) with Cercacor that governs certain engineering consulting and clinical studies support services that Cercacor may provide to the Company from time-to-time. Expenses incurred by the Company related to this Consulting Agreement were less than
$0.1 million
for the three and
six
months ended
July 2, 2016
and approximately
$0.1 million
and
$0.2 million
for the three and
six
months ended
July 4, 2015
, respectively.
|
•
|
Sublease Agreement
- In March 2016, the Company entered into a sublease agreement with Cercacor for approximately
16,830
square feet of excess office and laboratory space located at 40 Parker, Irvine, California (Cercacor Sublease). The Cercacor Sublease began on May 1, 2016 and expires on November 30, 2019. The Company recognized less than
$0.1 million
in sublease income for both the three and
six
months ended
July 2, 2016
.
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Raw materials
|
$
|
29,836
|
|
|
$
|
25,781
|
|
Work-in-process
|
5,489
|
|
|
4,337
|
|
||
Finished goods
|
26,987
|
|
|
31,920
|
|
||
Total inventories
|
$
|
62,312
|
|
|
$
|
62,038
|
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Prepaid expenses
|
$
|
13,170
|
|
|
$
|
9,930
|
|
Royalties receivable
|
7,500
|
|
|
7,200
|
|
||
Employee loans and advances
|
308
|
|
|
320
|
|
||
Due from related party
|
9
|
|
|
—
|
|
||
Other current assets
|
2,008
|
|
|
3,973
|
|
||
Total other current assets
|
$
|
22,995
|
|
|
$
|
21,423
|
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Building and building improvements
|
$
|
85,546
|
|
|
$
|
78,877
|
|
Machinery and equipment
|
43,106
|
|
|
42,460
|
|
||
Land
|
23,738
|
|
|
23,738
|
|
||
Computer equipment
|
15,202
|
|
|
15,023
|
|
||
Tooling
|
13,113
|
|
|
13,079
|
|
||
Furniture and office equipment
|
9,336
|
|
|
8,885
|
|
||
Leasehold improvements
|
7,777
|
|
|
7,734
|
|
||
Demonstration units
|
978
|
|
|
973
|
|
||
Vehicles
|
45
|
|
|
45
|
|
||
Construction-in-progress
|
2,186
|
|
|
7,124
|
|
||
Total property and equipment
|
201,027
|
|
|
197,938
|
|
||
Accumulated depreciation and amortization
|
(67,990
|
)
|
|
(65,472
|
)
|
||
Property and equipment, net
|
$
|
133,037
|
|
|
$
|
132,466
|
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Patents
|
$
|
18,931
|
|
|
$
|
21,619
|
|
Customer relationships
|
7,669
|
|
|
7,669
|
|
||
Licenses
(1)
|
7,500
|
|
|
—
|
|
||
Acquired technology
|
5,580
|
|
|
5,580
|
|
||
Trademarks
|
3,681
|
|
|
3,944
|
|
||
Capitalized software development costs
|
2,539
|
|
|
2,539
|
|
||
Other
|
2,529
|
|
|
2,541
|
|
||
Total intangible assets
|
48,429
|
|
|
43,892
|
|
||
Accumulated amortization
|
(20,165
|
)
|
|
(16,336
|
)
|
||
Intangible assets, net
|
$
|
28,264
|
|
|
$
|
27,556
|
|
(1)
|
As a result of the deconsolidation of the Company’s prior VIE, Cercacor,
$7.5 million
of licenses that were previously eliminated in consolidation are now included as part of the Company’s intangible assets at
July 2, 2016
.
|
Fiscal year
|
Amount
|
||
2016 (balance of year)
|
$
|
4,099
|
|
2017
|
3,791
|
|
|
2018
|
3,554
|
|
|
2019
|
3,156
|
|
|
2020
|
2,849
|
|
|
Thereafter
|
10,815
|
|
|
Total
|
$
|
28,264
|
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Accrued customer rebates, fees and reimbursements
|
$
|
14,484
|
|
|
$
|
11,857
|
|
Accrued taxes
|
3,618
|
|
|
5,263
|
|
||
Accrued legal fees
|
2,620
|
|
|
5,785
|
|
||
Accrued warranty
|
1,215
|
|
|
1,222
|
|
||
Accrued donations
|
107
|
|
|
5,612
|
|
||
Accrued stock repurchases
|
—
|
|
|
4,815
|
|
||
Accrued arbitration award
|
—
|
|
|
5,391
|
|
||
Accrued other
|
4,737
|
|
|
4,277
|
|
||
Total accrued liabilities
|
$
|
26,781
|
|
|
$
|
44,222
|
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Revolving line of credit
|
$
|
175,000
|
|
|
$
|
185,000
|
|
Long term portion of capital lease obligations acquisition
|
1
|
|
|
71
|
|
||
Total long term debt
|
$
|
175,001
|
|
|
$
|
185,071
|
|
|
July 2,
2016 |
|
January 2,
2016 |
||||
Unrecognized tax benefit
|
$
|
8,008
|
|
|
$
|
7,747
|
|
Deposits, long-term
|
3,215
|
|
|
—
|
|
||
Deferred rent, long-term
|
419
|
|
|
76
|
|
||
Deferred tax liability, long-term
|
194
|
|
|
194
|
|
||
Other
|
30
|
|
|
4
|
|
||
Total other liabilities, long-term
|
$
|
11,866
|
|
|
$
|
8,021
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2016 |
|
July 4,
2015 |
|
July 2,
2016 |
|
July 4,
2015 |
||||||||
Shares repurchased
|
400
|
|
|
2,126
|
|
|
1,496
|
|
|
2,376
|
|
||||
Average cost per share
|
$
|
51.30
|
|
|
$
|
34.56
|
|
|
$
|
42.39
|
|
|
$
|
34.39
|
|
Value of shares repurchased
|
$
|
20,519
|
|
|
$
|
73,467
|
|
|
$
|
63,403
|
|
|
$
|
81,628
|
|
|
Six Months Ended
July 2, 2016 |
|||||
|
Shares
|
|
Average
Exercise Price
|
|||
Options outstanding, beginning of period
|
9,202
|
|
|
$
|
25.46
|
|
Granted
|
1,189
|
|
|
38.33
|
|
|
Canceled
|
(120
|
)
|
|
28.61
|
|
|
Exercised
|
(965
|
)
|
|
19.83
|
|
|
Options outstanding, end of period
|
9,306
|
|
|
$
|
27.64
|
|
Options exercisable, end of period
|
5,358
|
|
|
$
|
25.87
|
|
|
Six Months Ended
July 2, 2016 |
|||||
|
Units
|
|
Weighted Average Grant
Date Fair Value
|
|||
RSUs outstanding, beginning of period
|
2,703
|
|
|
$
|
41.45
|
|
Granted
|
6
|
|
|
43.09
|
|
|
Canceled
|
—
|
|
|
—
|
|
|
Expired
|
—
|
|
|
—
|
|
|
Vested
|
—
|
|
|
—
|
|
|
RSUs outstanding, end of period
|
2,709
|
|
|
$
|
41.45
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
|
July 2,
2016 |
|
July 4,
2015 |
|
July 2,
2016 |
|
July 4,
2015 |
Risk-free interest rate
|
1.1% to 1.5%
|
|
1.4% to 1.9%
|
|
1.1% to 1.9%
|
|
1.3% to 1.9%
|
Expected term (in years)
|
5.7
|
|
5.5
|
|
5.7
|
|
5.5
|
Estimated volatility
|
31.7% to 32.8%
|
|
32.0% to 34.0%
|
|
31.7% to 35.7%
|
|
32.0% to 37.4%
|
Expected dividends
|
0%
|
|
0%
|
|
0%
|
|
0%
|
Weighted-average fair value of options granted
|
$14.70
|
|
$12.45
|
|
$13.24
|
|
$11.64
|
|
As of July 2, 2016
|
||||||||||
|
Operating
Leases
|
|
Capital
Leases
|
|
Total
|
||||||
2016 (balance of year)
|
$
|
2,721
|
|
|
$
|
5
|
|
|
$
|
2,726
|
|
2017
|
5,282
|
|
|
75
|
|
|
5,357
|
|
|||
2018
|
4,885
|
|
|
—
|
|
|
4,885
|
|
|||
2019
|
4,011
|
|
|
—
|
|
|
4,011
|
|
|||
2020
|
2,119
|
|
|
—
|
|
|
2,119
|
|
|||
Thereafter
|
5,811
|
|
|
—
|
|
|
5,811
|
|
|||
Total
|
$
|
24,829
|
|
|
$
|
80
|
|
|
$
|
24,909
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
|
July 2, 2016
|
|
July 4, 2015
|
|
July 2, 2016
|
|
July 4, 2015
|
||||||||||||||||||||
Geographic area by destination:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
United States
|
|
$
|
117,045
|
|
|
71.1
|
%
|
|
$
|
106,236
|
|
|
72.0
|
%
|
|
$
|
230,549
|
|
|
70.3
|
%
|
|
$
|
213,512
|
|
|
72.4
|
%
|
Europe, Middle East and Africa
|
|
25,988
|
|
|
15.8
|
|
|
24,335
|
|
|
16.5
|
|
|
57,958
|
|
|
17.7
|
|
|
48,396
|
|
|
16.4
|
|
||||
Asia and Australia
|
|
16,602
|
|
|
10.1
|
|
|
12,751
|
|
|
8.6
|
|
|
30,184
|
|
|
9.2
|
|
|
24,569
|
|
|
8.3
|
|
||||
North and South America (excluding United States)
|
|
4,972
|
|
|
3.0
|
|
|
4,290
|
|
|
2.9
|
|
|
9,206
|
|
|
2.8
|
|
|
8,492
|
|
|
2.9
|
|
||||
Total product revenue
|
|
$
|
164,607
|
|
|
100.0
|
%
|
|
$
|
147,612
|
|
|
100.0
|
%
|
|
$
|
327,897
|
|
|
100.0
|
%
|
|
$
|
294,969
|
|
|
100.0
|
%
|
•
|
SedLine
®
- Brain function monitoring is most commonly used during surgery to help clinicians monitor sedation under anesthesia. SedLine
®
brain function monitoring technology measures the brain’s electrical activity by detecting electroencephalogram (EEG) signals. Brain function monitors display the patient’s EEG waveforms, but these are difficult for clinicians to interpret, so the EEG signals are processed and displayed as a single number called Patient State Index (PSI), which gives a continuous indication of the patient’s depth of sedation. Our SedLine
®
brain function monitoring technology can now be delivered through the Masimo Open Connect
™
(MOC-9
™
) connectivity port within our Root
®
patient monitoring and connectivity platform, which integrates our rainbow
®
and SET
®
measurements with multiple additional parameters, such as SedLine
®
. In addition, our SedLine
®
brain function monitoring technology also displays raw EEG waveforms, the PSI trend and the Density Spectral Array view to allow clinicians to compare EEG power in both sides of the brain over time to facilitate the detection of asymmetrical activity.
|
•
|
Capnography and Gas Monitoring
- Our portfolio of capnography and gas monitoring products include external “plug-in-and-measure” capnography and gas analyzers, integrated modules and handheld capnograph and capnometer devices. These products have the ability to measure multiple expired gases, such as carbon dioxide (CO
2
), nitrous oxide (N
2
O), oxygen (O
2
) and other anesthetic agents. In the case of capnography, respiration rate is also calculated from the CO
2
waveform. These measurements are possible through either mainstream monitoring, which samples gases from a ventilated patient’s breathing circuit, or sidestream monitoring, which samples gases from a breathing circuit in mechanically ventilated patients or through a cannula or mask in spontaneously breathing patients.
|
•
|
O
3
™
- Regional oximetry monitoring, also known as tissue oximetry and cerebral oximetry monitoring, uses near-infrared spectroscopy to provide for continuous measurement of tissue oxygen saturation (rSO
2
) to help detect regional hypoxemia that pulse oximetry alone can miss. In addition, our Root
®
patient monitor and O
3
™
sensors can automate the differential analysis of regional to central oxygen saturation. O
3
™
monitoring involves applying O
3
™
regional oximetry sensors to the forehead and connecting our O
3
™
Masimo Open Connect
™
(MOC-9
™
) module to any Root
®
monitor through one of its three MOC-9
™
ports. O
3
™
regional oximetry is currently intended for use in subjects larger than 40 kg (approximately 88 lbs). O
3
™
regional oximetry has received the CE Mark and, in June 2016, received FDA 510(k) clearance.
|
•
|
rainbow Acoustic Monitoring
®
(RAM
™
)
- Our sound-based monitoring technology enables noninvasive monitoring of respiration rate (RRa
®
). Compared to traditional capnography, which monitors exhaled carbon dioxide (CO
2
), most often through a nasal cannula, multiple clinical studies have shown that the noninvasive measurement of RRa
®
provides as good or better accuracy to monitor respiration rate and detect respiratory pause episodes, defined as a cessation of breathing for 30 seconds or more. When used with other clinical variables, RRa
®
may help clinicians assess respiratory depression and respiratory distress earlier and more often to help determine treatment options and potentially enable earlier interventions.
|
•
|
Root
®
- This powerful patient monitoring and connectivity platform integrates our breakthrough rainbow
®
and SET
®
measurements with multiple additional specialty measurements through its MOC-9
™
connectivity ports in an integrated, clinician-centric platform. The first three Masimo MOC-9
™
technologies for Root
®
were SedLine
®
brain function monitoring, Phasein
™
capnography and O
3
™
regional oximetry. In March 2016, we announced Iris Gateway
™
, a server-based software solution for integrating medical device data. The Iris
™
ports on our Root
®
patient monitor allow other medical devices (such as infusion pumps, ventilators, patient monitors and “smart” beds) to connect to Iris Gateway
™
via Root
®
. Iris
™
Gateway can provide a timely and cost-effective solution for the integration of medical device data by connecting to existing medical devices and performing the required translations to move the data from the devices into EMRs. Iris Gateway
™
can be deployed on a remote server farm or as a server appliance in the hospital. Root
®
is also available with noninvasive blood pressure from SunTech Medical
®
, which enables clinicians to measure arterial blood pressure for adult, pediatric and neonatal patients with three distinct measurement modes: spot-check, automatic interval and stat interval. The temperature module from Welch Allyn
®
can measure the temperature of adult, pediatric and neonatal patients.
|
•
|
Patient SafetyNet
™
- Our patient surveillance, remote monitoring and clinician notification solution allows for monitoring of the oxygen saturation, pulse rate, perfusion index, hemoglobin, methemoglobin and respiration rate of up to 200 patients simultaneously. Patient SafetyNet
™
offers a rich user interface with trending, real-time waveform capability at the central station and remote notification via pager or smart phone. Patient SafetyNet
™
also features the Adaptive Connectivity Engine
™
, which enables two-way, Health Level 7 (HL7) based connectivity to clinical/hospital information systems. The Adaptive Connectivity Engine
™
significantly reduces the time and complexity to integrate and validate custom HL7 implementations and demonstrates our commitment to innovation that automates patient care with open, scalable and standards-based connectivity architecture.
|
•
|
MightySat
™
- Our fingertip pulse oximeter
provides oxygen saturation and pulse rate measurements and is designed for those who want accurate measurements even under challenging conditions such as movement and low perfusion. MightySat
™
provides SpO
2
, PR, RRp
™
, PVI
®
and PI measurements in a compact, battery-powered design with a large color screen that can be rotated for real-time display of the pleth waveform as well as measurements. Its Bluetooth
®
wireless functionality enables measurement display via the free, downloadable Masimo Personal Health app on iOS and Android mobile devices, as well as the ability to trend and communicate measurements and interface with the Apple Health app. MightySat
™
is also available with optional PVI
®
, a measure of the dynamic changes in the perfusion index that occur during one or more complete respiratory cycles. MightySat
™
is available through online retailers such as Amazon.com. In the U.S., MightySat
™
is intended for general health and wellness use and is not intended for medical use. However, MightySat
™
Rx, the medical version of the product with optional Bluetooth
®
, received 510(k) clearance in late 2015. MightySat
™
Rx with the RRp
™
measurement is not currently available for sale in the U.S.
|
•
|
MyView
™
- This wireless, presence-detection system enables clinicians to automatically display customized clinical profiles on our devices, such as Root
®
, Radical-7
®
and the Patient SafetyNet
™
View Station. When a clinician approaches the device, a clinician-worn MyView
™
badge signals the device to display a preselected set of parameters and waveforms tailored to the individual clinician’s preferences. MyView
™
gives clinicians the ability to receive and review medical device information in a manner that is most conducive to optimizing their workflow, while the presence mapping data collected by all the Masimo devices can provide information on how clinicians spend time with their patients. This provides nursing leadership and management with the opportunity to examine analytical data on patient and clinician interactions to optimize workflows across the unit, hospital or hospital system.
|
(1)
|
continue to expand our market share in pulse oximetry;
|
(2)
|
expand the pulse oximetry market to other patient care settings;
|
(3)
|
expand the use of rainbow
®
technology in hospital settings;
|
(4)
|
expand the use of rainbow
®
technology in non-hospital settings;
|
(5)
|
expand the use of Root
®
in hospital settings;
|
(6)
|
utilize our customer base and OEM relationships to market our rainbow SET
™
products incorporating our licensed rainbow
®
technology, as well as our other non-invasive specialty products including O
3
™
, SedLine
®
and capnography monitoring; and
|
(7)
|
continue to innovate and maintain our technology leadership position.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
July 2,
2016 |
|
Percentage
of Revenue |
|
July 4,
2015 |
|
Percentage
of Revenue |
|
July 2,
2016 |
|
Percentage
of Revenue
|
|
July 4,
2015 |
|
Percentage
of Revenue |
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product
|
$
|
164,607
|
|
|
95.3
|
%
|
|
$
|
147,612
|
|
|
94.8
|
%
|
|
$
|
327,897
|
|
|
95.4
|
%
|
|
$
|
294,969
|
|
|
95.1
|
%
|
Royalty
|
8,029
|
|
|
4.7
|
|
|
8,114
|
|
|
5.2
|
|
|
15,906
|
|
|
4.6
|
|
|
15,294
|
|
|
4.9
|
|
||||
Total revenue
|
172,636
|
|
|
100.0
|
|
|
155,726
|
|
|
100.0
|
|
|
343,803
|
|
|
100.0
|
|
|
310,263
|
|
|
100.0
|
|
||||
Cost of goods sold
|
57,501
|
|
|
33.3
|
|
|
52,825
|
|
|
33.9
|
|
|
114,455
|
|
|
33.3
|
|
|
104,257
|
|
|
33.6
|
|
||||
Gross profit
|
115,135
|
|
|
66.7
|
|
|
102,901
|
|
|
66.1
|
|
|
229,348
|
|
|
66.7
|
|
|
206,006
|
|
|
66.4
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Selling, general and administrative
|
63,888
|
|
|
37.0
|
|
|
61,666
|
|
|
39.6
|
|
|
126,399
|
|
|
36.8
|
|
|
122,465
|
|
|
39.5
|
|
||||
Research and development
|
14,818
|
|
|
8.6
|
|
|
13,394
|
|
|
8.6
|
|
|
29,183
|
|
|
8.5
|
|
|
28,323
|
|
|
9.1
|
|
||||
Total operating expenses
|
78,706
|
|
|
45.6
|
|
|
75,060
|
|
|
48.2
|
|
|
155,582
|
|
|
45.3
|
|
|
150,788
|
|
|
48.6
|
|
||||
Operating income
|
36,429
|
|
|
21.1
|
|
|
27,841
|
|
|
17.9
|
|
|
73,766
|
|
|
21.5
|
|
|
55,218
|
|
|
17.8
|
|
||||
Non-operating income (expense)
|
471
|
|
|
0.3
|
|
|
(1,125
|
)
|
|
(0.7
|
)
|
|
969
|
|
|
0.3
|
|
|
(972
|
)
|
|
(0.3
|
)
|
||||
Income before provision for income taxes
|
36,900
|
|
|
21.4
|
|
|
26,716
|
|
|
17.2
|
|
|
74,735
|
|
|
21.7
|
|
|
54,246
|
|
|
17.5
|
|
||||
Provision for income taxes
|
6,877
|
|
|
4.0
|
|
|
8,020
|
|
|
5.2
|
|
|
17,135
|
|
|
5.0
|
|
|
15,728
|
|
|
5.1
|
|
||||
Net income including noncontrolling interest
|
30,023
|
|
|
17.4
|
|
|
18,696
|
|
|
12.0
|
|
|
57,600
|
|
|
16.8
|
|
|
38,518
|
|
|
12.4
|
|
||||
Net loss attributable to the noncontrolling interest
(1)
|
—
|
|
|
—
|
|
|
655
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
1,356
|
|
|
0.4
|
|
||||
Net income attributable to Masimo Corporation stockholders
|
$
|
30,023
|
|
|
17.4
|
%
|
|
$
|
19,351
|
|
|
12.4
|
%
|
|
$
|
57,600
|
|
|
16.8
|
%
|
|
$
|
39,874
|
|
|
12.9
|
%
|
|
Three Months Ended
|
|||||||||||||||||||
|
July 2, 2016
|
|
July 4, 2015
|
|
Increase/
(Decrease)
|
|
Percentage
Change
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
$
|
117,045
|
|
|
71.1
|
%
|
|
$
|
106,236
|
|
|
72.0
|
%
|
|
$
|
10,809
|
|
|
10.2
|
%
|
Europe, Middle East and Africa
|
25,988
|
|
|
15.8
|
|
|
24,335
|
|
|
16.5
|
|
|
1,653
|
|
|
6.8
|
|
|||
Asia and Australia
|
16,602
|
|
|
10.1
|
|
|
12,751
|
|
|
8.6
|
|
|
3,851
|
|
|
30.2
|
|
|||
North and South America (excluding United States)
|
4,972
|
|
|
3.0
|
|
|
4,290
|
|
|
2.9
|
|
|
682
|
|
|
15.9
|
|
|||
Total product revenue
|
$
|
164,607
|
|
|
100.0
|
%
|
|
$
|
147,612
|
|
|
100.0
|
%
|
|
$
|
16,995
|
|
|
11.5
|
%
|
Royalty
|
8,029
|
|
|
|
|
8,114
|
|
|
|
|
(85
|
)
|
|
|
||||||
Total Revenue
|
$
|
172,636
|
|
|
|
|
$
|
155,726
|
|
|
|
|
$
|
16,910
|
|
|
10.9
|
%
|
|
Three Months Ended
|
|||||||||||||||||||
|
July 2, 2016
|
|
Gross Profit
Percentage |
|
July 4, 2015
|
|
Gross Profit
Percentage |
|
Increase/
(Decrease) |
|
Percentage
Change |
|||||||||
Product Gross Profit
|
$
|
107,106
|
|
|
65.1
|
%
|
|
$
|
94,787
|
|
|
64.2
|
%
|
|
$
|
12,319
|
|
|
13.0
|
%
|
Royalty Gross Profit
|
8,029
|
|
|
100.0
|
|
|
8,114
|
|
|
100.0
|
|
|
(85
|
)
|
|
(1.0
|
)
|
|||
Total Gross Profit
|
$
|
115,135
|
|
|
66.7
|
%
|
|
$
|
102,901
|
|
|
66.1
|
%
|
|
$
|
12,234
|
|
|
11.9
|
%
|
|
Three Months Ended
|
||||||||||||
|
July 2, 2016
|
|
Gross Profit
Percentage |
|
July 4,
2015 |
|
Gross Profit
Percentage |
||||||
Product Gross Profit (GAAP)
|
$
|
107,106
|
|
|
65.1
|
%
|
|
$
|
94,787
|
|
|
64.2
|
%
|
Less: Cercacor Royalty Eliminated in Consolidation
|
—
|
|
|
—
|
|
|
1,345
|
|
|
0.9
|
|
||
Adjusted Product Gross Profit (Non-GAAP)
|
$
|
107,106
|
|
|
65.1
|
%
|
|
$
|
93,442
|
|
|
63.3
|
%
|
Selling, General and Administrative
|
|||||
Three Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Three Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$63,888
|
37.0%
|
$61,666
|
39.6%
|
$2,222
|
3.6%
|
Research and Development
|
|||||
Three Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Three Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$14,818
|
8.6%
|
$13,394
|
8.6%
|
$1,424
|
10.6%
|
Non-operating Income (Expense)
|
|||||
Three Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Three Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$471
|
0.3%
|
$(1,125)
|
(0.7)%
|
$1,596
|
(141.9)%
|
Provision for Income Taxes
|
|||||
Three Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Three Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$6,877
|
4.0%
|
$8,020
|
5.2%
|
$(1,143)
|
(14.3)%
|
|
Six Months Ended
|
|||||||||||||||||||
|
July 2, 2016
|
|
July 4, 2015
|
|
Increase/
(Decrease)
|
|
Percentage
Change
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
United States
|
$
|
230,549
|
|
|
70.3
|
%
|
|
$
|
213,512
|
|
|
72.4
|
%
|
|
$
|
17,037
|
|
|
8.0
|
%
|
Europe, Middle East and Africa
|
57,958
|
|
|
17.7
|
|
|
48,396
|
|
|
16.4
|
|
|
9,562
|
|
|
19.8
|
|
|||
Asia and Australia
|
30,184
|
|
|
9.2
|
|
|
24,569
|
|
|
8.3
|
|
|
5,615
|
|
|
22.9
|
|
|||
North and South America (excluding United States)
|
9,206
|
|
|
2.8
|
|
|
8,492
|
|
|
2.9
|
|
|
714
|
|
|
8.4
|
|
|||
Total product revenue
|
$
|
327,897
|
|
|
100.0
|
%
|
|
$
|
294,969
|
|
|
100.0
|
%
|
|
$
|
32,928
|
|
|
11.2
|
%
|
Royalty
|
15,906
|
|
|
|
|
15,294
|
|
|
|
|
612
|
|
|
|
||||||
Total Revenue
|
$
|
343,803
|
|
|
|
|
$
|
310,263
|
|
|
|
|
$
|
33,540
|
|
|
10.8
|
%
|
|
Six Months Ended
|
|||||||||||||||||||
|
July 2,
2016 |
|
Gross Profit
Percentage
|
|
July 4,
2015 |
|
Gross Profit
Percentage
|
|
Increase/
(Decrease) |
|
Percentage
Change |
|||||||||
Product Gross Profit
|
$
|
213,442
|
|
|
65.1
|
%
|
|
$
|
190,712
|
|
|
64.7
|
%
|
|
$
|
22,730
|
|
|
11.9
|
%
|
Royalty Gross Profit
|
15,906
|
|
|
100.0
|
|
|
15,294
|
|
|
100.0
|
|
|
612
|
|
|
4.0
|
|
|||
Total Gross Profit
|
$
|
229,348
|
|
|
66.7
|
%
|
|
$
|
206,006
|
|
|
66.1
|
%
|
|
$
|
23,342
|
|
|
11.3
|
%
|
|
Six Months Ended
|
||||||||||||
|
July 2,
2016 |
|
Gross Profit
Percentage |
|
July 4,
2015 |
|
Gross Profit
Percentage |
||||||
Product Gross Profit (GAAP)
|
$
|
213,442
|
|
|
65.1
|
%
|
|
$
|
190,712
|
|
|
64.7
|
%
|
Eliminated Cercacor Royalty
|
—
|
|
|
—
|
|
|
2,595
|
|
|
0.9
|
|
||
Adjusted Product Gross Profit (Non-GAAP)
|
$
|
213,442
|
|
|
65.1
|
%
|
|
$
|
188,117
|
|
|
63.8
|
%
|
Selling, General and Administrative
|
|||||
Six Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Six Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$126,399
|
36.8%
|
$122,465
|
39.5%
|
$3,934
|
3.2%
|
Research and Development
|
|||||
Six Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Six Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$29,183
|
8.5%
|
$28,323
|
9.1%
|
$860
|
3.0%
|
Non-operating Income (Expense)
|
|||||
Six Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Six Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$969
|
0.3%
|
$(972)
|
(0.3)%
|
$1,941
|
(199.7)%
|
Provision for Income Taxes
|
|||||
Six Months Ended
July 2, 2016 |
Percentage of
Net Revenues |
Six Months Ended
July 4, 2015 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$17,135
|
5.0%
|
$15,728
|
5.1%
|
$1,407
|
8.9%
|
|
|
Six Months Ended
|
||||||
|
|
July 2,
2016 |
|
July 4,
2015 |
||||
Net cash provided by (used in):
|
|
|
|
|||||
Operating activities
|
$
|
56,691
|
|
|
$
|
28,623
|
|
|
Investing activities
|
(12,846
|
)
|
|
(27,261
|
)
|
|||
Financing activities
|
(59,911
|
)
|
|
(14,568
|
)
|
|||
Effect of foreign currency exchange rates on cash
|
(196
|
)
|
|
(1,850
|
)
|
|||
(Decrease) increase in cash and cash equivalents
|
$
|
(16,262
|
)
|
|
$
|
(15,056
|
)
|
•
|
perceived clinical benefits from our products;
|
•
|
perceived cost effectiveness of our products;
|
•
|
perceived safety and effectiveness of our products;
|
•
|
reimbursement available through Centers for Medicare and Medicaid Services (CMS) programs for using some of 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 which a product is intended to be used by a patient or pharmacist rather than by a professional medical caregiver, which we refer to as the Cercacor Market; and
|
•
|
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, in rem forfeiture proceedings, injunctions, consent decrees and criminal prosecution;
|
•
|
import alerts;
|
•
|
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 Anti-Kickback Statute, 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);
|
•
|
the Federal False Claims Act and other federal 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 provisions of the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which 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 governmental programs and non-governmental third-party payers, including commercial insurers, and state laws governing the privacy of certain patient identifiable health information (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;
|
•
|
movements in foreign currency exchange rates;
|
•
|
market seasonality of our sales due to quarterly fluctuations in hospital and other alternative care admissions;
|
•
|
our 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;
|
•
|
our 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
|
•
|
changes 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;
|
•
|
the 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;
|
•
|
changes in foreign currency exchange rates;
|
•
|
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.
|
•
|
incurring specified types of additional indebtedness (including guarantees or other contingent obligations);
|
•
|
paying dividends on, repurchasing or making distributions in respect of our common stock or making other restricted payments, subject to specified exceptions;
|
•
|
making specified investments (including loans and advances);
|
•
|
selling or transferring certain assets;
|
•
|
creating certain liens;
|
•
|
consolidating, merging, selling or otherwise disposing of all or substantially all of our assets; and
|
•
|
entering into certain transactions with any of our affiliates.
|
•
|
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 restructuring;
|
•
|
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 (Board) or certain institutional stockholders; and
|
•
|
changes in stock market analyst recommendations or earnings estimates regarding our stock, other comparable companies or our industry generally.
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid Per Share
|
|
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs |
|
Maximum Number
of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
|||||
April 3, 2016 to April 30, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
3,301,215
|
|
May 1, 2016 to May 28, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,301,215
|
|
|
May 29, 2016 to July 2, 2016
|
|
400,000
|
|
|
51.30
|
|
|
400,000
|
|
|
2,901,215
|
|
|
Total
|
|
400,000
|
|
|
$
|
51.30
|
|
|
400,000
|
|
|
2,901,215
|
|
(1)
|
In September 2015, our board of directors authorized a stock repurchase program, whereby we may purchase up to 5.0 million shares of our common stock over a period of up to three years. The stock repurchase program, which was announced by the Company in a press release dated November 5, 2015, may be carried out at the discretion of a committee comprised of our Chief Executive Officer and Chief Financial Officer through open market purchases, Rule 10b5-1 trading plans, block trades and in privately negotiated transactions. As of
July 2, 2016
,
2.9 million
shares remained authorized for repurchase under this program.
|
|
|
|
|
M
ASIMO
C
ORPORATION
|
||||
|
|
|
|
|
|
|
||
Date: August 3, 2016
|
|
|
|
By:
|
|
/s/ J
OE
K
IANI
|
||
|
|
|
|
|
|
Joe Kiani
|
||
|
|
|
|
|
|
Chief Executive Officer and Chairman
|
||
|
|
|
|
|
|
|
||
Date: August 3, 2016
|
|
|
|
By:
|
|
/s/ M
ARK
P.
DE
R
AAD
|
||
|
|
|
|
|
|
Mark P. de Raad
|
||
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
(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 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.
|
(3)
|
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.
|
#
|
Indicates management or compensatory plan.
|
*
|
Filed herewith.
|
ARTICLE I.
|
BASIC LEASE PROVISIONS
|
1
|
|
|||
|
|
|
|
|
|
|
ARTICLE II.
|
PREMISES
|
3
|
|
|||
|
|
SECTION 2.1.
|
LEASED PREMISES
|
3
|
|
|
|
|
SECTION 2.2.
|
ACCEPTANCE OF PREMISES
|
3
|
|
|
|
|
SECTION 2.3.
|
BUILDING NAME AND ADDRESS
|
3
|
|
|
|
|
SECTION 2.4.
|
LANDLORD’S RESPONSIBILITIES
|
3
|
|
|
|
|
|
|
|
|
|
ARTICLE III.
|
TERM
|
3
|
|
|||
|
|
SECTION 3.1.
|
GENERAL
|
3
|
|
|
|
|
SECTION 3.2.
|
DELAY IN POSSESSION
|
3
|
|
|
|
|
SECTION 3.3.
|
EARLY ENTRY TO PREMISES
|
3
|
|
|
|
|
SECTION 3.4.
|
RIGHT TO EXTEND THIS LEASE
|
3
|
|
|
|
||||||
ARTICLE IV.
|
RENT AND OPERATING EXPENSES
|
4
|
|
|||
|
|
SECTION 4.1.
|
BASIC RENT
|
4
|
|
|
|
|
SECTION 4.2.
|
OPERATING EXPENSES
|
4
|
|
|
|
|
SECTION 4.3.
|
SECURITY DEPOSIT
|
4
|
|
|
|
|
|
|
|
|
|
ARTICLE V.
|
USES
|
6
|
|
|||
|
|
SECTION 5.1.
|
USE
|
6
|
|
|
|
|
SECTION 5.2.
|
SIGNS
|
7
|
|
|
|
|
SECTION 5.3.
|
HAZARDOUS MATERIALS
|
7
|
|
|
|
|
|
|
|
|
|
ARTICLE VI.
|
COMMON AREAS; SERVICES
|
9
|
|
|||
|
|
SECTION 6.1.
|
UTILITIES AND SERVICES
|
9
|
|
|
|
|
SECTION 6.2.
|
OPERATION AND MAINTENANCE OF COMMON AREAS
|
9
|
|
|
|
|
SECTION 6.3.
|
USE OF COMMON AREAS
|
9
|
|
|
|
|
SECTION 6.4.
|
PARKING
|
9
|
|
|
|
|
SECTION 6.5.
|
CHANGES AND ADDITIONS BY LANDLORD
|
10
|
|
|
|
|
|
|
|
|
|
ARTICLE VII.
|
MAINTAINING THE PREMISES
|
10
|
|
|||
|
|
SECTION 7.1.
|
TENANT’S MAINTENANCE AND REPAIR
|
10
|
|
|
|
|
SECTION 7.2.
|
LANDLORD’S MAINTENANCE AND REPAIR
|
10
|
|
|
|
|
SECTION 7.3.
|
ALTERATIONS
|
10
|
|
|
|
|
SECTION 7.4.
|
MECHANIC’S LIENS
|
11
|
|
|
|
|
SECTION 7.5.
|
ENTRY AND INSPECTION
|
11
|
|
|
|
|
|
|
|
|
|
ARTICLE VIII.
|
TAXES AND ASSESSMENTS ON TENANT’S PROPERTY
|
12
|
|
|||
|
|
|
|
|
|
|
ARTICLE IX.
|
ASSIGNMENT AND SUBLETTING
|
12
|
|
|||
|
|
SECTION 9.1.
|
RIGHTS OF PARTIES
|
12
|
|
|
|
|
SECTION 9.2.
|
EFFECT OF TRANSFER
|
13
|
|
|
|
|
SECTION 9.3.
|
SUBLEASE REQUIREMENTS
|
14
|
|
|
|
|
SECTION 9.4.
|
CERTAIN TRANSFERS
|
14
|
|
|
|
|
|
|
|
|
|
ARTICLE X.
|
INSURANCE AND INDEMNITY
|
14
|
|
|||
|
|
SECTION 10.1.
|
TENANT’S INSURANCE
|
14
|
|
|
|
|
SECTION 10.2.
|
LANDLORD’S INSURANCE
|
14
|
|
|
|
|
SECTION 10.3.
|
TENANT’S INDEMNITY
|
15
|
|
|
|
SECTION 10.4.
|
LANDLORD’S NONLIABILITY
|
15
|
|
|
|
|
SECTION 10.5.
|
WAIVER OF SUBROGATION
|
15
|
|
|
|
|
|
|
|
|
|
ARTICLE XI.
|
DAMAGE OR DESTRUCTION
|
15
|
|
|||
|
|
SECTION 11.1.
|
RESTORATION
|
15
|
|
|
|
|
SECTION 11.2.
|
LEASE GOVERNS
|
16
|
|
|
|
|
|
|
|
||
ARTICLE XII.
|
EMINENT DOMAIN
|
16
|
|
|||
|
|
SECTION 12.1
|
TOTAL OR PARTIAL TAKING
|
16
|
|
|
|
|
SECTION 12.2.
|
TEMPORARY TAKING
|
17
|
|
|
|
|
SECTION 12.3.
|
TAKING OF PARKING AREA
|
17
|
|
|
|
|
|
|
|
|
|
ARTICLE XIII.
|
SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS
|
17
|
|
|||
|
|
SECTION 13.1.
|
SUBORDINATION
|
17
|
|
|
|
|
SECTION 13.2.
|
ESTOPPEL CERTIFICATE
|
17
|
|
|
|
|
SECTION 13.3.
|
FINANCIALS
|
17
|
|
|
|
|
|
|
|
||
ARTICLE XIV.
|
EVENTS OF DEFAULT AND REMEDIES
|
18
|
|
|||
|
|
SECTION 14.1.
|
TENANT’S DEFAULTS
|
18
|
|
|
|
|
SECTION 14.2.
|
LANDLORD’S REMEDIES
|
18
|
|
|
|
|
SECTION 14.3.
|
LATE PAYMENTS
|
19
|
|
|
|
|
SECTION 14.4.
|
RIGHT OF LANDLORD TO PERFORM
|
20
|
|
|
|
|
SECTION 14.5
|
DEFAULT BY LANDLORD
|
20
|
|
|
|
|
SECTION 14.6.
|
EXPENSES AND LEGAL FEES
|
20
|
|
|
|
|
SECTION 14.7.
|
WAIVER OF JURY TRIAL/JUDICIAL REFERENCE
|
20
|
|
|
|
|
SECTION 14.8.
|
SATISFACTION OF JUDGMENT
|
21
|
|
|
|
|
|
|
|
|
|
ARTICLE XV.
|
END OF TERM
|
22
|
|
|||
|
|
SECTION 15.1.
|
HOLDING OVER
|
22
|
|
|
|
|
SECTION 15.2.
|
MERGER ON TERMINATION
|
22
|
|
|
|
|
SECTION 15.3.
|
SURRENDER OF PREMISES; REMOVAL OF PROPERTY
|
22
|
|
|
|
|
|
|
|
|
|
ARTICLE XVI.
|
PAYMENTS AND NOTICES
|
22
|
|
|||
|
|
|
|
|
|
|
ARTICLE XVII.
|
RULES AND REGULATIONS
|
22
|
|
|||
|
|
|
|
|
|
|
ARTICLE XVIII.
|
BROKER’S COMMISSION
|
23
|
|
|||
|
|
|
|
|
|
|
ARTICLE XIX.
|
TRANSFER OF LANDLORD’S INTEREST
|
23
|
|
|||
|
|
|
|
|
|
|
ARTICLE XX.
|
INTERPRETATION
|
23
|
|
|||
|
|
SECTION 20.1.
|
GENDER AND NUMBER
|
23
|
|
|
|
|
SECTION 20.2.
|
HEADINGS
|
23
|
|
|
|
|
SECTION 20.3.
|
JOINT AND SEVERAL LIABILITY
|
23
|
|
|
|
|
SECTION 20.4.
|
SUCCESSORS
|
23
|
|
|
|
|
SECTION 20.5.
|
TIME OF ESSENCE
|
23
|
|
|
|
|
SECTION 20.6.
|
CONTROLLING LAW/VENUE
|
23
|
|
|
|
|
SECTION 20.7.
|
SEVERABILITY
|
23
|
|
|
|
|
SECTION 20.8.
|
WAIVER AND CUMULATIVE REMEDIES
|
23
|
|
|
|
|
SECTION 20.9.
|
INABILITY TO PERFORM
|
23
|
|
|
|
|
SECTION 20.10.
|
ENTIRE AGREEMENT
|
24
|
|
|
|
|
SECTION 20.11.
|
QUIET ENJOYMENT
|
24
|
|
|
|
|
SECTION 20.12
|
SURVIVAL
|
24
|
|
|
|
|
SECTION 20.13
|
INTERPRETATION
|
24
|
|
|
|
|
|
|
|
|
|
ARTICLE XXI.
|
EXECUTION AND RECORDING
|
24
|
|
|||
|
|
SECTION 21.1.
|
COUNTERPARTS
|
24
|
|
|
|
SECTION 21.2.
|
CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP AUTHORITY
|
24
|
|
|
|
|
SECTION 21.3.
|
EXECUTION OF LEASE; NO OPTION OR OFFER
|
24
|
|
|
|
|
SECTION 21.4.
|
RECORDING
|
24
|
|
|
|
|
SECTION 21.5.
|
AMENDMENTS
|
24
|
|
|
|
|
SECTION 21.6.
|
EXECUTED COPY
|
24
|
|
|
|
|
SECTION 21.7.
|
ATTACHMENTS
|
24
|
|
|
|
|
|
|
|
|
|
ARTICLE XXII.
|
MISCELLANEOUS
|
24
|
|
|||
|
|
SECTION 22.1.
|
NONDISCLOSURE OF LEASE TERMS
|
24
|
|
|
|
|
SECTION 22.2.
|
GUARANTEE
|
25
|
|
|
|
|
SECTION 22.3.
|
CHANGES REQUESTED BY LENDER
|
25
|
|
|
|
|
SECTION 22.4
|
MORTGAGEE PROTECTION
|
25
|
|
|
|
|
SECTION 22.5.
|
COVENANTS AND CONDITIONS
|
25
|
|
|
|
|
SECTION 22.6.
|
SECURITY MEASURES
|
25
|
|
|
|
|
SECTION 22.7.
|
SDN LIST
|
25
|
|
|
|
|
|
|
|
|
|
EXHIBITS
|
|
|
||||
|
|
Exhibit A
|
Description of Premises
|
|
||
|
|
Exhibit B
|
Environmental Questionnaire
|
|
||
|
|
Exhibit C
|
Landlord’s Disclosures
|
|
||
|
|
Exhibit D
|
Insurance Requirements
|
|
||
|
|
Exhibit E
|
Rules and Regulations
|
|
||
|
|
Exhibit Y
|
Project Site Plan
|
|
1.
|
Premises: The Premises are more particularly described in Section 2.1.
|
2.
|
Project Description (if applicable): Jeronimo 5 & 6
|
3.
|
Use of Premises: General office, warehouse and research and development related to medical devices (including ancillary laboratory use and manufacturing of prototypes of the medical devices), to the extent permitted by the City’s 5.4 Industrial Zoning Ordinance.
|
4.
|
Commencement Date: December 1, 2016
|
5.
|
Expiration Date: November 30, 2026
|
6.
|
Basic Rent: Commencing on the Commencement Date, the Basic Rent shall be Twenty Five Thousand Six Hundred Eighty-Nine Dollars ($25,689.00) per month, based on $.79 per rentable square foot.
|
7.
|
Guarantor(s): None
|
8.
|
Floor Area: Approximately 32,518 rentable square feet
|
9.
|
Security Deposit: $0
|
10.
|
Broker(s):“
Landlord’s Broker
”: Irvine Realty Company
|
11.
|
Additional Insureds: None
|
12.
|
Address for Payments and Notices:
|
LANDLORD
|
TENANT
|
Payment Address:
|
|
THE IRVINE COMPANY LLC
Department #0293
Los Angeles, CA 90084-0293
Attn: Senior Vice President, Property Operations
Irvine Office Properties
|
MASIMO CORPORATION
52 Discovery
Irvine, CA 92618
Attn: Chief Information Officer
|
Notice Address:
|
with a copy to:
|
THE IRVINE COMPANY LLC
550 Newport Center Drive
Newport Beach, CA 92660
Attn: Senior Vice President, Property Operations
Irvine Office Properties
|
MASIMO CORPORATION
52 Discovery
Irvine, CA 92618
Attn: Legal Department
|
|
and with a copy to:
|
|
Stuart Kane LLP
620 Newport Center Drive,
Suite 200
Newport Beach, CA 92660
Attn: Josh C. Grushkin
|
13.
|
Address for Payments: All payments due under this Lease shall be made to the address shown on the invoice for the payment due, or if no address is shown, to Landlord’s notice address above.
|
14.
|
Tenant’s Liability Insurance Requirement: $2,000,000.00
|
15.
|
Vehicle Parking Spaces: Ninety (90)
|
(1)
|
Any ground lease rental;
|
(2)
|
Costs incurred by Landlord for the repair of damage to the Building or the Project to the extent that Landlord is actually reimbursed by insurance proceeds;
|
(3)
|
Costs, including permit, license and inspection costs, incurred with respect to the installation of improvements made for new tenants or other occupants in the Building or the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building or the Project;
|
(4)
|
Marketing costs, including leasing commission, attorneys’ fees, and other costs and expenses incurred in connection with lease, sublease and/or assignment negotiations and transactions or disputes with present or prospective tenants or other occupants of the Building or the Project;
|
(5)
|
Except to the extent expressly permitted in Section 4.2(g), costs of capital nature, including, without limitation, capital improvements, capital repairs (except as otherwise permitted herein), capital equipment and capital tools;
|
(6)
|
Expenses in connection with services or other benefits which are made available to other tenants of the Building or Project but not made available to Tenant;
|
(7)
|
Costs incurred by Landlord due to the violation by Landlord of the terms of this Lease;
|
(8)
|
Overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in the Building or the Project to the extent the same exceeds the costs of such goods and/or services rendered by unaffiliated third parties on a competitive basis;
|
(9)
|
Interest, principal, points and fees on debt or amortization on any mortgage or mortgages or any other debt instrument encumbering the Building, the underlying land or the Project;
|
(10)
|
Advertising and promotional expenditures, and costs of the acquisition and/or installation (but excluding maintenance costs) of signs in or on the Building or the Project identifying the owner or any tenant;
|
(11)
|
Tax penalties incurred as a result of Landlord’s negligence, inability or unwillingness to make Property Tax payments when due;
|
(12)
|
Costs arising from Landlord’s charitable or political contributions; and
|
(13)
|
Costs for the acquisition or installation (but excluding maintenance costs) of sculpture, paintings or other objects of art.
|
(14)
|
Any bad debt loss, rent loss, or reserves for bad debts or rent loss;
|
(15)
|
Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of the operation, management, repair, replacement and maintenance of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants;
|
(16)
|
The wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis-à-vis time spent on matters unrelated to operating and managing the Project; provided that in no event shall Operating Costs include wages and/or benefits attributable to personnel above the level of portfolio property manager or chief engineer;
|
(17)
|
Costs incurred by Landlord for improvements or replacements (including structural additions), repairs, equipment and tools which are of a “capital” nature and/or which are considered “capital” improvements or replacements under GAAP, except to the extent included in Project Costs pursuant to the definition in subsection (e) above or by other express terms of this Lease;
|
(18)
|
Legal fees and costs, settlements, judgments or awards paid or incurred because of disputes between Landlord and other tenants or prospective occupants or prospective tenants/occupants or providers of goods and services to the Project; and
|
LANDLORD:
|
|
|
|
TENANT:
|
||
|
|
|
|
|
|
|
THE IRVINE COMPANY LLC,
|
|
|
|
MASIMO CORPORATION
|
||
a Delaware limited liability company
|
|
|
|
a Delaware corporation
|
||
|
|
|
|
|
|
|
By:
|
/s/ S
TEVEN
M. C
ASE
|
|
|
|
By:
|
/s/ Y
ONGSAM
L
EE
|
|
Steven M. Case, Executive Vice President, Office Properties
|
|
|
|
|
Yongsam Lee, CIO
|
|
|
|
|
|
|
|
By:
|
/s/ M
ICHAEL
T. B
ENNETT
|
|
|
|
By:
|
/s/ M
AR
K
DE
R
AAD
|
|
Michael T. Bennett, Senior Vice President, Office Properties
|
|
|
|
|
Mark de Raad, EVP and CFO
|
1.
|
GENERAL INFORMATION
.
|
2.
|
HAZARDOUS MATERIALS
. For the purposes of this Survey Form, the term “hazardous material” means any raw material, product or agent considered hazardous under any state or federal law. The term does not include wastes which are intended to be discarded.
|
2.1
|
Will any hazardous materials be used or stored on site?
|
2.2
|
List any hazardous materials to be used or stored, the quantities that will be on-site at any given time, and the location and method of storage (e.g., bottles in storage closet on the premises).
|
2.3
|
Is any underground storage of hazardous materials proposed or currently conducted on the premises? Yes ( ) No ( )
|
3.
|
HAZARDOUS WASTE
. For the purposes of this Survey Form, the term “hazardous waste” means any waste (including biological, infectious or radioactive waste) considered hazardous under any state or federal law, and which is intended to be discarded.
|
3.1
|
List any hazardous waste generated or to be generated on the premises, and indicate the quantity generated on a monthly basis.
|
3.2
|
Describe the method(s) of disposal (including recycling) for each waste. Indicate where and how often disposal will take place.
|
3.3
|
Is any treatment or processing of hazardous, infectious or radioactive wastes currently conducted or proposed to be conducted on the premise?
|
3.4
|
Attach copies of any hazardous waste permits or licenses issued to your company with respect to its operations on the premises.
|
4.
|
SPILLS
|
4.1
|
During the past year, have any spills or releases of hazardous materials occurred on the premises?
Yes ( )
No ( )
|
4.2
|
Were any agencies notified in connection with such spills?
Yes ( )
No ( )
|
4.3
|
Were any clean-up actions undertaken in connection with the spills?
Yes ( )
No ( )
|
5.
|
WASTEWATER TREATMENT/DISCHARGE
|
5.1
|
Do you discharge industrial wastewater to:
|
5.2
|
Is your industrial wastewater treated before discharge?
Yes ( ) No ( )
|
5.3
|
Attach copies of any wastewater discharge permits issued to your company with respect to its operations on the premises.
|
6.1
|
Do you have any air filtration systems or stacks that discharge into the air?
|
6.2
|
Do you operate any equipment that requires air emissions permits?
|
6.3
|
Attach copies of any air discharge permits pertaining to these operations.
|
7.1
|
Does your company handle an aggregate of at least 500 pounds, 55 gallons or 200 cubic feet of hazardous material at any given time? Yes ( )
No ( )
|
7.2
|
Has your company prepared a Hazardous Materials Disclosure - Chemical Inventory and Business Emergency Plan or similar disclosure document pursuant to state or county requirements?
Yes ( )
No ( )
|
7.3
|
Are any of the chemicals used in your operations regulated under Proposition 65?
|
7.4
|
Is your company subject to OSHA Hazard Communication Standard Requirements?
Yes ( )
No ( )
|
8.
|
ANIMAL TESTING
.
|
8.1
|
Does your company bring or intend to bring live animals onto the premises for research or development purposes?
Yes ( )
No ( )
|
8.2
|
Does your company bring or intend to bring animal body parts or bodily fluids onto the premises for research or development purposes?
Yes ( ) No ( )
|
9.
|
ENFORCEMENT ACTIONS, COMPLAINTS
.
|
9.1
|
Has your company ever been subject to any agency enforcement actions, administrative orders, lawsuits, or consent orders/decrees regarding environmental compliance or health and safety?
Yes ( )
No ( )
|
9.2
|
Has your company ever received any request for information, notice of violation or demand letter, complaint, or inquiry regarding environmental compliance or health and safety?
Yes ( )
No ( )
|
9.3
|
Has an environmental audit ever been conducted which concerned operations or activities on premises occupied by you?
Yes ( )
No ( )
|
9.4
|
If you answered “yes” to any questions in this section, describe the environmental action or complaint and any continuing compliance obligation imposed as a result of the same. ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
|
A.
|
Tenant shall submit the following to Landlord: (i) a preliminary pricing plan for the Tenant Improvements prepared by the Architect, which shall include interior partitions, ceilings, interior finishes, interior doors, suite entrance, floor coverings, window coverings, lighting, electrical and telephone outlets, plumbing connections, heavy floor loads and other special requirements (“
Preliminary Plan
”), (ii) working drawings and specifications prepared by the Architect based on the approved Preliminary Plan (the “
Working Drawings and Specifications
”), and (iii) any change proposed by Tenant to the approved Working Drawings and Specifications (“
Change
”). Within 5 business days following its submission to Landlord, Landlord shall approve (by signing a copy thereof) or shall disapprove the Preliminary Plan and/or any Change, and within 10 business days following its submission to Landlord, Landlord shall approve or shall disapprove the Working Drawings and Specifications. If Landlord disapproves the Preliminary Plan, Working Drawings and Specifications or Change, Landlord shall specify in detail the reasons for disapproval and Tenant shall cause the Architect to modify the Preliminary Plan, Working Drawings and Specifications or Change to incorporate Landlord’s suggested revisions in a mutually satisfactory manner. Tenant agrees and acknowledges that Landlord will not check the Preliminary Plan, the Working Drawings and Specifications and/or any Change for building code compliance (or other federal, state or local law, ordinance or regulations compliance), and that Tenant and its Architect shall be solely responsible for such matters. Notwithstanding the foregoing, but subject to Section I.O below, Landlord may only provide its disapproval of the Working Drawings and Specifications or a Change in the event such submittal: (i) shall not comply with applicable law or building code, (ii) adversely affects the Building or Project systems or structural components, (iii) adversely affects other tenants in the Project, or (iv) affects the exterior of the Building in any manner.
|
B.
|
The Tenant Improvements shall only include actual improvements to the Premises approved by Landlord as provided above, and shall exclude (but not by way of limitation) Tenant’s furniture, trade fixtures, partitions, equipment and signage improvements, if any. Further, to the extent applicable, the Tenant Improvements shall incorporate Landlord's building standard materials and specifications for the Project as set forth in
Schedule I
(“
Standard Improvements
”); provided, however, the Tenant Improvements shall include materials, finishes and specifications set forth in the Preliminary Plan, even if the same is of higher quality than the Standard Improvements (the “
Approved Improvements
”). Notwithstanding the foregoing, no deviations from the Standard Improvements may be required by Tenant with respect to doors and frames, finish hardware, entry graphics, the ceiling system, light fixtures and controls, mechanical systems, fire life and safety systems and/or window coverings; provided that Landlord may, authorize in writing one or more of such deviations, in which event Tenant shall be solely responsible for the cost of replacing same with the applicable Standard Improvements upon the expiration or termination of this Lease. All other deviations from the Standard Improvements or the Approved Improvements (such deviations referred to herein as the
|
C.
|
Tenant shall contract with a licensed general contractor reasonably approved by Landlord (the “
TI Contractor
”) for construction of the Tenant Improvements. The TI Contractor shall solicit bids from at least 3 subcontractors (reasonably acceptable to Landlord) for each major subtrade, provided that the drywall and acoustical subcontractors shall be union contractors. If required by Landlord, Tenant shall use the electrical, mechanical, plumbing and fire/life safety engineers reasonably acceptable to Landlord; if Tenant elects to use contractors other than Landlord’s designated electrical, mechanical, plumbing and fire/life safety engineers, and if such election is approved by Landlord, Landlord shall be entitled to have its designated contractors perform a “peer review” of such contractors work, and the reasonable cost thereof shall be borne solely by Tenant, but may be paid for by Tenant using any unused portion of the Landlord’s Contribution. Following the competitive bidding of the major subtrade work, Tenant shall enter into a construction contract (the “
TI Contract
”) with the TI Contractor for construction of the Tenant Improvements. If requested by Landlord, Tenant shall deliver copy of the TI Contract to Landlord. Tenant shall cause the Tenant Improvements to be constructed in a good and workmanlike manner in accordance with the approved Working Drawings and Specifications.
|
D.
|
Intentionally omitted.
|
E.
|
Prior to the commencement of the Tenant Improvement Work, Tenant shall deliver to Landlord a copy of the final application for permit and issued permit for the work.
|
F.
|
The TI Contractor shall comply with Landlord’s requirements as generally imposed on third party contractors, including without limitation all insurance coverage requirements and the obligation to furnish appropriate certificates of insurance to Landlord, prior to commencement of construction or the Tenant Improvement Work.
|
G.
|
A construction schedule shall be provided to Landlord prior to commencement of the construction of the Tenant Improvement Work, and weekly updates shall be supplied during the progress of the work.
|
H.
|
Tenant shall give Landlord at least 10 business days prior written notice of the commencement of construction of the Tenant Improvement Work so that Landlord may cause an appropriate notice of non-responsibility to be posted.
|
I.
|
The Tenant Improvement Work shall be subject to inspection at all times by Landlord and its construction manager, and Landlord and/or its construction manager shall be permitted to attend weekly job meetings with the TI Contractor.
|
J.
|
Upon completion of the Tenant Improvement Work, Tenant shall cause to be provided to Landlord a close-out package which shall include, without limitation, the following: (i) as-built drawings of the Tenant Improvements work signed by the Architect, (ii) CAD files of the improved space compatible with Landlord’s CAD standards, (iii) a final punch list signed by Tenant, (iv) final and
|
K.
|
The Tenant Improvements work shall be prosecuted at all times in accordance with all state, federal and local laws, regulations and ordinances, including without limitation all OSHA and other safety laws, the Americans with Disabilities Act (“
ADA
”) and all applicable governmental permit and code requirements.
|
L.
|
All of the provisions of this Lease (including, without limitation, the provisions of Sections 7.4, 10.1 and 10.3, except for the covenants to pay rent, shall apply to and shall be binding on Tenant with respect to the construction of the Tenant Improvements.
|
A.
|
Tenant hereby designates Yongsam Lee, Telephone (949) 697-4232, Email:
ylee@masimo.com
, as its representative, agent and attorney-in-fact for the purpose of receiving notices, approving submittals and issuing requests for Changes, and Landlord shall be entitled to rely upon authorizations and directives of such person(s) as if given directly by Tenant. Any notices or submittals to, or requests of, Tenant related to this Work Letter and/or the Tenant Improvement Work may be sent to Tenant’s Construction Representative at the email address above provided. Tenant may amend the designation of its construction representative(s) at any time upon delivery of written notice to Landlord.
|
B.
|
Tenant and the TI Contractor and its subcontractors shall be permitted to enter the Premises prior to the Commencement Date for the Premises to construct the Tenant Improvements. The foregoing license to enter the Premises prior to the Commencement Date for the Premises is, however, conditioned upon the compliance by the TI Contractor with all requirements imposed by Landlord on third party contractors, including without limitation the maintenance of workers’ compensation and public liability and property damage insurance by the TI Contractor in amounts and with companies and on forms satisfactory to Landlord, with certificates of such insurance being furnished to Landlord prior to proceeding with any such entry. Landlord will provide all utilities for the construction of the Tenant Improvements at the Premises (i.e., electrical, HVAC during normal business hours, water, etc.) at no cost to Tenant or the TI Contractor. Landlord shall not be liable in any way for any injury, loss or damage which may occur to any such work being performed by Tenant, the same being solely at Tenant’s risk. Tenant further agrees that the Commencement Date for the Premises is not conditioned upon, nor shall such Date be extended by, the completion of the foregoing Tenant Improvements.
|
C.
|
All of the Tenant Improvements shall become the property of Landlord and shall be surrendered with the Premises at the expiration or sooner termination of this Lease, except that Landlord shall have the right, by written notice to Tenant given at the time of Landlord’s approval of the Preliminary Plan, the Working Drawings and Specifications and any Change, to require Tenant either to remove all or any of the Tenant Improvements approved in the Preliminary Plan or in the Working Drawings and Specifications or by way of such Change (as specified in such written notice, a “
Required Removal Item
”), to repair any damage to the Premises or the Common Areas arising from such removal of any Required Removal Item, and to replace any Non-Standard Improvements or Approved Improvements so approved with the applicable Building Standard Improvement, or to reimburse Landlord for the reasonable cost of such removal, repair and replacement upon demand. Any such removals, repairs and replacements by Tenant shall be completed by the Expiration Date or sooner termination of this Lease. Notwithstanding anything to the contrary contained in the foregoing, no such removal or restoration shall be required for any of the components of the Tenant Improvements shown in any Preliminary Plan, the Working Drawings and Specifications or any Change once the same has been approved by Landlord and not designated by Landlord in writing as a Required Removal Item when so approved.
|
A.
|
Landlord shall provide to Tenant a tenant improvement allowance in the amount of $162,590.00 (the “
Landlord’s Contribution
”), based on $5.00 per rentable square foot of the Premises, towards the “Completion Cost” of the Tenant Improvements (as hereinafter defined), with any excess cost of the Tenant Improvements to be borne solely by Tenant. If the actual cost of completion of the Tenant Improvements is less than the maximum amount provided for the Landlord’s Contribution, such savings shall inure to the benefit of Landlord and Tenant shall not be entitled to any credit or payment other than the Rent Contribution Amount (defined below). It is further understood and agreed that the Tenant Improvements shall be scheduled and shall be substantially completed not later than twenty four (24) months following the Commencement Date (except in the event of a matter beyond the reasonable control of either party, in which case such date shall be extended on a day for day basis) to be eligible for funding by Landlord, and that Landlord shall not be obligated to fund any portion of the Landlord’s Contribution towards Tenant Improvements completed after such date (as the same may be so extended). Notwithstanding the foregoing, Tenant may utilize a portion of the Landlord’s Contribution, not
to exceed the amount of $97,554.00, based on $3.00 per usable square foot of the Premises, as credits to reduce the scheduled installments of Basic Rent next due and payable under this Lease (the “
Rent Contribution Amount
”).
|
B.
|
The “
Completion Cost
” shall mean the costs of completing the Tenant Improvements in accordance with the approved Working Drawings and Specifications, including but not limited to the following: (i) payments made to the TI Contractor, architects, engineers, subcontractors, project managers (not to exceed 3% of the Completion Cost) and other third party consultants in the performance of the work, (ii) permit fees and other sums paid to governmental agencies, and (iii) costs of all materials incorporated into the work or used in connection with the work. The Completion Cost shall also include an administrative/overhead fee to be paid to Landlord or to Landlord’s management agent in the amount of 3% of the Completion Cost, and Landlord’s reasonable “peer review” fees for the review of the Preliminary Plan and Working Drawings and Specifications by Landlord’s project architect and its MEP engineers, which fees shall be paid from the Landlord’s Contribution.
|
C.
|
Landlord shall fund the Landlord’s Contribution (less any applicable deductions for the above-described administrative/overhead fee and all “peer review” charges) in installments (not more frequently than monthly) as and when costs are incurred and a payment request therefor is submitted by Tenant, which payment request shall include a copy of all supporting invoices, lien waivers (in the form prescribed by the California Civil Code), and pertinent reasonable back-up information (all of which can be in the form of an email (i.e. PDF copies)). Landlord shall fund the payment request within 30 days following receipt of the application and supporting materials; provided that a 10% retention shall be held on payments to Tenant until Landlord receives the complete Close-Out Package. Such 10% retention of the Landlord Contribution towards the Completion Cost shall be funded within 30 days following Landlord’s receipt of the completed Close-Out Package.
|
Tenant Improvement / Interior Construction Outline Specifications
(By Tenant/Tenant Allowance)
|
Tenant Standard Fire Protection:
|
FIRE PROTECTION
Pendant satin chrome plated, recessed heads, adjustable canopies, minimum K factor to be 5.62, located at center of 2’ x 2’ section of scored ceiling tile. Ceiling drops from shell supply loop.
|
Tenant Standard Fire Sprinkler:
|
FIRE SPRINKLER
Hard pipe to be used. Any substitutions to be submitted for Landlord review and approval prior to install.
Center sprinkler head in 2x2 ceiling tile.
|
|
|
Tenant Standard Warehouse/Shipping and Receiving (if applicable):
|
FLOORS
Sealed concrete.
|
|
WALLS
5/8” gypsum wallboard standard partition, height and construction subject to Landlord approval. At furred walls, paint to match Benjamin Moore AC-40 Glacier White. Provide rated partition at occupancy separation, as required by code.
|
|
CEILING
Exposed structure, non-painted.
|
|
WINDOWS
None
|
|
ACCESS
7’-6” H x 7’-6” W glazed service doors. Glazing is bronze reflective glass.
|
|
HVAC
None
|
|
PLUMBING
Single accommodation restroom, if required.
Sheet vinyl flooring to be Armstrong Classic Corlon “Seagate” #86526 Oyster, with Smooth White FRP panel wainscot to 48” high. Painted walls and ceiling to be Benjamin Moore AC-40 Glacier White, semi-gloss finish.
|
|
LIGHTING
T5 High Bay, 2 x 4 fixtures.
|
|
OTHER ELECTRICAL
Convenience outlets; surface mounted at exposed concrete walls.
|
|
SECURITY
Lockable doors.
|
Masimo Corporation
Ratio of Earnings to Fixed Charges
(Dollars in thousands)
|
||||||||||||||||||||||||
|
|
Six Months Ended
|
|
Fiscal Year Ended
|
||||||||||||||||||||
|
|
July 2,
2016 |
|
January 2,
2016 |
|
January 3,
2015 |
|
December 28,
2013 |
|
December 29,
2012 |
|
December 31,
2011 |
||||||||||||
Ratio of earnings to fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income before provision for income taxes
|
$
|
74,735
|
|
|
$
|
116,345
|
|
|
$
|
102,041
|
|
|
$
|
75,726
|
|
|
$
|
83,821
|
|
|
$
|
86,531
|
|
|
Fixed charges
|
2,414
|
|
|
5,524
|
|
|
3,381
|
|
|
2,705
|
|
|
2,514
|
|
|
1,910
|
|
|||||||
Noncontrolling interests in pre-tax (income) loss
|
—
|
|
|
1,757
|
|
|
2,350
|
|
|
607
|
|
|
744
|
|
|
(58
|
)
|
|||||||
Total earnings
|
$
|
77,149
|
|
|
$
|
123,626
|
|
|
$
|
107,772
|
|
|
$
|
79,038
|
|
|
$
|
87,079
|
|
|
$
|
88,383
|
|
|
Fixed charges
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest expensed
|
$
|
1,789
|
|
|
$
|
3,494
|
|
|
$
|
594
|
|
|
$
|
28
|
|
|
$
|
44
|
|
|
$
|
116
|
|
|
Estimated of interest within rental expense
|
625
|
|
|
2,030
|
|
|
2,787
|
|
|
2,677
|
|
|
2,470
|
|
|
1,794
|
|
|||||||
Total fixed charges
|
$
|
2,414
|
|
|
$
|
5,524
|
|
|
$
|
3,381
|
|
|
$
|
2,705
|
|
|
$
|
2,514
|
|
|
$
|
1,910
|
|
|
Ratio of earnings to fixed charges
|
31.96
|
|
|
22.38
|
|
|
31.88
|
|
|
29.22
|
|
|
34.64
|
|
|
46.27
|
|
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
|
Date: August 3, 2016
|
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
|
Date: August 3, 2016
|
Mark P. de Raad
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
/s/ J
OE
K
IANI
|
Date: August 3, 2016
|
Joe Kiani
|
|
Chairman of the Board and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ M
ARK
P.
DE
R
AAD
|
Date: August 3, 2016
|
Mark P. de Raad
|
|
Executive Vice President and Chief Financial Officer
|
|
(Principal Financial Officer)
|