|
ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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MASIMO CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
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Delaware
|
|
33-0368882
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
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(I.R.S. Employer
Identification Number)
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|
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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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Emerging growth company
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¨
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Class
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Number of Shares Outstanding as of March 31, 2018
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Common stock, $0.001 par value
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|
51,783,786
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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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||
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Item 6.
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||
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March 31,
2018 |
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December 30,
2017 As Adjusted |
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
369,498
|
|
|
$
|
315,302
|
|
Accounts receivable, net of allowance for doubtful accounts of $1,717 and $2,116 at March 31, 2018 and December 30, 2017, respectively.
|
101,093
|
|
|
118,532
|
|
||
Inventories
|
91,062
|
|
|
92,259
|
|
||
Other current assets
|
34,663
|
|
|
33,601
|
|
||
Total current assets
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596,316
|
|
|
559,694
|
|
||
Deferred costs and other contract assets
|
114,958
|
|
|
109,256
|
|
||
Property and equipment, net
|
164,236
|
|
|
164,096
|
|
||
Intangible assets, net
|
29,453
|
|
|
27,123
|
|
||
Goodwill
|
20,477
|
|
|
20,617
|
|
||
Deferred tax assets
|
20,026
|
|
|
19,981
|
|
||
Other non-current assets
|
4,093
|
|
|
4,668
|
|
||
Total assets
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$
|
949,559
|
|
|
$
|
905,435
|
|
LIABILITIES AND STOCKHOLDERS
’
EQUITY
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
36,893
|
|
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$
|
33,780
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|
Accrued compensation
|
28,704
|
|
|
39,515
|
|
||
Accrued and other current liabilities
|
30,824
|
|
|
24,254
|
|
||
Deferred revenue and other contract-related liabilities, current
|
34,509
|
|
|
32,105
|
|
||
Total current liabilities
|
130,930
|
|
|
129,654
|
|
||
Other non-current liabilities
|
52,118
|
|
|
51,757
|
|
||
Total liabilities
|
183,048
|
|
|
181,411
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding at March 31, 2018 and December 30, 2017
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value; 100,000 shares authorized; 51,784 and 51,636 shares issued and outstanding at March 31, 2018 and December 30, 2017, respectively
|
52
|
|
|
52
|
|
||
Treasury stock, 15,255 and 15,059 shares at March 31, 2018 and December 30, 2017, respectively
|
(489,027
|
)
|
|
(472,536
|
)
|
||
Additional paid-in capital
|
475,538
|
|
|
461,494
|
|
||
Accumulated other comprehensive loss
|
(3,211
|
)
|
|
(2,941
|
)
|
||
Retained earnings
|
783,159
|
|
|
737,955
|
|
||
Total stockholders’ equity
|
766,511
|
|
|
724,024
|
|
||
Total liabilities and stockholders’ equity
|
$
|
949,559
|
|
|
$
|
905,435
|
|
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Three Months Ended
|
||||||
|
March 31,
2018 |
|
April 1,
2017 As Adjusted |
||||
Revenue:
|
|
|
|
||||
Product
|
$
|
204,389
|
|
|
$
|
182,466
|
|
Royalty and other revenue
|
8,564
|
|
|
14,177
|
|
||
Total revenue
|
212,953
|
|
|
196,643
|
|
||
Cost of goods sold
|
69,292
|
|
|
64,229
|
|
||
Gross profit
|
143,661
|
|
|
132,414
|
|
||
Operating expenses:
|
|
|
|
||||
Selling, general and administrative
|
71,175
|
|
|
66,087
|
|
||
Research and development
|
18,601
|
|
|
14,176
|
|
||
Total operating expenses
|
89,776
|
|
|
80,263
|
|
||
Operating income
|
53,885
|
|
|
52,151
|
|
||
Non-operating income
|
1,647
|
|
|
874
|
|
||
Income before provision for income taxes
|
55,532
|
|
|
53,025
|
|
||
Provision for income taxes
|
9,902
|
|
|
1,492
|
|
||
Net income
|
$
|
45,630
|
|
|
$
|
51,533
|
|
|
|
|
|
||||
Net income per share:
|
|
|
|
||||
Basic
|
$
|
0.88
|
|
|
$
|
1.02
|
|
Diluted
|
$
|
0.82
|
|
|
$
|
0.93
|
|
|
|
|
|
||||
Weighted-average shares used in per share calculations:
|
|
|
|
||||
Basic
|
51,709
|
|
|
50,652
|
|
||
Diluted
|
55,496
|
|
|
55,529
|
|
|
Three Months Ended
|
||||||
|
March 31,
2018 |
|
April 1,
2017 As Adjusted |
||||
Net income
|
$
|
45,630
|
|
|
$
|
51,533
|
|
Other comprehensive income, net of tax:
|
|
|
|
||||
Unrealized gains (losses) from foreign currency translation adjustments
|
(270
|
)
|
|
566
|
|
||
Comprehensive income
|
$
|
45,360
|
|
|
$
|
52,099
|
|
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Three Months Ended
|
||||||
|
March 31,
2018 |
|
April 1,
2017 As Adjusted |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
45,630
|
|
|
$
|
51,533
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
5,241
|
|
|
4,736
|
|
||
Stock-based compensation
|
5,332
|
|
|
2,889
|
|
||
Loss on disposal of property, equipment and intangibles
|
429
|
|
|
144
|
|
||
Provision for doubtful accounts
|
(394
|
)
|
|
60
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Decrease (increase) in accounts receivable
|
17,776
|
|
|
(2,687
|
)
|
||
Decrease (increase) in inventories
|
1,139
|
|
|
(7,381
|
)
|
||
Increase in other current assets
|
(204
|
)
|
|
(3,125
|
)
|
||
Increase in deferred costs and other contract assets
|
(5,706
|
)
|
|
(7,643
|
)
|
||
Decrease in other non-current assets
|
644
|
|
|
878
|
|
||
Increase in accounts payable
|
2,363
|
|
|
1,470
|
|
||
Decrease in accrued compensation
|
(11,074
|
)
|
|
(19,088
|
)
|
||
Increase (decrease) in accrued liabilities
|
2,193
|
|
|
(94
|
)
|
||
Increase (decrease) in income tax payable
|
6,318
|
|
|
(4,845
|
)
|
||
Increase (decrease) in deferred revenue and other contract-related liabilities
|
2,381
|
|
|
(4,043
|
)
|
||
(Decrease) increase in other non-current liabilities
|
(73
|
)
|
|
1,094
|
|
||
Net cash provided by operating activities
|
71,995
|
|
|
13,898
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment, net
|
(3,788
|
)
|
|
(4,394
|
)
|
||
Increase in intangible assets
|
(3,583
|
)
|
|
(833
|
)
|
||
Net cash used in investing activities
|
(7,371
|
)
|
|
(5,227
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Repayments of capital lease obligations
|
—
|
|
|
(69
|
)
|
||
Proceeds from issuance of common stock
|
8,415
|
|
|
27,290
|
|
||
Payroll tax withholdings on behalf of employees for vested equity awards
|
(168
|
)
|
|
—
|
|
||
Repurchases of common stock
|
(18,479
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
(10,232
|
)
|
|
27,221
|
|
||
Effect of foreign currency exchange rates on cash
|
(225
|
)
|
|
414
|
|
||
Net increase in cash, cash equivalents, and restricted cash
|
54,167
|
|
|
36,306
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
315,483
|
|
|
308,198
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
369,650
|
|
|
$
|
344,504
|
|
●
|
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.
|
|
Useful Lives
|
Aircraft and components
|
10 to 20 years
|
Buildings
|
39 years
|
Building improvements
|
7 to 15 years
|
Computer equipment
|
2 to 6 years
|
Demonstration units
|
3 years
|
Furniture and office equipment
|
2 to 6 years
|
Leasehold improvements
|
Lesser of useful life or term of lease
|
Machinery and equipment
|
5 to 10 years
|
Tooling
|
3 years
|
Vehicles
|
5 years
|
|
Three Months Ended
|
||||||
|
March 31,
2018 |
|
April 1,
2017 |
||||
Warranty accrual, beginning of period
|
$
|
1,149
|
|
|
$
|
910
|
|
Accrual for warranties issued
|
430
|
|
|
334
|
|
||
Changes to pre-existing warranties (including changes in estimates)
|
(278
|
)
|
|
61
|
|
||
Settlements made
|
(161
|
)
|
|
(320
|
)
|
||
Warranty accrual, end of period
|
$
|
1,140
|
|
|
$
|
985
|
|
|
Three Months Ended
March 31, 2018 |
||
Accumulated other comprehensive loss, beginning of period
|
$
|
(2,941
|
)
|
Unrealized gains from foreign currency translation
|
(270
|
)
|
|
Accumulated other comprehensive loss, end of period
|
$
|
(3,211
|
)
|
|
Three Months Ended
|
||||||
|
March 31,
2018 |
|
April 1,
2017 As Adjusted |
||||
Net income
|
$
|
45,630
|
|
|
$
|
51,533
|
|
Basic net income per share:
|
|
|
|
||||
Weighted-average shares outstanding - basic
|
51,709
|
|
|
50,652
|
|
||
Net income per basic share
|
$
|
0.88
|
|
|
$
|
1.02
|
|
Diluted net income per share:
|
|
|
|
||||
Weighted-average shares outstanding - basic
|
51,709
|
|
|
50,652
|
|
||
Diluted share equivalent: stock options and RSUs
|
3,787
|
|
|
4,877
|
|
||
Weighted-average shares outstanding - diluted
|
55,496
|
|
|
55,529
|
|
||
Net income per diluted share
|
$
|
0.82
|
|
|
$
|
0.93
|
|
|
Three Months Ended
|
||||||
|
March 31,
2018 |
|
April 1,
2017 |
||||
Cash paid during the year for:
|
|
|
|
||||
Interest
|
$
|
169
|
|
|
$
|
213
|
|
Income taxes
|
1,023
|
|
|
3,157
|
|
||
|
|
|
|
||||
Noncash investing and financing activities:
|
|
|
|
||||
Unpaid purchases of property, plant and equipment
|
$
|
1,492
|
|
|
$
|
1,203
|
|
Unsettled common stock proceeds from option exercises
|
794
|
|
|
2,560
|
|
||
|
|
|
|
||||
Reconciliation of cash, cash equivalents and restricted cash:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
369,498
|
|
|
$
|
343,825
|
|
Restricted cash
|
152
|
|
|
679
|
|
||
Total cash, cash equivalents and restricted cash shown in the statement of cash flow
|
$
|
369,650
|
|
|
$
|
344,504
|
|
Condensed Consolidated Balance Sheet:
|
December 30, 2017
|
||||||||||
|
As Previously
Reported
|
|
Adjustments
|
|
As Adjusted
|
||||||
Accounts receivable
|
$
|
121,309
|
|
|
$
|
(2,777
|
)
|
|
$
|
118,532
|
|
Inventories
|
95,944
|
|
|
(3,685
|
)
|
|
92,259
|
|
|||
Other current assets
|
31,563
|
|
|
2,038
|
|
|
33,601
|
|
|||
Deferred costs and other contract assets
|
99,600
|
|
|
9,656
|
|
|
109,256
|
|
|||
Deferred tax assets
|
23,898
|
|
|
(3,917
|
)
|
|
19,981
|
|
|||
Other non-current assets
|
10,782
|
|
|
(6,114
|
)
|
|
4,668
|
|
|||
Accrued and other liabilities
|
42,344
|
|
|
(18,090
|
)
|
|
24,254
|
|
|||
Deferred revenue and other contract liabilities, current
|
35,929
|
|
|
(3,824
|
)
|
|
32,105
|
|
|||
Retained earnings
|
720,842
|
|
|
17,113
|
|
|
737,955
|
|
Condensed Consolidated Statement of Operations:
|
April 1, 2017
|
||||||||||
|
As Previously
Reported |
|
Adjustments
|
|
As Adjusted
|
||||||
Product revenue
|
$
|
178,097
|
|
|
$
|
4,369
|
|
|
$
|
182,466
|
|
Royalty and other revenue
|
8,205
|
|
|
5,972
|
|
|
14,177
|
|
|||
Cost of goods sold
|
62,168
|
|
|
2,061
|
|
|
64,229
|
|
|||
Selling, general and administrative
|
65,572
|
|
|
515
|
|
|
66,087
|
|
|||
Provision (benefit) for income taxes
|
(1,265
|
)
|
|
2,757
|
|
|
1,492
|
|
|||
Net income
|
45,334
|
|
|
6,199
|
|
|
51,533
|
|
|||
|
|
|
|
|
|
||||||
Net income per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.90
|
|
|
$
|
0.12
|
|
|
$
|
1.02
|
|
Diluted
|
$
|
0.82
|
|
|
$
|
0.11
|
|
|
$
|
0.93
|
|
Condensed Consolidated Statements of Cash Flows:
|
April 1, 2017
|
||||||||||
|
As Previously
Reported |
|
Adjustments
|
|
As Adjusted
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
45,334
|
|
|
$
|
6,199
|
|
|
$
|
51,533
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Decrease in inventories
|
(7,655
|
)
|
|
274
|
|
|
(7,381
|
)
|
|||
Decrease in other current assets
|
(3,106
|
)
|
|
(19
|
)
|
|
(3,125
|
)
|
|||
Decrease in deferred costs and other contract assets
|
(8,158
|
)
|
|
515
|
|
|
(7,643
|
)
|
|||
Increase (decrease) in other non-current assets
|
(188
|
)
|
|
1,066
|
|
|
878
|
|
|||
Decrease in accrued liabilities
|
(1,960
|
)
|
|
1,866
|
|
|
(94
|
)
|
|||
Decrease in income taxes payable
|
—
|
|
|
(4,845
|
)
|
|
(4,845
|
)
|
|||
(Decrease) increase in deferred revenue and other contract liabilities
|
2,563
|
|
|
(6,606
|
)
|
|
(4,043
|
)
|
|||
Increase in other non-current liabilities
|
1,094
|
|
|
—
|
|
|
1,094
|
|
•
|
Cross-Licensing Agreement -
The Company and Cercacor are parties to 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
. Aggregate liabilities to Cercacor arising under the Cross-Licensing Agreement were
$2.5 million
and
$1.6 million
for the three months ended
March 31, 2018
and
April 1, 2017
, respectively.
|
•
|
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
and
$0.1 million
for the
three
months ended
March 31, 2018
and
April 1, 2017
, 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
and
$0.1 million
in sublease income for the
three
months ended
March 31, 2018
and
April 1, 2017
, respectively.
|
|
March 31,
2018 |
|
December 30,
2017 As Adjusted |
||||
Raw materials
|
$
|
32,315
|
|
|
$
|
31,200
|
|
Work-in-process
|
7,435
|
|
|
8,619
|
|
||
Finished goods
|
51,312
|
|
|
52,440
|
|
||
Total inventories
|
$
|
91,062
|
|
|
$
|
92,259
|
|
|
March 31,
2018 |
|
December 30,
2017 As Adjusted |
||||
Prepaid expenses
|
$
|
18,363
|
|
|
$
|
17,073
|
|
Royalties receivable
|
7,500
|
|
|
7,400
|
|
||
Customer note receivables
|
3,375
|
|
|
2,777
|
|
||
Prepaid income taxes
|
620
|
|
|
3,493
|
|
||
Employee loans and advances
|
361
|
|
|
364
|
|
||
Due from related party
|
21
|
|
|
39
|
|
||
Restricted cash
|
—
|
|
|
33
|
|
||
Other current assets
|
4,423
|
|
|
2,422
|
|
||
Total other current assets
|
$
|
34,663
|
|
|
$
|
33,601
|
|
|
March 31,
2018 |
|
December 30,
2017 |
||||
Deferred cost of goods sold
|
$
|
99,857
|
|
|
$
|
93,261
|
|
Prepaid contract incentives
|
6,033
|
|
|
6,115
|
|
||
Deferred commissions
|
5,207
|
|
|
5,613
|
|
||
Unbilled contract receivables
|
3,861
|
|
|
4,267
|
|
||
Deferred costs and other contract assets
|
$
|
114,958
|
|
|
$
|
109,256
|
|
|
March 31,
2018 |
|
December 30,
2017 |
||||
Building and building improvements
|
$
|
88,215
|
|
|
$
|
87,999
|
|
Machinery and equipment
|
49,842
|
|
|
47,556
|
|
||
Aircraft and vehicles
|
25,329
|
|
|
25,329
|
|
||
Land
|
23,762
|
|
|
23,762
|
|
||
Computer equipment
|
15,785
|
|
|
15,789
|
|
||
Leasehold improvements
|
15,649
|
|
|
15,326
|
|
||
Tooling
|
13,818
|
|
|
13,754
|
|
||
Furniture and office equipment
|
10,328
|
|
|
9,967
|
|
||
Demonstration units
|
491
|
|
|
486
|
|
||
Construction-in-progress (CIP)
|
6,994
|
|
|
6,365
|
|
||
Total property and equipment
|
250,213
|
|
|
246,333
|
|
||
Accumulated depreciation and amortization
|
(85,977
|
)
|
|
(82,237
|
)
|
||
Property and equipment, net
|
$
|
164,236
|
|
|
$
|
164,096
|
|
|
March 31,
2018 |
|
December 30,
2017 |
||||
Patents
|
$
|
21,558
|
|
|
$
|
20,623
|
|
Licenses-related party
|
8,000
|
|
|
7,500
|
|
||
Customer relationships
|
7,669
|
|
|
7,669
|
|
||
Acquired technology
|
5,580
|
|
|
5,580
|
|
||
Trademarks
|
4,112
|
|
|
4,036
|
|
||
Capitalized software development costs
|
2,868
|
|
|
2,699
|
|
||
Other
|
5,466
|
|
|
3,691
|
|
||
Total intangible assets
|
55,253
|
|
|
51,798
|
|
||
Accumulated amortization
|
(25,800
|
)
|
|
(24,675
|
)
|
||
Intangible assets, net
|
$
|
29,453
|
|
|
$
|
27,123
|
|
Fiscal year
|
Amount
|
||
2018 (balance of year)
|
$
|
5,091
|
|
2019
|
3,748
|
|
|
2020
|
3,598
|
|
|
2021
|
3,345
|
|
|
2022
|
2,173
|
|
|
Thereafter
|
11,498
|
|
|
Total
|
$
|
29,453
|
|
|
March 31,
2018 |
|
December 30,
2017 |
||||
Prepaid deposits
|
$
|
2,670
|
|
|
$
|
3,286
|
|
Long term investments
|
1,271
|
|
|
1,234
|
|
||
Restricted cash
(1)
|
152
|
|
|
148
|
|
||
Total other assets, long-term
|
$
|
4,093
|
|
|
$
|
4,668
|
|
|
March 31,
2018 |
|
December 30,
2017 As Adjusted |
||||
Income taxes payable
|
$
|
10,632
|
|
|
$
|
4,292
|
|
Accrued indirect taxes payable
|
7,465
|
|
|
6,711
|
|
||
Accrued GPO fees
|
3,064
|
|
|
2,351
|
|
||
Related party payable
|
2,129
|
|
|
1,528
|
|
||
Accrued legal fees
|
1,546
|
|
|
975
|
|
||
Accrued warranty
|
1,140
|
|
|
1,149
|
|
||
Accrued donations
|
346
|
|
|
548
|
|
||
Accrued stock repurchases
|
—
|
|
|
1,988
|
|
||
Other
|
4,502
|
|
|
4,712
|
|
||
Total accrued and other current liabilities
|
$
|
30,824
|
|
|
$
|
24,254
|
|
|
March 31,
2018 |
|
December 30,
2017 |
||||
Accrued customer reimbursements
|
$
|
17,648
|
|
|
$
|
16,896
|
|
Deferred revenue
|
12,385
|
|
|
11,589
|
|
||
Accrued rebates and incentives
|
4,407
|
|
|
3,598
|
|
||
Other contract-related liabilities
|
281
|
|
|
259
|
|
||
Total deferred revenue and other contract-related liabilities
|
34,721
|
|
|
32,342
|
|
||
Less: Non-current portion of deferred revenue
|
(212
|
)
|
|
(237
|
)
|
||
Deferred revenue and other contract-related liabilities - current
|
$
|
34,509
|
|
|
$
|
32,105
|
|
|
Three Months Ended
March 31, 2018 |
||
Deferred revenue, beginning of the period
|
$
|
11,589
|
|
Revenue deferred during the period
|
2,873
|
|
|
Recognition of revenue deferred in prior periods
|
(2,077
|
)
|
|
Deferred revenue, end of the period
|
$
|
12,385
|
|
|
Expected Future Revenue By Period (in thousands)
|
||||||||||||||||||
|
Less than
1 year
|
|
Between
1-3 years
|
|
Between
3-5 years
|
|
More than
5 years
|
|
Total
|
||||||||||
Unrecognized Contract Revenue
|
$
|
179,650
|
|
|
$
|
241,482
|
|
|
$
|
92,674
|
|
|
$
|
15,412
|
|
|
$
|
529,218
|
|
|
March 31,
2018 |
|
December 30,
2017 |
||||
Income tax payable, long-term
|
$
|
25,734
|
|
|
$
|
25,734
|
|
Unrecognized tax benefits
|
14,715
|
|
|
14,348
|
|
||
Deferred tax liabilities, long-term
|
10,012
|
|
|
9,880
|
|
||
Deferred rent, long-term
|
1,267
|
|
|
1,266
|
|
||
Deferred revenue, long-term
|
212
|
|
|
237
|
|
||
Other
|
178
|
|
|
292
|
|
||
Total other non-current liabilities
|
$
|
52,118
|
|
|
$
|
51,757
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
2018 |
|
April 1,
2017 |
||||
Shares repurchased
|
|
198
|
|
|
—
|
|
||
Average cost per share
|
|
$
|
84.14
|
|
|
$
|
—
|
|
Value of shares repurchased
|
|
$
|
16,490
|
|
|
$
|
—
|
|
|
Three Months Ended
March 31, 2018 |
|||||
|
Shares
|
|
Average
Exercise Price
|
|||
Options outstanding, beginning of period
|
6,953
|
|
|
$
|
36.26
|
|
Granted
|
270
|
|
|
86.93
|
|
|
Canceled
|
(83
|
)
|
|
47.36
|
|
|
Exercised
|
(314
|
)
|
|
28.24
|
|
|
Options outstanding, end of period
|
6,826
|
|
|
$
|
38.50
|
|
Options exercisable, end of period
|
4,003
|
|
|
$
|
26.79
|
|
|
Three Months Ended
March 31, 2018 |
|||||
|
Units
|
|
Weighted Average Grant
Date Fair Value
|
|||
RSUs outstanding, beginning of period
|
2,708
|
|
|
$
|
95.51
|
|
Granted
|
—
|
|
|
—
|
|
|
Canceled
|
—
|
|
|
—
|
|
|
Expired
|
—
|
|
|
—
|
|
|
Vested
|
—
|
|
|
—
|
|
|
RSUs outstanding, end of period
|
2,708
|
|
|
$
|
95.51
|
|
|
Three Months Ended
March 31, 2018 |
|||||
|
Units
|
|
Weighted Average Grant
Date Fair Value
|
|||
PSUs outstanding, beginning of period
|
233
|
|
|
$
|
90.70
|
|
Granted
|
197
|
|
|
86.95
|
|
|
Canceled
|
(86
|
)
|
|
90.71
|
|
|
Expired
|
—
|
|
|
—
|
|
|
Vested
|
(31
|
)
|
|
90.70
|
|
|
PSUs outstanding, end of period
|
313
|
|
|
$
|
88.34
|
|
|
Three Months Ended
|
||
|
March 31,
2018 |
|
April 1,
2017 |
Risk-free interest rate
|
2.3% to 2.7%
|
|
1.9% to 2.2%
|
Expected term (in years)
|
5.6
|
|
5.5
|
Estimated volatility
|
29.3% to 29.7%
|
|
29.7% to 30.1%
|
Expected dividends
|
0%
|
|
0%
|
Weighted-average fair value of options granted
|
$28.53
|
|
$25.25
|
|
Total
Operating
Leases
|
||
2018 (balance of year)
|
$
|
5,380
|
|
2019
|
5,926
|
|
|
2020
|
3,573
|
|
|
2021
|
2,216
|
|
|
2022
|
1,819
|
|
|
Thereafter
|
5,469
|
|
|
Total
|
$
|
24,383
|
|
|
Three Months Ended
|
||||||||||||
|
March 31, 2018
|
|
April 1, 2017
As Adjusted |
||||||||||
Geographic area by destination:
|
|
|
|
|
|
|
|||||||
United States
|
$
|
141,040
|
|
|
69.0
|
%
|
|
$
|
128,789
|
|
|
70.5
|
%
|
Europe, Middle East and Africa
|
44,046
|
|
|
21.6
|
|
|
30,790
|
|
|
16.9
|
|
||
Asia and Australia
|
12,906
|
|
|
6.3
|
|
|
16,583
|
|
|
9.1
|
|
||
North and South America (excluding United States)
|
6,397
|
|
|
3.1
|
|
|
6,304
|
|
|
3.5
|
|
||
Total product revenue
|
$
|
204,389
|
|
|
100.0
|
%
|
|
$
|
182,466
|
|
|
100.0
|
%
|
|
Three Months Ended
|
||||||||||||
|
March 31,
2018 |
|
Percentage
of Revenue |
|
April 1,
2017 As Adjusted |
|
Percentage
of Revenue |
||||||
Revenue:
|
|
|
|
|
|
|
|
||||||
Product
|
$
|
204,389
|
|
|
96.0
|
%
|
|
$
|
182,466
|
|
|
92.8
|
%
|
Royalty and other revenue
|
8,564
|
|
|
4.0
|
|
|
14,177
|
|
|
7.2
|
|
||
Total revenue
|
212,953
|
|
|
100.0
|
|
|
196,643
|
|
|
100.0
|
|
||
Cost of goods sold
|
69,292
|
|
|
32.5
|
|
|
64,229
|
|
|
32.7
|
|
||
Gross profit
|
143,661
|
|
|
67.5
|
|
|
132,414
|
|
|
67.3
|
|
||
Operating expenses:
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative
|
71,175
|
|
|
33.4
|
|
|
66,087
|
|
|
33.6
|
|
||
Research and development
|
18,601
|
|
|
8.7
|
|
|
14,176
|
|
|
7.2
|
|
||
Total operating expenses
|
89,776
|
|
|
42.2
|
|
|
80,263
|
|
|
40.8
|
|
||
Operating income
|
53,885
|
|
|
25.3
|
|
|
52,151
|
|
|
26.5
|
|
||
Non-operating income
|
1,647
|
|
|
0.8
|
|
|
874
|
|
|
0.4
|
|
||
Income before provision for income taxes
|
55,532
|
|
|
26.1
|
|
|
53,025
|
|
|
27.0
|
|
||
Provision for income taxes
|
9,902
|
|
|
4.6
|
|
|
1,492
|
|
|
0.8
|
|
||
Net income
|
$
|
45,630
|
|
|
21.4
|
%
|
|
$
|
51,533
|
|
|
26.2
|
%
|
|
Three Months Ended
|
|||||||||||||||||||
|
March 31, 2018
|
|
April 1, 2017
As Adjusted |
|
Increase/
(Decrease)
|
|
Percentage
Change
|
|||||||||||||
United States
|
$
|
141,040
|
|
|
69.0
|
%
|
|
$
|
128,789
|
|
|
70.5
|
%
|
|
$
|
12,251
|
|
|
9.5
|
%
|
Europe, Middle East and Africa
|
44,046
|
|
|
21.6
|
|
|
30,790
|
|
|
16.9
|
|
|
13,256
|
|
|
43.1
|
|
|||
Asia and Australia
|
12,906
|
|
|
6.3
|
|
|
16,583
|
|
|
9.1
|
|
|
(3,677
|
)
|
|
(22.2
|
)
|
|||
North and South America (excluding United States)
|
6,397
|
|
|
3.1
|
|
|
6,304
|
|
|
3.5
|
|
|
93
|
|
|
1.5
|
|
|||
Total product revenue
|
$
|
204,389
|
|
|
100.0
|
%
|
|
$
|
182,466
|
|
|
100.0
|
%
|
|
$
|
21,923
|
|
|
12.0
|
%
|
Royalty and other revenue
|
8,564
|
|
|
|
|
14,177
|
|
|
|
|
(5,613
|
)
|
|
(39.6
|
)
|
|||||
Total revenue
|
$
|
212,953
|
|
|
|
|
$
|
196,643
|
|
|
|
|
$
|
16,310
|
|
|
8.3
|
%
|
(1)
|
Certain information presented for periods ending prior to December 31, 2017 has been restated to reflect the full retrospective application of the new revenue accounting standard, Accounting Standards Update (ASU) No. 2014-09,
Revenue (Topic 606): Revenue from Contracts with Customers
(ASU 2014-09). See Note 2 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our adoption of this new accounting standard.
|
|
Three Months Ended
|
|||||||||||||||||||
|
March 31,
2018 |
|
Gross Profit
Percentage |
|
April 1,
2017 As Adjusted |
|
Gross Profit
Percentage |
|
Increase/
(Decrease) |
|
Percentage
Change |
|||||||||
Product gross profit
|
$
|
135,271
|
|
|
66.2
|
%
|
|
$
|
119,428
|
|
|
65.5
|
%
|
|
$
|
15,843
|
|
|
13.3
|
%
|
Royalty and other revenue gross profit
|
8,390
|
|
|
98.0
|
|
|
12,986
|
|
|
91.6
|
|
|
(4,596
|
)
|
|
(35.4
|
)
|
|||
Total gross profit
|
$
|
143,661
|
|
|
67.5
|
%
|
|
$
|
132,414
|
|
|
67.3
|
%
|
|
$
|
11,247
|
|
|
8.5
|
%
|
Research and Development
|
|||||
Three Months Ended
March 31, 2018 |
Percentage of
Net Revenues |
Three Months Ended
April 1, 2017 As Adjusted |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$18,601
|
8.7%
|
$14,176
|
7.2%
|
$4,425
|
31.2%
|
Non-operating Income (Expense)
|
|||||
Three Months Ended
March 31, 2018 |
Percentage of
Net Revenues |
Three Months Ended
April 1, 2017 As Adjusted |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$1,647
|
0.8%
|
$874
|
0.4%
|
$773
|
88.4%
|
Provision for Income Taxes
|
|||||
Three Months Ended
March 31, 2018 |
Percentage of
Net Revenues |
Three Months Ended
April 1, 2017 As Adjusted |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$9,902
|
4.6%
|
$1,492
|
0.8%
|
$8,410
|
563.7%
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
2018 |
|
April 1,
2017 |
||||
Net cash (used in) provided by:
|
|
|
|
|||||
Operating activities
|
$
|
71,995
|
|
|
$
|
13,898
|
|
|
Investing activities
|
(7,371
|
)
|
|
(5,227
|
)
|
|||
Financing activities
|
(10,232
|
)
|
|
27,221
|
|
|||
Effect of foreign currency exchange rates on cash
|
(225
|
)
|
|
414
|
|
|||
Increase (decrease) in cash, cash equivalents and restricted cash
|
$
|
54,167
|
|
|
$
|
36,306
|
|
(2)
|
Certain information presented for periods ending prior to December 31, 2017 has been restated to reflect the full retrospective application of the new revenue accounting standard, ASU 2014-09. See Note 2 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information related to our adoption of this new accounting standard.
|
•
|
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
®
technology 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
®
technology owned by us 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).
|
•
|
predatory pricing and bundling practices by our competitors targeted to dissuade customers from using our technology;
|
•
|
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.
|
•
|
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;
|
•
|
outbreaks of illnesses, pandemics or other local or global health issues such as the Zika virus;
|
•
|
the inability to collect amounts paid by foreign government customers to our appointed foreign agents;
|
•
|
longer payment cycles, increased credit risk and different collection remedies with respect to receivables; and
|
•
|
difficulties in enforcing or defending intellectual property rights.
|
•
|
payment of above-market prices for acquisitions and incurring higher than anticipated acquisition costs;
|
•
|
a need to issue shares of common stock as part of the acquisition price or a need to issue stock options or other equity to newly-hired employees of target companies, resulting in dilution of ownership to our existing stockholders;
|
•
|
reduced profitability as future acquisitions may not result in accretive contributions to the business over either the short-term or the long-term;
|
•
|
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;
|
•
|
regulatory challenges;
|
•
|
cybersecurity and compliance related issues;
|
•
|
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;
|
•
|
unanticipated issues dealing with unfamiliar suppliers, service providers or other collaborators of the acquired company;
|
•
|
higher costs of integration than we anticipated;
|
•
|
write-downs or impairments of goodwill or other intangible assets associated with the acquired company;
|
•
|
difficulties in retaining key employees of the acquired business who are necessary to manage these acquisitions;
|
•
|
negative impacts on our relationships with our employees, clients or collaborators;
|
•
|
litigation or other claims in connection with the acquisition; and
|
•
|
changes in the overall financial model as certain acquired companies may have a different revenue, gross profit margin or operating expense profile.
|
•
|
actual or anticipated fluctuations in our operating results or future prospects;
|
•
|
our announcements or our competitors’ announcements of new products;
|
•
|
the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
|
•
|
strategic actions by us or our competitors, such as acquisitions or restructurings;
|
•
|
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
•
|
changes in accounting standards, policies, guidance, interpretations or principles;
|
•
|
changes in our growth rates or our competitors’ growth rates;
|
•
|
developments regarding our patents or proprietary rights or those of our competitors;
|
•
|
ongoing legal proceedings;
|
•
|
our inability to raise additional capital as needed;
|
•
|
concerns or allegations as to the safety or efficacy of our products;
|
•
|
changes in financial markets or general economic conditions, including the effects of recession or slow economic growth in the U.S. and abroad;
|
•
|
sales of stock by us or members of our management team, our Board of Directors (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) |
|||||
December 31, 2017 to January 25, 2018
|
|
2,801
|
|
|
$
|
85.01
|
|
|
2,801
|
|
|
2,094,439
|
|
January 26, 2018 to February 25, 2018
|
|
193,224
|
|
|
84.11
|
|
|
193,224
|
|
|
1,901,215
|
|
|
February 26, 2018 to March 31, 2018
|
|
1,955
|
|
(2)
|
86.08
|
|
(2)
|
—
|
|
|
1,901,215
|
|
|
Total
|
|
197,980
|
|
|
$
|
84.14
|
|
|
196,025
|
|
|
1,901,215
|
|
(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.
|
(2)
|
Comprised solely of shares of our common stock withheld from employees to satisfy tax withholding obligations. Average price paid price share represents fair market value of our common stock on the date of withholding.
|
(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.
|
|
|
|
|
M
ASIMO
C
ORPORATION
|
||||
|
|
|
|
|
|
|
||
Date: May 4, 2018
|
|
|
|
By:
|
|
/s/ J
OE
K
IANI
|
||
|
|
|
|
|
|
Joe Kiani
|
||
|
|
|
|
|
|
Chief Executive Officer and Chairman
|
||
|
|
|
|
|
|
|
||
Date: May 4, 2018
|
|
|
|
By:
|
|
/s/ M
ICAH
Y
OUNG
|
||
|
|
|
|
|
|
Micah Young
|
||
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Sincerely,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ T
RACY
M
ILLER
|
|
|
|
April 30, 2012
|
|
|
Manager, Human Resources
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offer Acceptance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ B
ILAL
M
UHSIN
|
|
|
|
May 1, 2012
|
|
|
Bilal Muhsin
|
|
|
|
Date
|
|
|
Annual Salary:
|
You will be paid a bi-weekly salary of $12,500, which equates to $325,000 annually.
|
Bonus Potential:
|
You will be eligible to receive a bonus of up to 50% of your salary (subject to increase not to exceed 100% of your base salary), depending on Company, department, and individual performance, in accordance with the Company’s Bonus Plan. Your eligibility for a bonus will begin for fiscal year 2018 (for a potential bonus payable in 2019). Under the Bonus Plan, employees must be employed on the bonus payment date in order to receive their bonus.
|
Benefits:
|
You will be eligible for health/dental and other insurance coverage, participation in the Company’s 401(k) plan, and paid vacation, holiday and sick leave. These benefits will be provided in accordance with applicable plan documents or Company policy. Insurance coverage will begin the first day of the first month after your employment begins.
|
Relocation
|
You agree to relocate your residence from New York to Orange County within 6 months of your start date. The Company will reimburse you up to $20,000 towards relocation costs in accordance with our Company relocation guidelines and agreement.
|
/s/ J
OE
K
IANI
|
|
|
December 15, 2017
|
|
Joe Kiani
|
|
|
Date
|
|
Chairman and CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accepted and agreed:
|
|
|
|
|
|
|
|
|
|
/s/ T
AO
L
EVY
|
|
|
December 20, 2017
|
|
Tao Levy
|
|
|
Date
|
|
|
|
|
|
|
Re:
|
Masimo Corporation Amended and Restated 2007 Severance Protection Plan -Participation Agreement
|
a)
|
your Basic Severance Benefit shall equal your annual salary (“Base Salary”) determined at the highest rate in effect during the one-year period before the date of your Covered Termination.
|
b)
|
You and your COBRA qualifying beneficiaries will be entitled to COBRA continuation coverage at the Company’s expense for a period of twelve (12) months after your Covered Termination. Thereafter, you will be entitled to continuation coverage at your own expense and only to the extent it is legally required under applicable federal or state law, notably COBRA. In addition, the Company shall make life insurance coverage over the first twelve months following your covered termination available for purchase by you.
|
c)
|
Notwithstanding the foregoing, if you commence new employment during the time that you are receiving any Basic Severance Benefit, any income or benefits that you receive from such new subsequent employment will offset and reduce (on a dollar for dollar basis) your Basic Severance Benefits payable from the date such new employment commences.
|
b)
|
If you experience a Covered Termination on or after a Change in Control for a reason other than as set forth in preceding paragraph 2.a), then your Change in Control Severance Benefit shall equal the sum of (i) two times your Base Salary, and (ii) one times your Average Bonus.
|
c)
|
You and your COBRA qualifying beneficiaries will be entitled to COBRA continuation coverage at the Company’s expense for a period of 12 months following the date of your Covered Termination. Thereafter, you will be entitled to continuation coverage at your own expense and only to the extent it is legally required under applicable federal or state law, notably COBRA. In addition, the Company shall provide you with Company paid life insurance for the first 12 months following your Covered Termination.
|
a)
|
your termination of employment other than pursuant to a “Covered Termination” as defined in Section 2(d)(i) of the Plan; or
|
b)
|
the Sponsor’s termination of the Plan before you become entitled to Severance Benefits as the result of a termination of your employment, including a Covered Termination.
|
Dated:
|
March 26, 2018
|
|
MASIMO CORPORATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ J
OE
K
IANI
|
|
|
|
|
|
Joe Kiani
|
|
|
|
|
|
Chairman and CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCEPTED AND AGREED TO as of March 16, 2018.
|
|
||||
|
|
|
|
|
|
/s/ B
ILAL
M
UHSIN
|
|
|
|
|
|
Bilal Muhsin
|
|
|
|
|
Re:
|
Masimo Corporation
Amended and Restated 2007 Severance Protection Plan
-Limited Participation Agreement
|
Dated:
|
March 16, 2018
|
|
MASIMO CORPORATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ J
OE
K
IANI
|
|
|
|
|
|
Joe Kiani
|
|
|
|
|
|
Chairman and CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCEPTED AND AGREED TO
as of March 16, 2018.
|
|
||||
|
|
|
|
|
|
/s/ T
AO
L
EVY
|
|
|
|
|
|
Tao Levy
|
|
|
|
|
Masimo Corporation
Ratio of Earnings to Fixed Charges
(Dollars in thousands)
|
|||||||||||||||||||||||||
|
|
Three Months Ended
|
|
|
|
Fiscal Year Ended
|
|||||||||||||||||||
|
|
March 31,
2018 |
|
December 30,
2017 As Adjusted* |
|
December 31,
2016 |
|
January 2,
2016 |
|
January 3,
2015 |
|
December 28,
2013 |
|
||||||||||||
Ratio of earnings to fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income before provision for income taxes
|
$
|
55,532
|
|
|
$
|
185,800
|
|
|
$
|
418,341
|
|
|
$
|
116,345
|
|
|
$
|
102,041
|
|
|
$
|
75,726
|
|
|
|
Fixed charges
|
1,286
|
|
|
3,316
|
|
|
5,140
|
|
|
5,524
|
|
|
3,381
|
|
|
2,705
|
|
|
|||||||
Noncontrolling interests in pre-tax (income) loss
|
—
|
|
|
—
|
|
|
—
|
|
|
1,757
|
|
|
2,350
|
|
|
607
|
|
|
|||||||
Total earnings
|
$
|
56,818
|
|
|
$
|
189,116
|
|
|
$
|
423,481
|
|
|
$
|
123,626
|
|
|
$
|
107,772
|
|
|
$
|
79,038
|
|
|
|
Fixed charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest expensed
|
$
|
627
|
|
|
$
|
678
|
|
|
$
|
3,261
|
|
|
$
|
3,494
|
|
|
$
|
594
|
|
|
$
|
28
|
|
|
|
Estimated of interest within rental expense
|
659
|
|
|
2,638
|
|
|
1,879
|
|
|
2,030
|
|
|
2,787
|
|
|
2,677
|
|
|
|||||||
Total fixed charges
|
$
|
1,286
|
|
|
$
|
3,316
|
|
|
$
|
5,140
|
|
|
$
|
5,524
|
|
|
$
|
3,381
|
|
|
$
|
2,705
|
|
|
|
Ratio of earnings to fixed charges
|
44.18
|
|
|
57.03
|
|
|
82.39
|
|
|
22.38
|
|
|
31.88
|
|
|
29.22
|
|
|
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: May 4, 2018
|
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
ICAH
Y
OUNG
|
Date: May 4, 2018
|
Micah Young
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
/s/ J
OE
K
IANI
|
Date: May 4, 2018
|
Joe Kiani
|
|
Chairman of the Board and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ M
ICAH
Y
OUNG
|
Date: May 4, 2018
|
Micah Young
|
|
Executive Vice President and Chief Financial Officer
|
|
(Principal Financial Officer)
|