|
|
|
|
|
(Mark One)
|
|
☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
|
|
Page
|
|
|
|
Item 1
|
||
|
|
|
Item 1A
|
||
|
|
|
Item 1B
|
||
|
|
|
Item 2
|
||
|
|
|
Item 3
|
||
|
|
|
Item 4
|
||
|
||
|
|
|
Item 5
|
||
|
|
|
Item 6
|
||
|
|
|
Item 7
|
||
|
|
|
Item 7A
|
||
|
|
|
Item 8
|
||
|
|
|
Item 9
|
||
|
|
|
Item 9A
|
||
|
|
|
Item 9B
|
||
|
||
|
|
|
Item 10
|
||
|
|
|
Item 11
|
||
|
|
|
Item 12
|
||
|
|
|
Item 13
|
||
|
|
|
Item 14
|
||
|
||
|
|
|
Item 15
|
||
|
|
|
Item 16
|
||
|
|
|
ITEM 1.
|
BUSINESS
|
•
|
Continue to Expand our Market Share in Pulse Oximetry. We grew our product revenue to $936.4 million in 2019 from $674.0 million in 2016, representing a three-year compound annual growth rate of 11.6%. This growth can be attributed to continued expansion of our core SET® pulse oximeter customer base, higher revenues from rainbow® Pulse CO-Oximetry, NomoLine® capnography and other new technologies, and our expanding list of OEM partners. We supplement our direct sales to hospitals and other low-acuity healthcare facilities through various U.S. and international distributors. Combined sales through our direct and distributor sales channels increased to $816.8 million, or 87.2% of product revenue in 2019, from $582.1 million, or 86.4% of product revenue, in 2016. As the healthcare industry shifts toward hospitals, physicians and providers being rewarded by payers based on the quality and value of the services (as opposed to the volume of fee-for-service transactions), we expect to see more hospitals gravitate towards technologies like Masimo SET® that have a proven track record of improving patient care.
|
•
|
Expand the Pulse Oximetry Market to Other Patient Care Settings. Many patients die due to unintended opioid overdoses after surgery while on general care floors. We believe the ability to continuously and accurately monitor patients outside of critical care settings, including the general, medical and surgical floors of the hospital, is currently an unmet medical need that has the potential to significantly improve patient care and increase the size of the pulse oximetry market. In addition, we believe the ability of Masimo SET® to accurately monitor and address the limitations of conventional pulse oximetry has enabled us, and will continue to enable us, to expand into non-critical care settings, and therefore, significantly expand the market for our products. To further support our expansion into the general care areas, we market Patient SafetyNet™, which enables continuous monitoring of up to 200 patients’ oxygen saturation, pulse rate and with rainbow SET®, noninvasive hemoglobin and respiration rate. We believe that Patient SafetyNet™, when combined with Masimo SET® pulse oximetry and RAM® or capnography, offers a clinically proven and cost-effective approach to continuous post-operative monitoring. Outside of the hospital setting, patients could die due to unintentional opioid overdose, even when opioids are being taken for short duration, such as after surgery, and as prescribed by a physician. We believe that in the home setting, accurate monitoring with Masimo SET® may help reduce the risk of opioid overdose by alerting family members and others when opioids have slowed a patient’s breathing and caused a significant drop in oxygen saturation.
|
•
|
Expand the Use of rainbow® Technology in Hospital Settings. We believe the noninvasive measurement of rainbow® Pulse CO-Oximetry (SpHb®, SpCO®, SpMet®, PVi®, SpfO2™, SPOC™ and ORi™), rainbow Acoustic Monitoring® (RRa®), and the Halo Index™, as well as future measurements, provide an excellent opportunity to help our customers improve patient care while reducing their overall cost of care.
|
•
|
Expand the Use of rainbow® Technology in Non-Hospital Settings. We believe the noninvasive measurement of hemoglobin, SpHb®, creates a significant opportunity in markets such as physician offices, emergency departments and blood donation centers; and the noninvasive measurement of carboxyhemoglobin, SpCO®, creates a significant opportunity in the fire/alternate care market.
|
•
|
Expand the Use of Root® in Hospital Settings. We believe Root® represents a powerful new paradigm in patient monitoring because it enhances our rainbow® and SET® measurements with multiple specialty parameters, including SedLine® brain function monitoring, O3® regional oximetry, and NomoLine® capnography and gas monitoring, and enables open-architecture connectivity in an integrated, clinician-centric hub. Our Iris® integration platform for Root® provides a conduit to the patient’s EMR for a range of clinical devices that may otherwise remain disconnected, and therefore, unable to communicate their information. Iris® offers clinical utility and flexibility by collecting device information from multiple sources and making it available to clinicians in one networked place, akin to an airplane cockpit. Complementary innovations like the Radius-7® wearable, wireless monitor foster an environment of safety without sacrificing patient mobility or comfort. Radius-7® provides patients in medical-surgical units with mobility, allowing them to visit common areas and labs, all while being continuously monitored around the clock. Root® is acuity-adaptable, meaning it can be configured for any care area, and is competitively priced.
|
•
|
Expand Hospital Automation and Connectivity in Hospital Settings. We believe we can improve and automate the continuum of care through our connectivity platform by reducing complexity by integrating data from multiple disparate monitors and therapeutic devices through Root® and Iris Gateway®; by deploying decision support algorithms like Halo ION™; by saving time through semi-automated and automated bedside vital signs measurement and documentation with Patient SafetyNet™; by keeping patients connected with their care providers through Doctella™ and Rad 97® when they are discharged from hospitals; by improving data interpretation through adaptable and intuitive displays like UniView™ ; and through remote monitoring via Patient SafetyNet™ and Replica™.
|
•
|
Utilize our Customer Base and OEM Relationships to Market Masimo rainbow SET®, O3®, SedLine® and Capnography Products Incorporating Licensed rainbow® Technology. We currently sell rainbow SET® products through our direct sales force and distributors. We include our MX circuit boards in our pulse oximeters and also sell them to our OEM partners. Our MX circuit boards are equipped with circuitry to support rainbow® Pulse CO-Oximetry measurements that can be activated at time of sale or through a subsequent software upgrade. We believe that, over time, the clinical need for these measurements, along with our installed customer base, will help drive the adoption of our rainbow® Pulse CO-Oximetry products.
|
•
|
Continue to Innovate and Maintain Our Technology Leadership Position. We invented and pioneered the first pulse oximeter to accurately measure arterial blood oxygen saturation level and pulse rate in the presence of motion artifact and low perfusion. In addition, we launched our rainbow SET® platform that enabled what we believe is the first noninvasive monitoring of carboxyhemoglobin, methemoglobin and hemoglobin, as well as PVi®, all of which were previously only available with invasive and/or complicated testing. Furthermore, we believe that our introduction of RRa® with rainbow Acoustic Monitoring® technology represented the first platform to enable noninvasive and continuous respiration monitoring through an easy-to-use single-patient adhesive acoustic sensor. Finally, we believe that our recent introduction of ORi™ may provide advance warning of an impending hypoxic state, or an indication of an unintended hyperoxic state.
|
Description:
|
|
|
Use:
|
|
Distribution Channel:
|
|
|
|
|
|
|
||
Line Filters and Mainstream Adapters for Capnography and Gas Monitoring.
(e.g., NomoLine® Cannula with EMMA® Capnograph with disposable adapter, ISA™CO2 (shown below))
|
|
|||||
|
• Line of disposables to measure gas parameters using mainstream and sidestream capnography
|
|
• Sold directly to end-users and through distributors and to OEM partners who sell to end-users
|
|||
|
|
|
|
|||
|
|
|
|
|
|
|
Proprietary Measurements
(e.g., SpHb®, SpCO®, SpMet®, PVi®, RRa®, ORi™, 3D Alarms® and Adaptive Threshold Alarm) |
|
|
|
|||
|
• rainbow® measurements and other proprietary features
|
|
• Sold directly to end-users and through OEM partners who sell to new and existing end-users
|
|||
|
|
|
|
|||
|
|
|
|
|
|
Description:
|
|
|
Use:
|
|
Distribution Channel:
|
|
|
• Network-linked, wired or wireless, multiple patient floor monitoring solutions
• Standalone wireless alarm notification solutions
|
|
• Sold directly to end-users
|
|||
|
• Home-based patient engagement and remote data capture platform
|
|
• Sold directly to end-users and through distributors
|
|||
Devices
(e.g., iSpO2®, MightySat® with PVi® and RRp®(shown below)) |
|
|
|
|||
|
• Fingertip pulse oximeter, or pulse oximeter cable and sensor for use with an iPhone, iPad, iPod touch and select Android smart phones
|
|
• Sold directly to consumers and through consumer retailers
|
•
|
a standalone device for bedside monitoring;
|
•
|
a detachable, battery-operated handheld unit for easy portable monitoring;
|
•
|
an integrated device as part of the Root® patient monitoring and connectivity platform; and
|
•
|
a monitor interface via SatShare®, a proprietary technology allowing our products to work with certain competitor products, to upgrade existing conventional multiparameter patient monitors to Masimo SET® while displaying rainbow® measurements on the Radical-7® itself.
|
•
|
Patient safety may be compromised by using counterfeit Masimo sensors and cables because they are not produced with comparable components, do not provide proper shielding from ambient interferences, create electrostatic noise caused by motion, do not have our quality and performance controls, and are not tested or warranted to work within a Masimo system;
|
•
|
We design our sensors and cables to last well beyond their warranty period and customer feedback indicates our sensors and cables last significantly longer than competing products, but cable and sensor reliability may still be compromised when used beyond their intended life, affecting patient care and causing clinicians and biomedical engineers to spend time troubleshooting intermittent cable and sensor issues; and
|
•
|
We believe that third-party reprocessed pulse oximetry sensors introduce challenges in the clinical environment due to potential quality issues. In fact, we believe that most third-party reprocessed sensors do not indicate that they are capable of performing in the same conditions as Masimo Measure-through Motion and Low Perfusion™ sensors or in neonatal applications, key performance requirements available with Masimo SET® sensors. To the best of our knowledge, no third-party company has attempted to reprocess rainbow SET® sensors.
|
|
|
End-User Markets
|
||
Measurements
|
|
Professional Caregiver and
Alternate Care Market
|
|
Patient and Pharmacist
|
Vital Signs(1)
|
|
Masimo
(owns)
|
|
Cercacor
(non-exclusive license)
|
Non-Vital Signs(2)
|
|
Masimo
(exclusive license)
|
|
Cercacor
(owns or exclusive license)
|
(1)
|
Vital signs measurements include, but are not limited to, SpO2, peripheral venous oxygen saturation, mixed venous oxygen saturation, fetal oximetry, sudden infant death syndrome, ECG, blood pressure (noninvasive blood pressure, invasive blood pressure and continuous noninvasive blood pressure), temperature, respiration rate, CO2, pulse rate, cardiac output, EEG, perfusion index, depth of anesthesia, cerebral oximetry, tissue oximetry and/or EMG, and associated features derived from these measurements, such as 3D alarm®, PVi® and other features.
|
(2)
|
Non-vital signs measurements include the body fluid constituents other than vital signs measurements and include, but are not limited to, carbon monoxide, methemoglobin, blood glucose, hemoglobin and bilirubin.
|
•
|
if the surviving or acquiring entity ceases to use “Masimo” as a company name and trademark, all rights to the “Masimo” trademark will be assigned to Cercacor;
|
•
|
the option to license technology developed by Cercacor for use in blood glucose monitoring will be deemed automatically exercised and a $2.5 million license fee for this technology will become immediately payable to Cercacor; and
|
•
|
the minimum aggregate annual royalties payable to Cercacor for carbon monoxide, methemoglobin, fractional arterial oxygen saturation, hemoglobin and/or glucose will increase to $15.0 million per year until the exclusivity period of the agreement ends, plus up to $2.0 million for each additional measurement with no maximum ceiling for non-vital sign measurements.
|
•
|
the sale of all or substantially all of either company’s assets to a non-affiliated third-party;
|
•
|
the acquisition by a non-affiliated third-party of 50% or more of the voting power of either company;
|
•
|
Joe Kiani, our Chief Executive Officer and the Chief Executive Officer of Cercacor, resigns or is terminated from his position with either company; or
|
•
|
the merger or consolidation of either company with a non-affiliated third-party.
|
•
|
accurate monitoring during both patient motion and low perfusion;
|
•
|
ability to introduce other clinically beneficial measurements related to oxygenation and respiration, such as noninvasive and continuous oxygen reserve index and hemoglobin;
|
•
|
competitive pricing;
|
•
|
brand recognition and perception of innovation abilities;
|
•
|
sales and marketing capability;
|
•
|
access to hospitals which are members of GPOs;
|
•
|
access to integrated delivery networks;
|
•
|
access to OEM partners; and
|
•
|
patent protection.
|
ITEM 1A.
|
RISK FACTORS
|
•
|
perceived clinical benefits from our products;
|
•
|
perceived cost effectiveness of our products;
|
•
|
perceived safety and effectiveness of our products;
|
•
|
reimbursement available through government and private healthcare 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 to 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.
|
•
|
be expensive and time-consuming to defend and result in payment of significant damages to third parties;
|
•
|
force us to stop making or selling products that incorporate the intellectual property;
|
•
|
require us to redesign, reengineer or rebrand our products, product candidates and technologies;
|
•
|
require us to enter into royalty agreements that would increase the costs of our products;
|
•
|
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; and
|
•
|
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;
|
•
|
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;
|
•
|
withdrawals or suspensions of clearance or approval of our products or those of our third-party suppliers by the FDA or other regulatory bodies;
|
•
|
product recalls or seizures;
|
•
|
orders for physician notification or device repair, replacement or refund;
|
•
|
interruptions 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 healthcare 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, other government payers or other third-party payers that are false or fraudulent;
|
•
|
the Physician Payments Sunshine Act (Sunshine Act), which requires medical device companies to track and publicly report, with limited exceptions, all payments and transfers of value to physicians and teaching hospitals in the U.S; 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.
|
•
|
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;
|
•
|
compliance with foreign tax laws, regulations and requirements;
|
•
|
pricing pressure;
|
•
|
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;
|
•
|
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 higher than anticipated acquisition costs;
|
•
|
issuance 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 if an acquisition is not accretive to our 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.
|
•
|
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 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.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
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) |
|||||
September 29, 2019 to October 26, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
4,791,684
|
|
October 27, 2019 to November 23, 2019
|
|
66,598
|
|
|
144.60
|
|
|
274,914
|
|
|
4,725,086
|
|
|
November 24, 2019 to December 28, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,725,086
|
|
|
Total
|
|
66,598
|
|
|
$
|
144.60
|
|
|
274,914
|
|
|
4,725,086
|
|
(1)
|
In July 2018, our board of directors authorized the Repurchase Program, whereby we may repurchase up to 5.0 million shares of our common stock. The Repurchase Program can be carried out at the discretion of a committee comprised of the Company’s CEO and CFO through open market purchases, one or more Rule 10b5-1 trading plans, block trades and privately negotiated transactions.
|
|
|
Three Months Ended
|
|
Year Ended
|
||||||||||||
|
|
December 28,
2019 |
|
December 29
2018 |
|
December 28,
2019 |
|
December 29,
2018 |
||||||||
Shares withheld
|
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||
Average cost per share
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
105.52
|
|
|
$
|
86.08
|
|
Value of shares withheld
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
123
|
|
|
$
|
168
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017(1) |
|
Year Ended
December 31, 2016(1) |
|
Year Ended
January 2, 2016(1)(2) |
||||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||||||
Statement of Operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Product
|
$
|
936,408
|
|
|
$
|
829,874
|
|
|
$
|
738,242
|
|
|
$
|
673,962
|
|
|
$
|
599,334
|
|
Royalty and other revenue
|
1,429
|
|
|
28,415
|
|
|
52,006
|
|
|
38,936
|
|
|
30,777
|
|
|||||
Total revenue
|
937,837
|
|
|
858,289
|
|
|
790,248
|
|
|
712,898
|
|
|
630,111
|
|
|||||
Cost of goods sold
|
308,665
|
|
|
283,397
|
|
|
268,216
|
|
|
234,560
|
|
|
220,128
|
|
|||||
Gross profit
|
629,172
|
|
|
574,892
|
|
|
522,032
|
|
|
478,338
|
|
|
409,983
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative
|
314,661
|
|
|
285,417
|
|
|
273,011
|
|
|
254,707
|
|
|
252,725
|
|
|||||
Research and development
|
93,295
|
|
|
81,006
|
|
|
65,234
|
|
|
57,686
|
|
|
56,617
|
|
|||||
Litigation settlement, award and/or defense costs
|
—
|
|
|
425
|
|
|
—
|
|
|
(270,000
|
)
|
|
(19,609
|
)
|
|||||
Total operating expenses
|
407,956
|
|
|
366,848
|
|
|
338,245
|
|
|
42,393
|
|
|
289,733
|
|
|||||
Operating income
|
221,216
|
|
|
208,044
|
|
|
183,787
|
|
|
435,945
|
|
|
120,250
|
|
|||||
Non-operating income (expense)
|
12,950
|
|
|
5,732
|
|
|
2,013
|
|
|
(2,429
|
)
|
|
(3,905
|
)
|
|||||
Income before provision for income taxes
|
234,166
|
|
|
213,776
|
|
|
185,800
|
|
|
433,516
|
|
|
116,345
|
|
|||||
Provision for income taxes
|
37,950
|
|
|
20,233
|
|
|
61,011
|
|
|
122,419
|
|
|
34,845
|
|
|||||
Net income including noncontrolling interests
|
196,216
|
|
|
193,543
|
|
|
124,789
|
|
|
311,097
|
|
|
81,500
|
|
|||||
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,800
|
)
|
|||||
Net income attributable to Masimo Corporation stockholders
|
$
|
196,216
|
|
|
$
|
193,543
|
|
|
$
|
124,789
|
|
|
$
|
311,097
|
|
|
$
|
83,300
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per common share attributable to Masimo Corporation stockholders(3):
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
3.67
|
|
|
$
|
3.70
|
|
|
$
|
2.42
|
|
|
$
|
6.28
|
|
|
$
|
1.62
|
|
Diluted
|
$
|
3.44
|
|
|
$
|
3.45
|
|
|
$
|
2.23
|
|
|
$
|
5.85
|
|
|
$
|
1.55
|
|
Weighted-average number of common shares:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
53,434
|
|
|
52,296
|
|
|
51,516
|
|
|
49,530
|
|
|
51,311
|
|
|||||
Diluted
|
57,100
|
|
|
56,039
|
|
|
55,874
|
|
|
53,195
|
|
|
53,707
|
|
|
December 28,
2019 |
|
December 29,
2018 |
|
December 30,
2017(1) |
|
December 31,
2016(1) |
|
January 2,
2016(1)(2) |
||||||||||
|
(in thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents and short-term investments
|
$
|
687,687
|
|
|
$
|
552,490
|
|
|
$
|
315,302
|
|
|
$
|
305,970
|
|
|
$
|
132,317
|
|
Working capital
|
823,843
|
|
|
642,722
|
|
|
430,041
|
|
|
289,830
|
|
|
166,509
|
|
|||||
Total assets
|
1,396,128
|
|
|
1,154,818
|
|
|
905,436
|
|
|
814,352
|
|
|
601,735
|
|
|||||
Total debt
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
185,145
|
|
|||||
Total equity
|
1,167,874
|
|
|
969,065
|
|
|
724,025
|
|
|
584,177
|
|
|
275,712
|
|
(1)
|
Certain information presented as of and for the periods ended December 30, 2017 and December 31, 2016 have been previously 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), as of December 31, 2017. Information presented as of and for the period ended January 2, 2016 has not been restated and continues to reflect the prior revenue recognition guidance pursuant to ASC Topic 605, Revenue Recognition.
|
(2)
|
Cercacor was consolidated as a variable interest entity within our financial statements for all periods prior to January 3, 2016. Accordingly, all intercompany royalties, option and licensing fees, and other charges between us and Cercacor for such periods have been eliminated in the consolidation. For additional discussion of Cercacor, see Note 3 to our accompanying consolidated financial statements in Part IV, Item 15(a) of this Annual Report on Form 10-K.
|
(3)
|
See Note 2 to our accompanying consolidated financial statements in Part IV, Item 15(a) of this Annual Report on Form 10-K for a description of the method used to compute basic and diluted net income per common share.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|||||||||||||||
|
Amount
|
|
% of
Revenue
|
|
Amount
|
|
% of
Revenue |
|
Amount
|
|
% of
Revenue |
|||||||||
|
(dollars in thousands)
|
|||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Product
|
$
|
936,408
|
|
|
99.8
|
%
|
|
$
|
829,874
|
|
|
96.7
|
%
|
|
$
|
738,242
|
|
|
93.4
|
%
|
Royalty and other revenue
|
1,429
|
|
|
0.2
|
|
|
28,415
|
|
|
3.3
|
|
|
52,006
|
|
|
6.6
|
|
|||
Total revenue
|
937,837
|
|
|
100.0
|
|
|
858,289
|
|
|
100.0
|
|
|
790,248
|
|
|
100.0
|
|
|||
Cost of goods sold
|
308,665
|
|
|
32.9
|
|
|
283,397
|
|
|
33.0
|
|
|
268,216
|
|
|
33.9
|
|
|||
Gross profit
|
629,172
|
|
|
67.1
|
|
|
574,892
|
|
|
67.0
|
|
|
522,032
|
|
|
66.1
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Selling, general and administrative
|
314,661
|
|
|
33.6
|
|
|
285,417
|
|
|
33.3
|
|
|
273,011
|
|
|
34.5
|
|
|||
Research and development
|
93,295
|
|
|
9.9
|
|
|
81,006
|
|
|
9.4
|
|
|
65,234
|
|
|
8.3
|
|
|||
Litigation settlement, award and/or defense costs
|
—
|
|
|
—
|
|
|
425
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total operating expenses
|
407,956
|
|
|
43.5
|
|
|
366,848
|
|
|
42.7
|
|
|
338,245
|
|
|
42.8
|
|
|||
Operating income
|
221,216
|
|
|
23.6
|
|
|
208,044
|
|
|
24.2
|
|
|
183,787
|
|
|
23.3
|
|
|||
Non-operating income
|
12,950
|
|
|
1.4
|
|
|
5,732
|
|
|
0.7
|
|
|
2,013
|
|
|
0.3
|
|
|||
Income before provision for income taxes
|
234,166
|
|
|
25.0
|
|
|
213,776
|
|
|
24.9
|
|
|
185,800
|
|
|
23.5
|
|
|||
Provision for income taxes
|
37,950
|
|
|
4.0
|
|
|
20,233
|
|
|
2.4
|
|
|
61,011
|
|
|
7.7
|
|
|||
Net income
|
$
|
196,216
|
|
|
20.9
|
%
|
|
$
|
193,543
|
|
|
22.5
|
%
|
|
$
|
124,789
|
|
|
15.8
|
%
|
|
Gross Profit
|
|||||||||||||||||||
|
Year Ended
December 28, 2019 |
|
Percentage of
Net Revenues |
|
Year Ended
December 29, 2018 |
|
Percentage of
Net Revenues
|
|
Increase/
(Decrease) |
|
Percentage
Change |
|||||||||
Product gross profit
|
$
|
627,911
|
|
|
67.1
|
%
|
|
$
|
547,188
|
|
|
65.9
|
%
|
|
$
|
80,723
|
|
|
14.8
|
%
|
Royalty and other revenue gross profit
|
1,261
|
|
|
88.2
|
|
|
27,704
|
|
|
97.5
|
|
|
(26,443
|
)
|
|
(95.4
|
)
|
|||
Total gross profit
|
$
|
629,172
|
|
|
67.1
|
%
|
|
$
|
574,892
|
|
|
67.0
|
%
|
|
$
|
54,280
|
|
|
9.4
|
%
|
Selling, General and Administrative
|
|||||
Year Ended
December 28, 2019 |
Percentage of
Net Revenues |
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$314,661
|
33.6%
|
$285,417
|
33.3%
|
$29,244
|
10.2%
|
Research and Development
|
|||||
Year Ended
December 28, 2019 |
Percentage of
Net Revenues |
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$93,295
|
9.9%
|
$81,006
|
9.4%
|
$12,289
|
15.2%
|
Non-operating Income
|
|||||
Year Ended
December 28, 2019 |
Percentage of
Net Revenues |
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$12,950
|
1.4%
|
$5,732
|
0.7%
|
$7,218
|
125.9%
|
Provision for Income Taxes
|
|||||
Year Ended
December 28, 2019 |
Percentage of
Net Revenues |
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$37,950
|
4.0%
|
$20,233
|
2.4%
|
$17,717
|
87.6%
|
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|
Increase/
(Decrease) |
|
Percentage Change
|
|||||||||||||
United States (U.S.)
|
$
|
566,816
|
|
|
68.3
|
%
|
|
$
|
502,983
|
|
|
68.1
|
%
|
|
$
|
63,833
|
|
|
12.7
|
%
|
Europe, Middle East and Africa
|
160,910
|
|
|
19.4
|
|
|
138,689
|
|
|
18.8
|
|
|
22,221
|
|
|
16.0
|
|
|||
Asia and Australia
|
75,534
|
|
|
9.1
|
|
|
72,434
|
|
|
9.8
|
|
|
3,100
|
|
|
4.3
|
|
|||
North and South America (excluding U.S.)
|
26,614
|
|
|
3.2
|
|
|
24,136
|
|
|
3.3
|
|
|
2,478
|
|
|
10.3
|
|
|||
Total product revenue
|
$
|
829,874
|
|
|
100.0
|
%
|
|
$
|
738,242
|
|
|
100.0
|
%
|
|
$
|
91,632
|
|
|
12.4
|
%
|
Royalty and other revenue
|
28,415
|
|
|
|
|
52,006
|
|
|
|
|
(23,591
|
)
|
|
(45.4
|
)%
|
|||||
Total revenue
|
$
|
858,289
|
|
|
|
|
$
|
790,248
|
|
|
|
|
$
|
68,041
|
|
|
|
|
Gross Profit
|
|||||||||||||||||||
|
Year Ended
December 29, 2018 |
|
Percentage of
Net Revenues
|
|
Year Ended
December 30, 2017 |
|
Percentage of
Net Revenues
|
|
Increase/
(Decrease) |
|
Percentage
Change |
|||||||||
Product gross profit
|
$
|
547,188
|
|
|
65.9
|
%
|
|
$
|
473,647
|
|
|
64.2
|
%
|
|
$
|
73,541
|
|
|
15.5
|
%
|
Royalty and other revenue gross profit
|
27,704
|
|
|
97.5
|
|
|
48,385
|
|
|
93.0
|
|
|
(20,681
|
)
|
|
(42.7
|
)
|
|||
Total gross profit
|
$
|
574,892
|
|
|
67.0
|
%
|
|
$
|
522,032
|
|
|
66.1
|
%
|
|
$
|
52,860
|
|
|
10.1
|
%
|
Selling, General and Administrative
|
|||||
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Year Ended
December 30, 2017 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$285,417
|
33.3%
|
$273,011
|
34.5%
|
$12,406
|
4.5%
|
Research and Development
|
|||||
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Year Ended
December 30, 2017 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$81,006
|
9.4%
|
$65,234
|
8.3%
|
$15,772
|
24.2%
|
Litigation Settlement, Award and/or Defense Costs
|
|||||
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Year Ended
December 30, 2017 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$425
|
—%
|
$—
|
—%
|
$425
|
100.0%
|
Non-operating Income
|
|||||
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Year Ended
December 30, 2017 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$5,732
|
0.7%
|
$2,013
|
0.3%
|
$3,719
|
184.7%
|
Provision for Income Taxes
|
|||||
Year Ended
December 29, 2018 |
Percentage of
Net Revenues |
Year Ended
December 30, 2017 |
Percentage of
Net Revenues |
Increase/
(Decrease) |
Percentage
Change |
$20,233
|
2.4%
|
$61,011
|
7.7%
|
$(40,778)
|
(66.8)%
|
|
Payments Due By Period
|
||||||||||||||||||
|
Less than
1 Year
|
|
Between
1-3 Years
|
|
Between
3-5 Years
|
|
More than
5 Years
|
|
Total
|
||||||||||
Operating leases(1)
|
$
|
5,280
|
|
|
$
|
5,536
|
|
|
$
|
3,631
|
|
|
$
|
9,399
|
|
(3)
|
$
|
23,846
|
|
Purchase commitments(2)(4)
|
108,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
108,400
|
|
|||||
Total contractual obligations
|
$
|
113,680
|
|
|
$
|
5,536
|
|
|
$
|
3,631
|
|
|
$
|
9,399
|
|
|
$
|
132,246
|
|
(1)
|
Undiscounted lease payments for operating leases.
|
(2)
|
Certain inventory items under non-cancellable purchase orders.
|
(3)
|
Includes optional renewal periods for certain leases.
|
(4)
|
Excludes the purchase commitment of $47.3 million related to the acquisition of NantHealth, Inc.’s Connected Care business pursuant to the definitive agreement executed in January 2020.
|
|
Payments Due By Period
|
||||||||||||
|
Less than
1 Year
|
|
Between
1-3 Years
|
|
Between
3-5 Years
|
|
More than
5 Years
|
||||||
Minimum royalty commitment to Cercacor(1)
|
$
|
5,000
|
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
(1)
|
(1)
|
Subsequent to 2022, the royalty arrangement requires a $5.0 million minimum annual royalty payment unless the agreement is amended, restated or terminated.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
Exhibit
Number
|
|
Description of Document
|
|
||
3.1(1)
|
|
|
|
|
|
3.2(2)
|
|
|
|
|
|
4.1(1)
|
|
|
|
|
|
4.2(4)#
|
|
|
|
|
|
4.3*
|
|
|
|
|
|
10.1(1)#
|
|
|
|
|
|
10.2(5)#
|
|
|
|
|
|
10.3(16)
|
|
|
|
|
|
10.4(1)#
|
|
|
|
|
|
10.5(1)#
|
|
|
|
|
|
10.6(6)#
|
|
|
|
|
|
10.7(22)#
|
|
|
|
|
|
10.8(17)#
|
|
|
|
|
|
10.9(5)#
|
|
|
|
|
|
10.10(5)#
|
|
|
|
|
|
10.11(7)#
|
|
|
|
|
|
10.12(11)#
|
|
|
|
|
|
10.13(22)#
|
|
|
|
|
|
10.14(24)#
|
|
|
|
|
|
10.15(3)#
|
|
|
|
|
|
10.16(20)#
|
|
|
|
|
|
Exhibit
Number |
|
Description of Document
|
|
|
|
|
|
10.17(1)#
|
|
||
|
|
||
10.18(18)#
|
|
||
|
|
|
|
10.19(19)#
|
|
||
|
|
|
|
10.20(6)+
|
|
||
|
|
|
|
10.21(1)+
|
|
||
|
|
||
10.22(1)+
|
|
||
|
|
||
10.23(8)+
|
|
||
|
|
|
|
10.24(10)+
|
|
||
|
|
|
|
10.25(1)
|
|
||
|
|
|
|
10.26(9)
|
|
||
|
|
|
|
10.27(1)
|
|
||
|
|
|
|
10.28(1)
|
|
||
|
|
|
|
|
|
|
|
10.29(12)+
|
|
||
|
|
|
|
10.30(12)
|
|
||
|
|
|
|
10.31(12)
|
|
||
|
|
|
|
10.32(3)
|
|
||
|
|
|
|
10.33(12)
|
|
||
|
|
|
|
10.34(13)
|
|
||
|
|
|
|
10.35(14)
|
|
||
|
|
|
|
10.36(14)+
|
|
||
|
|
|
|
10.37(22)
|
|
||
|
|
|
|
10.38(21)#
|
|
||
|
|
|
Exhibit
Number |
|
Description of Document
|
|
|
|
10.39(21)#
|
|
|
|
|
|
10.40(21)#
|
|
|
|
|
|
10.41(21)#
|
|
|
|
|
|
21.1*
|
|
|
|
|
|
23.1*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32.1*
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
(1)
|
Incorporated by reference to the exhibits to the Registrant’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 Registrant’s Current Report on Form 8-K, filed on October 30, 2019. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(3)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K, filed on February 17, 2015. The number given in parentheses indicates the corresponding exhibit number in such Form 10-K.
|
(4)
|
Incorporated by reference to the exhibit to the Registrant’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.
|
(5)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K, filed on November 5, 2015 at 4:45 p.m. Eastern Time. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(6)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K, filed on March 4, 2009. The number given in parentheses indicates the corresponding exhibit number in such Form 10-K.
|
(7)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K, filed on February 15, 2013. The number given in parentheses indicates the corresponding exhibit number in such Form 10-K.
|
(8)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K, filed on June 5, 2008. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(9)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K, filed on January 31, 2011. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(10)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K filed February 14, 2014. The number given in parentheses indicates the corresponding exhibit number in such Form 10-K.
|
(11)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K, filed on January 17, 2008. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(12)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K, filed on February 24, 2016. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(13)
|
Incorporated by reference to the exhibit to the Registrant’s Quarterly Report on Form 10-Q, filed on August 3, 2016. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(14)
|
Incorporated by reference to the exhibit to the Registrant’s Quarterly Report on Form 8-K, filed on September 2, 2016. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(15)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K, filed on November 7, 2016. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(16)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K filed on August 2, 2017. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(17)
|
Incorporated by reference to the exhibit to the Registrant’s Current Report on Form 8-K filed on September 25, 2017. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(18)
|
Incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A (File No. 001-33642) filed on April 12, 2017.
|
(19)
|
Incorporated by reference to Appendix C to the Registrant’s Definitive Proxy Statement on Schedule 14A (File No. 001-33642) filed on April 12, 2017.
|
(20)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K filed February 28, 2018. The number given in parentheses indicates the corresponding exhibit number in such Form 10-K.
|
(21)
|
Incorporated by reference to the exhibit to the Registrant’s Quarterly Report on Form 10-Q filed May 7, 2018. The number given in parentheses indicates the corresponding exhibit number in such Form 10-Q.
|
(22)
|
Incorporated by reference to the exhibit to the Registrant’s Annual Report on Form 10-K filed February 26, 2019. The number given in parentheses indicates the corresponding exhibit number in such Form 10-K.
|
*
|
Filed herewith.
|
#
|
Indicates management contract or compensatory plan.
|
+
|
The SEC has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
|
ITEM 16.
|
FORM 10-K SUMMARY
|
Date:
|
February 19, 2020
|
|
By:
|
/s/ JOE KIANI
|
|
|
|
|
Joe Kiani
Chairman of the Board & Chief Executive Officer
|
SIGNATURE
|
|
TITLE(S)
|
|
DATE
|
|
|
|
||
/s/ JOE KIANI
|
|
Chairman of the Board & Chief Executive Officer
(Principal Executive Officer)
|
|
February 19, 2020
|
Joe Kiani
|
|
|
|
|
|
|
|
||
/s/ MICAH YOUNG
|
|
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
|
|
February 19, 2020
|
Micah Young
|
|
|
|
|
|
|
|
||
/s/ DAVID J. VAN RAMSHORST
|
|
Senior Vice President, Chief Accounting Officer
(Principal Accounting Officer)
|
|
February 19, 2020
|
David J. Van Ramshorst
|
|
|
|
|
|
|
|
|
|
/s/ STEVEN J. BARKER, M.D. PH.D.
|
|
Director
|
|
February 19, 2020
|
Steven J. Barker, M.D., Ph.D.
|
|
|
|
|
|
|
|
||
/s/ H MICHAEL COHEN
|
|
Director
|
|
February 19, 2020
|
H Michael Cohen
|
|
|
|
|
|
|
|
|
|
/s/ SANFORD FITCH
|
|
Director
|
|
February 19, 2020
|
Sanford Fitch
|
|
|
|
|
|
|
|
||
/s/ THOMAS HARKIN
|
|
Director
|
|
February 19, 2020
|
Thomas Harkin
|
|
|
|
|
|
|
|
|
|
/s/ ADAM MIKKELSON
|
|
Director
|
|
February 19, 2020
|
Adam Mikkelson
|
|
|
|
|
|
|
|
|
|
/s/ CRAIG REYNOLDS
|
|
Director
|
|
February 19, 2020
|
Craig Reynolds
|
|
|
|
|
|
|
|
|
|
/s/ JULIE A. SHIMER, PH.D
|
|
Director
|
|
February 19, 2020
|
Julie A. Shimer, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial Statements
|
|
Schedule
|
|
•
|
Inspecting a sample of deferred equipment agreements with fixed sensor commitments and evaluating the reasonableness of performance obligations, including lease components, identified by management in accordance with the relevant authoritative guidance.
|
•
|
Evaluating the reasonableness of management’s process for estimating standalone selling prices for a sample of items selected. Comparing estimated standalone selling price information to historical sales prices charged to customers, when such observable inputs were available. When actual sales price history was not available, evaluating the reasonableness of management’s estimate by comparing estimated selling prices to (i) sales prices charged to customers for products with similar features, functionality, and other similar economic and market conditions, (ii) contractual prices pursuant to Group Purchasing Organization contracts, or (iii) the Company’s historical pricing and discount practices, as applicable based on the facts and circumstances of the transaction.
|
•
|
Testing the design and operating effectiveness of internal controls related to the accounting for deferred equipment agreements, including controls over the identification of performance obligations and the determination of standalone selling price.
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
567,687
|
|
|
$
|
552,490
|
|
Short-term investments
|
120,000
|
|
|
—
|
|
||
Trade accounts receivable, net of allowance for doubtful accounts of $1,803 and $1,535 at December 28, 2019 and December 29, 2018, respectively
|
132,433
|
|
|
109,629
|
|
||
Inventories
|
115,871
|
|
|
94,732
|
|
||
Other current assets
|
60,071
|
|
|
32,426
|
|
||
Total current assets
|
996,062
|
|
|
789,277
|
|
||
Lease receivable, noncurrent
|
49,936
|
|
|
—
|
|
||
Deferred costs and other contract assets
|
16,214
|
|
|
122,906
|
|
||
Property and equipment, net
|
219,552
|
|
|
165,972
|
|
||
Intangible assets, net
|
27,251
|
|
|
27,924
|
|
||
Goodwill
|
22,350
|
|
|
23,297
|
|
||
Deferred tax assets
|
35,972
|
|
|
21,210
|
|
||
Other non-current assets
|
28,791
|
|
|
4,232
|
|
||
Total assets
|
$
|
1,396,128
|
|
|
$
|
1,154,818
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
54,548
|
|
|
$
|
40,388
|
|
Accrued compensation
|
54,705
|
|
|
49,486
|
|
||
Deferred revenue and other contract-related liabilities, current
|
25,939
|
|
|
32,054
|
|
||
Other current liabilities
|
37,027
|
|
|
24,627
|
|
||
Total current liabilities
|
172,219
|
|
|
146,555
|
|
||
Other non-current liabilities
|
56,035
|
|
|
39,198
|
|
||
Total liabilities
|
228,254
|
|
|
185,753
|
|
||
Commitments and contingencies (Note 21)
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value; 100,000 shares authorized; 53,696 and 53,085 shares issued and outstanding at December 28, 2019 and December 29, 2018, respectively
|
54
|
|
|
53
|
|
||
Treasury stock, 15,530 and 15,255 shares at December 28, 2019 and December 29, 2018, respectively
|
(526,580
|
)
|
|
(489,026
|
)
|
||
Additional paid-in capital
|
600,624
|
|
|
533,164
|
|
||
Accumulated other comprehensive loss
|
(6,718
|
)
|
|
(6,199
|
)
|
||
Retained earnings
|
1,100,494
|
|
|
931,073
|
|
||
Total stockholders’ equity
|
1,167,874
|
|
|
969,065
|
|
||
Total liabilities and stockholders’ equity
|
$
|
1,396,128
|
|
|
$
|
1,154,818
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
Revenue:
|
|
|
|
|
|
||||||
Product
|
$
|
936,408
|
|
|
$
|
829,874
|
|
|
$
|
738,242
|
|
Royalty and other revenue
|
1,429
|
|
|
28,415
|
|
|
52,006
|
|
|||
Total revenue
|
937,837
|
|
|
858,289
|
|
|
790,248
|
|
|||
Cost of goods sold
|
308,665
|
|
|
283,397
|
|
|
268,216
|
|
|||
Gross profit
|
629,172
|
|
|
574,892
|
|
|
522,032
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Selling, general and administrative
|
314,661
|
|
|
285,417
|
|
|
273,011
|
|
|||
Research and development
|
93,295
|
|
|
81,006
|
|
|
65,234
|
|
|||
Litigation settlement, award and/or defense costs
|
—
|
|
|
425
|
|
|
—
|
|
|||
Total operating expenses
|
407,956
|
|
|
366,848
|
|
|
338,245
|
|
|||
Operating income
|
221,216
|
|
|
208,044
|
|
|
183,787
|
|
|||
Non-operating income
|
12,950
|
|
|
5,732
|
|
|
2,013
|
|
|||
Income before provision for income taxes
|
234,166
|
|
|
213,776
|
|
|
185,800
|
|
|||
Provision for income taxes
|
37,950
|
|
|
20,233
|
|
|
61,011
|
|
|||
Net income
|
$
|
196,216
|
|
|
$
|
193,543
|
|
|
$
|
124,789
|
|
|
|
|
|
|
|
||||||
Net income per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
3.67
|
|
|
$
|
3.70
|
|
|
$
|
2.42
|
|
Diluted
|
$
|
3.44
|
|
|
$
|
3.45
|
|
|
$
|
2.23
|
|
|
|
|
|
|
|
||||||
Weighted-average shares used in per share calculations:
|
|
|
|
|
|
||||||
Basic
|
53,434
|
|
|
52,296
|
|
|
51,516
|
|
|||
Diluted
|
57,100
|
|
|
56,039
|
|
|
55,874
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
Net income
|
$
|
196,216
|
|
|
$
|
193,543
|
|
|
$
|
124,789
|
|
Other comprehensive gain (loss), net of tax:
|
|
|
|
|
|
||||||
Foreign currency translation gains (losses)
|
(519
|
)
|
|
(3,258
|
)
|
|
4,201
|
|
|||
Unrealized loss on marketable securities
|
—
|
|
|
—
|
|
|
(115
|
)
|
|||
Total comprehensive income
|
$
|
195,697
|
|
|
$
|
190,285
|
|
|
$
|
128,875
|
|
MASIMO CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
|
|||||||||||||||||||||||||||||
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
Total Stockholders’
Equity
|
||||||||||||||||||
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||||||
Balance at December 31, 2016
|
50,188
|
|
|
$
|
50
|
|
|
14,255
|
|
|
$
|
(404,276
|
)
|
|
$
|
382,263
|
|
|
$
|
(7,027
|
)
|
|
$
|
613,167
|
|
|
$
|
584,177
|
|
Stock options exercised
|
2,246
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
62,044
|
|
|
—
|
|
|
—
|
|
|
62,046
|
|
||||||
Restricted/Performance stock units vested
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,187
|
|
|
—
|
|
|
—
|
|
|
17,187
|
|
||||||
Repurchases of common stock
|
(804
|
)
|
|
—
|
|
|
804
|
|
|
(68,260
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68,260
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
124,789
|
|
|
124,789
|
|
||||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,201
|
|
|
—
|
|
|
4,201
|
|
||||||
Unrealized loss on marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(115
|
)
|
|
—
|
|
|
(115
|
)
|
||||||
Balance at December 30, 2017
|
51,636
|
|
|
52
|
|
|
15,059
|
|
|
(472,536
|
)
|
|
461,494
|
|
|
(2,941
|
)
|
|
737,956
|
|
|
724,025
|
|
||||||
Stock options exercised
|
1,608
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
44,421
|
|
|
—
|
|
|
—
|
|
|
44,422
|
|
||||||
Restricted/Performance stock units vested
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Shares paid for tax withholding
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168
|
)
|
|
—
|
|
|
—
|
|
|
(168
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,417
|
|
|
—
|
|
|
—
|
|
|
27,417
|
|
||||||
Repurchases of common stock
|
(196
|
)
|
|
—
|
|
|
196
|
|
|
(16,490
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,490
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193,543
|
|
|
193,543
|
|
||||||
Adoption of ASU 2016-16
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(426
|
)
|
|
(426
|
)
|
||||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,258
|
)
|
|
—
|
|
|
(3,258
|
)
|
||||||
Balance at December 29, 2018
|
53,085
|
|
|
53
|
|
|
15,255
|
|
|
(489,026
|
)
|
|
533,164
|
|
|
(6,199
|
)
|
|
931,073
|
|
|
969,065
|
|
||||||
Stock options exercised
|
851
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
28,348
|
|
|
—
|
|
|
—
|
|
|
28,349
|
|
||||||
Restricted/Performance stock units vested
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Shares paid for tax withholding
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(123
|
)
|
|
—
|
|
|
—
|
|
|
(123
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,235
|
|
|
—
|
|
|
—
|
|
|
39,235
|
|
||||||
Repurchases of common stock
|
(275
|
)
|
|
—
|
|
|
275
|
|
|
(37,554
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37,554
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
196,216
|
|
|
196,216
|
|
||||||
Adoption of ASU 2016-02
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,795
|
)
|
|
(26,795
|
)
|
||||||
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(519
|
)
|
|
—
|
|
|
(519
|
)
|
||||||
Balance at December 28, 2019
|
53,696
|
|
|
$
|
54
|
|
|
15,530
|
|
|
$
|
(526,580
|
)
|
|
$
|
600,624
|
|
|
$
|
(6,718
|
)
|
|
$
|
1,100,494
|
|
|
$
|
1,167,874
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
196,216
|
|
|
$
|
193,543
|
|
|
$
|
124,789
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
23,487
|
|
|
21,127
|
|
|
20,061
|
|
|||
Stock-based compensation
|
39,233
|
|
|
27,417
|
|
|
17,187
|
|
|||
Loss on disposal of equipment, intangibles and other assets
|
357
|
|
|
949
|
|
|
522
|
|
|||
Provision (benefit) for doubtful accounts
|
687
|
|
|
(439
|
)
|
|
251
|
|
|||
(Benefit) provision for amount due from former foreign agent
|
—
|
|
|
(2,016
|
)
|
|
10,477
|
|
|||
(Benefit) provision from deferred income taxes
|
(5,965
|
)
|
|
(8,274
|
)
|
|
17,276
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
(Increase) decrease in trade accounts receivable
|
(23,580
|
)
|
|
10,826
|
|
|
(19,772
|
)
|
|||
Increase in inventories
|
(21,257
|
)
|
|
(1,885
|
)
|
|
(24,014
|
)
|
|||
(Increase) decrease in other current assets
|
(8,536
|
)
|
|
3,843
|
|
|
(5,406
|
)
|
|||
Increase in lease receivable, net
|
(11,958
|
)
|
|
—
|
|
|
—
|
|
|||
Decrease (increase) in deferred costs and other contract assets
|
3,308
|
|
|
(17,935
|
)
|
|
(14,102
|
)
|
|||
(Increase) decrease in other non-current assets
|
(226
|
)
|
|
407
|
|
|
(10,771
|
)
|
|||
Increase (decrease) in accounts payable
|
9,934
|
|
|
5,211
|
|
|
(4,057
|
)
|
|||
Increase (decrease) in accrued compensation
|
5,338
|
|
|
10,195
|
|
|
(4,292
|
)
|
|||
Increase (decrease) in deferred revenue and other contract-related liabilities
|
7,739
|
|
|
1,420
|
|
|
(13,295
|
)
|
|||
Increase (decrease) in income taxes payable
|
4,079
|
|
|
(1,208
|
)
|
|
(72,087
|
)
|
|||
Increase in accrued liabilities
|
746
|
|
|
3,923
|
|
|
5,282
|
|
|||
Increase (decrease) in other non-current liabilities
|
2,038
|
|
|
(7,577
|
)
|
|
28,013
|
|
|||
Net cash provided by operating activities
|
221,640
|
|
|
239,527
|
|
|
56,062
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of short-term investments
|
(120,000
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of property and equipment
|
(68,375
|
)
|
|
(17,126
|
)
|
|
(43,684
|
)
|
|||
Increase in intangible assets
|
(4,117
|
)
|
|
(5,557
|
)
|
|
(3,079
|
)
|
|||
(Purchases of) proceeds from strategic investments
|
(5,189
|
)
|
|
453
|
|
|
(1,145
|
)
|
|||
Business acquisition, net of cash acquired
|
—
|
|
|
(3,922
|
)
|
|
—
|
|
|||
Net cash used in investing activities
|
(197,681
|
)
|
|
(26,152
|
)
|
|
(47,908
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
28,339
|
|
|
44,748
|
|
|
62,205
|
|
|||
Repurchases of common stock
|
(37,555
|
)
|
|
(18,478
|
)
|
|
(66,272
|
)
|
|||
Other
|
(123
|
)
|
|
(490
|
)
|
|
(71
|
)
|
|||
Net cash provided by (used in) financing activities
|
(9,339
|
)
|
|
25,780
|
|
|
(4,138
|
)
|
|||
Effect of foreign currency exchange rates on cash
|
814
|
|
|
(1,997
|
)
|
|
3,269
|
|
|||
Net increase in cash, cash equivalents and restricted cash
|
15,434
|
|
|
237,158
|
|
|
7,285
|
|
|||
Cash, cash equivalents and restricted cash at beginning of period
|
552,641
|
|
|
315,483
|
|
|
308,198
|
|
|||
Cash, cash equivalents and restricted cash at end of period
|
$
|
568,075
|
|
|
$
|
552,641
|
|
|
$
|
315,483
|
|
•
|
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.
|
|
|
|
|
|
|
|
|
|
Reported as
|
||||||||||||||
|
Adjusted Basis
Cost |
|
Gross Unrealized
Gains |
|
Gross Unrealized
(Losses) |
|
Estimated
Fair Value |
|
Cash and Cash
Equivalents
|
|
Short-Term
Investments |
||||||||||||
Cash
|
$
|
567,687
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
567,687
|
|
|
$
|
567,687
|
|
|
$
|
—
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
120,000
|
|
|
—
|
|
|
—
|
|
|
120,000
|
|
|
—
|
|
|
120,000
|
|
||||||
Subtotal
|
120,000
|
|
|
—
|
|
|
—
|
|
|
120,000
|
|
|
—
|
|
|
120,000
|
|
||||||
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Level 3:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
None
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total assets measured at fair value
|
$
|
687,687
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
687,687
|
|
|
$
|
567,687
|
|
|
$
|
120,000
|
|
|
Useful Lives
|
Aircraft and components
|
4 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
|
|
Year Ended
|
||||||||||
|
December 28,
2019 |
|
December 29,
2018 |
|
December 30,
2017 |
||||||
Warranty accrual, beginning of period
|
$
|
1,910
|
|
|
$
|
1,149
|
|
|
$
|
910
|
|
Accrual for warranties issued
|
1,715
|
|
|
1,549
|
|
|
1,061
|
|
|||
Changes in pre-existing warranties (including changes in estimates)(1)
|
1,130
|
|
|
551
|
|
|
332
|
|
|||
Settlements made
|
(1,360
|
)
|
|
(1,339
|
)
|
|
(1,154
|
)
|
|||
Warranty accrual, end of period
|
$
|
3,395
|
|
|
$
|
1,910
|
|
|
$
|
1,149
|
|
(1)
|
In connection with its adoption of ASC 842 on December 30, 2018, the Company recorded an adjustment to pre-existing warranties of $2.5 million related to equipment previously capitalized under its deferred equipment agreements where the embedded leases were treated as operating leases under prior guidance. See “Recently Adopted Accounting Pronouncements” in Note 2 to these consolidated financial statements for additional information related to the Company’s adoption of ASC 842.
|
|
Year Ended
|
||||||||||
|
December 28,
2019 |
|
December 29,
2018 |
|
December 30,
2017 |
||||||
Net income
|
$
|
196,216
|
|
|
$
|
193,543
|
|
|
$
|
124,789
|
|
Basic net income per share:
|
|
|
|
|
|
||||||
Weighted-average shares outstanding - basic
|
53,434
|
|
|
52,296
|
|
|
51,516
|
|
|||
Net income per basic share
|
$
|
3.67
|
|
|
$
|
3.70
|
|
|
$
|
2.42
|
|
Diluted net income per share:
|
|
|
|
|
|
||||||
Weighted-average shares outstanding - basic
|
53,434
|
|
|
52,296
|
|
|
51,516
|
|
|||
Diluted share equivalents: stock options and RSUs
|
3,666
|
|
|
3,743
|
|
|
4,358
|
|
|||
Weighted-average shares outstanding - diluted
|
57,100
|
|
|
56,039
|
|
|
55,874
|
|
|||
Net income per diluted share
|
$
|
3.44
|
|
|
$
|
3.45
|
|
|
$
|
2.23
|
|
|
Year Ended
|
||||||||||
|
December 28,
2019 |
|
December 29,
2018 |
|
December 30,
2017 |
||||||
Cash paid during the year for:
|
|
|
|
|
|
||||||
Interest expense
|
$
|
211
|
|
|
$
|
193
|
|
|
$
|
551
|
|
Income taxes
|
42,270
|
|
|
36,589
|
|
|
91,061
|
|
|||
Operating lease liabilities
|
6,676
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Non-cash operating activities:
|
|
|
|
|
|
||||||
ROU assets obtained in exchange for lease liabilities(1)
|
$
|
26,484
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Non-cash investing activities:
|
|
|
|
|
|
||||||
Unpaid purchases of property, plant and equipment
|
$
|
6,686
|
|
|
$
|
2,391
|
|
|
$
|
1,559
|
|
|
|
|
|
|
|
||||||
Non-cash financing activities:
|
|
|
|
|
|
||||||
Unsettled common stock proceeds from option exercises
|
$
|
14
|
|
|
$
|
4
|
|
|
$
|
161
|
|
Unsettled common stock repurchases
|
—
|
|
|
—
|
|
|
1,988
|
|
|||
|
|
|
|
|
|
||||||
Reconciliation of cash, cash equivalents and restricted cash:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
567,687
|
|
|
$
|
552,490
|
|
|
$
|
315,302
|
|
Restricted cash
|
388
|
|
|
151
|
|
|
181
|
|
|||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
|
$
|
568,075
|
|
|
$
|
552,641
|
|
|
$
|
315,483
|
|
(1)
|
In connection with its adoption of ASC 842 on December 30, 2018, the Company recorded a lessee operating lease ROU asset of $22.5 million. See “Recently Adopted Accounting Pronouncements” in Note 2 to these consolidated financial statements for additional information related to the Company’s adoption of ASC 842.
|
•
|
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 payable to Cercacor arising under the Cross-Licensing Agreement were $12.1 million, $10.9 million and $8.0 million for the years ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. The Company had $0.1 million in sales to Cercacor for the year ended December 28, 2019. The Company had less than $0.1 million in sales to Cercacor for each of the years ended December 29, 2018 and December 30, 2017.
|
•
|
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 $0.2 million for each of the years ended December 28, 2019, December 29, 2018 and December 30, 2017.
|
•
|
Patent Transfer and Licensing Agreement. The Company entered into a patent transfer and licensing agreement with Cercacor (the Patent Agreement) effective July 2015, pursuant to which, among other things, it purchased certain patents from Cercacor (the Purchased Patents) for an aggregate purchase price of $2.4 million. Pursuant to the Patent Agreement, the Company granted Cercacor an irrevocable, non-exclusive, worldwide license with respect to the products and services covered by the Purchased Patents.
|
•
|
Lease and Sublease Agreements - Effective December 14, 2019, the Company entered into a new lease agreement with Cercacor for approximately 34,000 of square feet of office, research and development space at one of the Company’s owned facilities in Irvine (Cercacor Lease). The term of the Cercacor Lease expires on December 31, 2024. 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 expired on December 15, 2019. The Company recognized approximately $0.4 million of combined lease and sublease income for each of the years ended December 28, 2019, December 29, 2018, and December 30, 2017.
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Raw materials
|
$
|
55,920
|
|
|
$
|
38,955
|
|
Work-in-process
|
10,966
|
|
|
9,036
|
|
||
Finished goods
|
48,985
|
|
|
46,741
|
|
||
Total
|
$
|
115,871
|
|
|
$
|
94,732
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Lease receivable, current
|
$
|
20,250
|
|
|
$
|
—
|
|
Prepaid expenses
|
11,746
|
|
|
10,582
|
|
||
Indirect taxes receivable
|
9,311
|
|
|
6,516
|
|
||
Prepaid income taxes
|
7,330
|
|
|
3,071
|
|
||
Customer notes receivable
|
4,847
|
|
|
3,780
|
|
||
Other
|
6,587
|
|
|
8,477
|
|
||
Total other current assets
|
$
|
60,071
|
|
|
$
|
32,426
|
|
|
December 28,
2019 |
||
Lease receivable
|
$
|
70,589
|
|
Allowance for credit loss
|
(403
|
)
|
|
Lease receivable, net
|
70,186
|
|
|
Less: Current portion of lease receivable
|
(20,250
|
)
|
|
Lease receivable, noncurrent
|
$
|
49,936
|
|
Fiscal year
|
Amount
|
||
2020
|
$
|
20,653
|
|
2021
|
16,541
|
|
|
2022
|
13,500
|
|
|
2023
|
9,380
|
|
|
2024
|
5,869
|
|
|
Thereafter
|
4,646
|
|
|
Total
|
$
|
70,589
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Prepaid contract allowances
|
$
|
8,098
|
|
|
$
|
7,036
|
|
Deferred commissions
|
5,260
|
|
|
5,085
|
|
||
Unbilled contract receivables
|
2,482
|
|
|
2,368
|
|
||
Equipment leased to customers, net(1)
|
374
|
|
|
108,417
|
|
||
Deferred costs and other contract assets
|
$
|
16,214
|
|
|
$
|
122,906
|
|
(1)
|
Formerly titled “Deferred cost of goods sold”. In connection with its adoption of ASC 842 on December 30, 2018, the Company recorded a reduction to equipment leased to customers, net, of $103.5 million as a result of the reclassification of certain embedded leases within the Company’s deferred equipment agreements with its customers from operating to sales-type leases. See “Recently Adopted Accounting Pronouncements” under Note 2 to these consolidated financial statements for additional information related to the Company’s adoption of ASC 842.
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Building and building improvements
|
$
|
101,731
|
|
|
$
|
88,449
|
|
Machinery and equipment
|
58,864
|
|
|
54,525
|
|
||
Land
|
40,216
|
|
|
23,762
|
|
||
Aircraft and vehicles
|
29,934
|
|
|
25,555
|
|
||
Computer equipment
|
19,650
|
|
|
16,582
|
|
||
Leasehold improvements
|
15,921
|
|
|
16,428
|
|
||
Tooling
|
15,346
|
|
|
14,212
|
|
||
Furniture and office equipment
|
11,049
|
|
|
10,459
|
|
||
Demonstration units
|
836
|
|
|
470
|
|
||
Construction-in-progress (CIP)
|
39,107
|
|
|
13,320
|
|
||
Total property and equipment
|
332,654
|
|
|
263,762
|
|
||
Accumulated depreciation
|
(113,102
|
)
|
|
(97,790
|
)
|
||
Property and equipment, net
|
$
|
219,552
|
|
|
$
|
165,972
|
|
|
Balance sheet classification
|
|
Amount
|
||
Lessee ROU assets
|
Other non-current assets
|
|
$
|
19,137
|
|
|
|
|
|
||
Lessee current lease liabilities
|
Other current liabilities
|
|
4,653
|
|
|
Lessee non-current lease liabilities
|
Other non-current liabilities
|
|
15,834
|
|
|
Total operating lease liabilities
|
|
|
$
|
20,487
|
|
Fiscal year
|
Amount
|
||
2020
|
$
|
5,280
|
|
2021
|
3,371
|
|
|
2022
|
2,165
|
|
|
2023
|
1,875
|
|
|
2024
|
1,756
|
|
|
Thereafter(1)
|
9,399
|
|
|
Total
|
23,846
|
|
|
Imputed interest
|
(3,359
|
)
|
|
Present value
|
$
|
20,487
|
|
Fiscal year
|
Amount
|
||
2019
|
$
|
6,926
|
|
2020
|
4,422
|
|
|
2021
|
2,384
|
|
|
2022
|
1,701
|
|
|
2023
|
1,568
|
|
|
Thereafter(1)
|
9,921
|
|
|
Total
|
$
|
26,922
|
|
|
Amount
|
||
Operating lease costs
|
$
|
6,790
|
|
Short-term lease costs
|
12
|
|
|
Sublease income
|
(232
|
)
|
|
Total lease cost
|
$
|
6,570
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Cost
|
|
|
|
||||
Patents
|
$
|
23,242
|
|
|
$
|
21,323
|
|
Customer relationships
|
7,669
|
|
|
7,669
|
|
||
Licenses-related party
|
7,500
|
|
|
7,500
|
|
||
Acquired technology
|
5,580
|
|
|
5,580
|
|
||
Trademarks
|
4,614
|
|
|
4,190
|
|
||
Capitalized software development costs
|
3,328
|
|
|
3,430
|
|
||
Other
|
5,466
|
|
|
5,466
|
|
||
Total cost
|
$
|
57,399
|
|
|
$
|
55,158
|
|
Accumulated amortization
|
|
|
|
||||
Patents
|
$
|
(9,251
|
)
|
|
$
|
(8,868
|
)
|
Licenses-related party
|
(5,984
|
)
|
|
(5,252
|
)
|
||
Customer relationships
|
(5,688
|
)
|
|
(4,921
|
)
|
||
Acquired technology
|
(4,182
|
)
|
|
(3,624
|
)
|
||
Trademarks
|
(2,195
|
)
|
|
(1,889
|
)
|
||
Capitalized software development costs
|
(2,137
|
)
|
|
(1,983
|
)
|
||
Other
|
(711
|
)
|
|
(697
|
)
|
||
Total accumulated amortization
|
(30,148
|
)
|
|
(27,234
|
)
|
||
Net carrying amount
|
$
|
27,251
|
|
|
$
|
27,924
|
|
Fiscal year
|
Amount
|
||
2020
|
$
|
4,172
|
|
2021
|
3,926
|
|
|
2022
|
3,199
|
|
|
2023
|
2,097
|
|
|
2024
|
1,768
|
|
|
Thereafter
|
12,089
|
|
|
Total
|
$
|
27,251
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Goodwill, beginning of period
|
$
|
23,297
|
|
|
$
|
20,617
|
|
Adjustments to goodwill from finalization of purchase price allocation
|
(651
|
)
|
|
3,402
|
|
||
Foreign currency translation adjustment
|
(296
|
)
|
|
(722
|
)
|
||
Goodwill, end of period
|
$
|
22,350
|
|
|
$
|
23,297
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Lessee ROU assets
|
$
|
19,137
|
|
|
$
|
—
|
|
Strategic investments
|
6,475
|
|
|
1,200
|
|
||
Prepaid deposits
|
3,022
|
|
|
2,881
|
|
||
Other
|
157
|
|
|
151
|
|
||
Total other assets, long-term
|
$
|
28,791
|
|
|
$
|
4,232
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Deferred revenue(1)
|
$
|
13,998
|
|
|
$
|
10,328
|
|
Accrued rebates and allowances
|
8,436
|
|
|
7,269
|
|
||
Accrued customer reimbursements(2)
|
5,739
|
|
|
16,194
|
|
||
Total deferred revenue and other contract liabilities
|
28,173
|
|
|
33,791
|
|
||
Less: Non-current portion of deferred revenue
|
(2,234
|
)
|
|
(1,737
|
)
|
||
Deferred revenue and other contract liabilities - current
|
$
|
25,939
|
|
|
$
|
32,054
|
|
(1)
|
In connection with its adoption of ASC 842 on December 30, 2018, the Company recorded a reduction to deferred revenue of approximately $1.1 million due to the acceleration of revenue as a result of the reclassification of certain embedded leases within the Company’s deferred equipment agreements with its customers from operating to sales-type leases. See “Recently Adopted Accounting Pronouncements” in Note 2 to these consolidated financial statements for additional information related to the Company’s adoption of ASC 842.
|
(2)
|
In connection with its adoption of ASC 842 on December 30, 2018, the Company recorded a reduction to accrued customer reimbursements of approximately $12.3 million related to the derecognition of liabilities and leased equipment assets for certain OEM equipment reimbursements. See “Recently Adopted Accounting Pronouncements” in Note 2 to these consolidated financial statements for additional information related to the Company’s adoption of ASC 842.
|
|
Amount
|
||
Deferred revenue, beginning of the period
|
$
|
10,328
|
|
Revenue deferred during the period
|
11,261
|
|
|
Recognition of revenue deferred in prior periods
|
(7,591
|
)
|
|
Deferred revenue, end of the period
|
$
|
13,998
|
|
|
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
|
$
|
201,874
|
|
|
$
|
319,513
|
|
|
$
|
150,928
|
|
|
$
|
39,515
|
|
|
$
|
711,830
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Accrued indirect taxes payable
|
$
|
7,545
|
|
|
$
|
6,465
|
|
Income tax payable
|
7,142
|
|
|
3,071
|
|
||
Accrued expenses
|
6,115
|
|
|
5,038
|
|
||
Lessee lease liabilities, current
|
4,653
|
|
|
—
|
|
||
Accrued warranty
|
3,395
|
|
|
1,910
|
|
||
Related party payables
|
3,024
|
|
|
4,000
|
|
||
Accrued legal fees
|
1,839
|
|
|
1,481
|
|
||
Accrued property taxes
|
1,629
|
|
|
791
|
|
||
Other
|
1,685
|
|
|
1,871
|
|
||
Total other current liabilities
|
$
|
37,027
|
|
|
$
|
24,627
|
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Income tax payable, noncurrent
|
$
|
21,509
|
|
|
$
|
21,522
|
|
Lessee lease liabilities, noncurrent
|
15,834
|
|
|
—
|
|
||
Unrecognized tax benefits
|
13,184
|
|
|
11,717
|
|
||
Deferred tax liabilities
|
3,052
|
|
|
2,956
|
|
||
Other
|
2,456
|
|
|
3,003
|
|
||
Total other non-current liabilities
|
$
|
56,035
|
|
|
$
|
39,198
|
|
|
Years Ended
|
||||||||||
|
December 28,
2019 |
|
December 29,
2018 |
|
December 30,
2017 |
||||||
Shares repurchased
|
275
|
|
(1)
|
196
|
|
(1)
|
804
|
|
|||
Average cost per share
|
$
|
136.61
|
|
|
$
|
84.12
|
|
|
$
|
84.90
|
|
Value of shares repurchased
|
$
|
37,554
|
|
|
$
|
16,490
|
|
|
$
|
68,260
|
|
(1)
|
Excludes shares withheld from the shares of its common stock actually issued in connection the vesting of PSU awards to satisfy certain U.S. federal and state tax withholding obligations.
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|||||||||||||||
|
Shares
|
|
Average
Exercise Price |
|
Shares
|
|
Average
Exercise
Price
|
|
Shares
|
|
Average
Exercise Price |
|||||||||
Options outstanding, beginning of period
|
5,676
|
|
|
$
|
43.61
|
|
|
6,953
|
|
|
$
|
36.26
|
|
|
8,521
|
|
|
$
|
28.56
|
|
Granted
|
545
|
|
|
140.56
|
|
|
564
|
|
|
98.47
|
|
|
928
|
|
|
86.69
|
|
|||
Canceled/Forfeited
|
(158
|
)
|
|
83.14
|
|
|
(233
|
)
|
|
67.45
|
|
|
(250
|
)
|
|
38.59
|
|
|||
Exercised
|
(851
|
)
|
|
33.32
|
|
|
(1,608
|
)
|
|
27.62
|
|
|
(2,246
|
)
|
|
27.63
|
|
|||
Options outstanding, end of period
|
5,212
|
|
|
$
|
54.23
|
|
|
5,676
|
|
|
$
|
43.61
|
|
|
6,953
|
|
|
$
|
36.26
|
|
Options exercisable, end of period
|
3,311
|
|
|
$
|
33.80
|
|
|
3,273
|
|
|
$
|
29.63
|
|
|
3,812
|
|
|
$
|
26.28
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
||||||||||||
|
Options Outstanding
|
|
Options
Exercisable
|
|
Options Outstanding
|
|
Options
Exercisable
|
||||||||
Range of Exercise Prices
|
Number of
Options
|
|
Average
Remaining
Contractual
Life
|
|
Number of
Options
|
|
Number of
Options
|
|
Average
Remaining
Contractual
Life
|
|
Number of
Options
|
||||
$15.00 to $35.00
|
2,287
|
|
|
3.35
|
|
2,240
|
|
|
2,956
|
|
|
4.24
|
|
2,560
|
|
$35.01 to $55.00
|
1,189
|
|
|
5.95
|
|
724
|
|
|
1,341
|
|
|
6.97
|
|
548
|
|
$55.01 to $75.00
|
53
|
|
|
6.69
|
|
23
|
|
|
72
|
|
|
7.75
|
|
20
|
|
$75.01 to $95.00
|
985
|
|
|
7.76
|
|
291
|
|
|
1,076
|
|
|
8.75
|
|
141
|
|
$95.01 to $115.00
|
144
|
|
|
8.61
|
|
26
|
|
|
160
|
|
|
9.54
|
|
4
|
|
$115.01 to $135.00
|
251
|
|
|
9.12
|
|
7
|
|
|
71
|
|
|
9.73
|
|
—
|
|
$135.01 to $160.00
|
303
|
|
|
9.63
|
|
—
|
|
|
—
|
|
|
0.00
|
|
—
|
|
Total
|
5,212
|
|
|
5.60
|
|
3,311
|
|
|
5,676
|
|
|
6.01
|
|
3,273
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|||||||||||||||
|
Units
|
|
Weighted Average
Grant Date Fair Value |
|
Units
|
|
Weighted Average
Grant Date Fair Value |
|
Units
|
|
Weighted Average
Grant Date Fair Value |
|||||||||
RSUs outstanding, beginning of period
|
2,707
|
|
|
$
|
95.54
|
|
|
2,708
|
|
|
$
|
95.51
|
|
|
2,706
|
|
|
$
|
95.40
|
|
Granted
|
100
|
|
|
133.57
|
|
|
7
|
|
|
99.05
|
|
|
33
|
|
|
86.42
|
|
|||
Canceled/Forfeited
|
(3
|
)
|
|
133.50
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
85.79
|
|
|||
Vested
|
(7
|
)
|
|
99.05
|
|
|
(8
|
)
|
|
88.40
|
|
|
(6
|
)
|
|
43.09
|
|
|||
RSUs outstanding, end of period
|
2,797
|
|
|
$
|
96.85
|
|
|
2,707
|
|
|
$
|
95.54
|
|
|
2,708
|
|
|
$
|
95.51
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|||||||||||||||
|
Units
|
|
Weighted Average
Grant Date Fair Value |
|
Units
|
|
Weighted Average
Grant Date Fair Value |
|
Units
|
|
Weighted Average
Grant Date Fair Value |
|||||||||
PSUs outstanding, beginning of period
|
313
|
|
|
$
|
88.34
|
|
|
233
|
|
|
$
|
90.70
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
128
|
|
|
133.50
|
|
|
197
|
|
|
86.95
|
|
|
248
|
|
|
90.71
|
|
|||
Canceled/Forfeited
|
—
|
|
|
—
|
|
|
(86
|
)
|
|
90.71
|
|
|
(15
|
)
|
|
90.87
|
|
|||
Vested
|
(29
|
)
|
|
90.69
|
|
|
(31
|
)
|
|
90.70
|
|
|
—
|
|
|
—
|
|
|||
PSUs outstanding, end of period
|
412
|
|
|
$
|
102.22
|
|
|
313
|
|
|
$
|
88.34
|
|
|
233
|
|
|
$
|
90.70
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
Risk-free interest rate
|
1.4% to 2.6%
|
|
2.3% to 3.1%
|
|
1.7% to 2.2%
|
Expected term
|
5.1 years to 5.2 years
|
|
5.2 years to 5.6 years
|
|
5.5 years to 5.6 years
|
Estimated volatility
|
28.2% to 30.0%
|
|
26.8% to 32.0%
|
|
29.7% to 32.1%
|
Expected dividends
|
0%
|
|
0%
|
|
0%
|
Weighted-average fair value of options granted
|
$42.29 per share
|
|
$31.85 per share
|
|
$27.81 per share
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
Cost of goods sold
|
$
|
445
|
|
|
$
|
334
|
|
|
$
|
351
|
|
Selling, general and administrative
|
30,450
|
|
|
21,391
|
|
|
13,272
|
|
|||
Research and development
|
8,340
|
|
|
5,692
|
|
|
3,564
|
|
|||
Total
|
$
|
39,235
|
|
|
$
|
27,417
|
|
|
$
|
17,187
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
Interest income
|
$
|
13,917
|
|
|
$
|
8,178
|
|
|
$
|
2,974
|
|
Realized and unrealized foreign currency loss
|
(627
|
)
|
|
(2,027
|
)
|
|
(270
|
)
|
|||
Interest expense
|
(328
|
)
|
|
(706
|
)
|
|
(678
|
)
|
|||
Other
|
(12
|
)
|
|
287
|
|
|
(13
|
)
|
|||
Total
|
$
|
12,950
|
|
|
$
|
5,732
|
|
|
$
|
2,013
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
United States
|
$
|
181,664
|
|
|
$
|
173,848
|
|
|
$
|
159,245
|
|
Foreign
|
52,502
|
|
|
39,928
|
|
|
26,555
|
|
|||
Total
|
$
|
234,166
|
|
|
$
|
213,776
|
|
|
$
|
185,800
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
30,218
|
|
|
$
|
20,418
|
|
|
$
|
38,777
|
|
State
|
5,273
|
|
|
3,075
|
|
|
1,940
|
|
|||
Foreign
|
8,424
|
|
|
5,014
|
|
|
3,018
|
|
|||
Subtotal
|
$
|
43,915
|
|
|
$
|
28,507
|
|
|
$
|
43,735
|
|
Deferred:
|
|
|
|
|
|
||||||
Federal
|
$
|
(3,732
|
)
|
|
$
|
(6,678
|
)
|
|
$
|
20,735
|
|
State
|
(1,985
|
)
|
|
(1,258
|
)
|
|
(3,420
|
)
|
|||
Foreign
|
(248
|
)
|
|
(338
|
)
|
|
(39
|
)
|
|||
Subtotal
|
(5,965
|
)
|
|
(8,274
|
)
|
|
17,276
|
|
|||
Total
|
$
|
37,950
|
|
|
$
|
20,233
|
|
|
$
|
61,011
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|||
Statutory regular federal income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State provision, net of federal benefit
|
1.1
|
|
|
0.7
|
|
|
(0.6
|
)
|
Nondeductible executive compensation
|
2.1
|
|
|
1.9
|
|
|
1.3
|
|
Research and development tax credits
|
(1.1
|
)
|
|
(1.4
|
)
|
|
(2.2
|
)
|
Foreign income taxed at different rates
|
(1.7
|
)
|
|
(2.0
|
)
|
|
(3.4
|
)
|
U.S. tax on foreign income, net
|
0.1
|
|
|
0.7
|
|
|
—
|
|
Impact of 2017 Tax Act
|
—
|
|
|
0.1
|
|
|
18.8
|
|
Withholding taxes on undistributed foreign earnings, net
|
—
|
|
|
(0.6
|
)
|
|
3.5
|
|
Excess stock-based compensation
|
(6.0
|
)
|
|
(9.4
|
)
|
|
(20.3
|
)
|
Derecognition of uncertain tax position
|
—
|
|
|
(1.5
|
)
|
|
—
|
|
Other
|
0.7
|
|
|
—
|
|
|
0.7
|
|
Total
|
16.2
|
%
|
|
9.5
|
%
|
|
32.8
|
%
|
|
December 28,
2019 |
|
December 29,
2018 |
||||
Deferred tax assets:
|
|
|
|
||||
Tax credits
|
$
|
6,438
|
|
|
$
|
5,672
|
|
Deferred revenue
|
13,948
|
|
|
331
|
|
||
Accrued liabilities
|
13,273
|
|
|
12,645
|
|
||
Stock-based compensation
|
7,926
|
|
|
6,615
|
|
||
Operating lease assets
|
4,174
|
|
|
—
|
|
||
Other
|
1,591
|
|
|
—
|
|
||
Total
|
47,350
|
|
|
25,263
|
|
||
Valuation allowance
|
—
|
|
|
—
|
|
||
Total deferred tax assets
|
$
|
47,350
|
|
|
$
|
25,263
|
|
|
|
|
|
||||
Deferred tax liabilities:
|
|
|
|
||||
Property and equipment
|
$
|
(6,604
|
)
|
|
$
|
(2,504
|
)
|
State taxes and other
|
(1,152
|
)
|
|
(857
|
)
|
||
Withholding taxes on undistributed foreign earnings
|
(2,829
|
)
|
|
(2,803
|
)
|
||
Operating lease liabilities
|
(3,845
|
)
|
|
—
|
|
||
Other
|
—
|
|
|
(845
|
)
|
||
Total deferred tax liabilities
|
(14,430
|
)
|
|
(7,009
|
)
|
||
Net deferred tax assets
|
$
|
32,920
|
|
|
$
|
18,254
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
||||
Unrecognized tax benefits (gross), beginning of period
|
$
|
15,412
|
|
|
$
|
16,157
|
|
Increase from tax positions in prior period
|
81
|
|
|
701
|
|
||
Increase from tax positions in current period
|
2,636
|
|
|
2,633
|
|
||
Settlements
|
—
|
|
|
(33
|
)
|
||
Lapse of statute of limitations
|
(1,120
|
)
|
|
(4,046
|
)
|
||
Unrecognized tax benefits (gross), end of period
|
$
|
17,009
|
|
|
$
|
15,412
|
|
|
Year Ended
December 28, 2019 |
|
Year Ended
December 29, 2018 |
|
Year Ended
December 30, 2017 |
|||||||||||||||
Geographic area by destination:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
United States (U.S.)
|
$
|
636,371
|
|
|
68.0
|
%
|
|
$
|
566,816
|
|
|
68.3
|
%
|
|
$
|
502,983
|
|
|
68.1
|
%
|
Europe, Middle East and Africa
|
183,363
|
|
|
19.6
|
|
|
160,910
|
|
|
19.4
|
|
|
138,689
|
|
|
18.8
|
|
|||
Asia and Australia
|
87,961
|
|
|
9.4
|
|
|
75,534
|
|
|
9.1
|
|
|
72,434
|
|
|
9.8
|
|
|||
North and South America (excluding U.S.)
|
28,713
|
|
|
3.0
|
|
|
26,614
|
|
|
3.2
|
|
|
24,136
|
|
|
3.3
|
|
|||
Total product revenue
|
$
|
936,408
|
|
|
100.0
|
%
|
|
$
|
829,874
|
|
|
100.0
|
%
|
|
$
|
738,242
|
|
|
100.0
|
%
|
|
Quarters Ended
|
||||||||||||||
Fiscal 2019
|
March 30,
2019 |
|
June 29,
2019 |
|
September 28,
2019 |
|
December 28,
2019 |
||||||||
Total revenue
|
$
|
231,664
|
|
|
$
|
229,652
|
|
|
$
|
229,011
|
|
|
$
|
247,510
|
|
Gross profit
|
151,642
|
|
|
154,339
|
|
|
156,268
|
|
|
166,923
|
|
||||
Operating income
|
56,023
|
|
|
52,004
|
|
|
51,632
|
|
|
61,557
|
|
||||
Net income
|
49,322
|
|
|
44,888
|
|
|
49,085
|
|
|
52,921
|
|
||||
Net income per share
|
|
|
|
|
|
|
|
||||||||
Basic(1)
|
$
|
0.93
|
|
|
$
|
0.84
|
|
|
$
|
0.92
|
|
|
$
|
0.99
|
|
Diluted(1)
|
$
|
0.87
|
|
|
$
|
0.79
|
|
|
$
|
0.86
|
|
|
$
|
0.92
|
|
|
Quarters Ended
|
||||||||||||||
Fiscal 2018
|
March 31,
2018 |
|
June 30,
2018 |
|
September 29,
2018 |
|
December 29,
2018 |
||||||||
Total revenue
|
$
|
212,953
|
|
|
$
|
211,621
|
|
|
$
|
210,583
|
|
|
$
|
223,132
|
|
Gross profit
|
143,661
|
|
|
142,147
|
|
|
140,753
|
|
|
148,331
|
|
||||
Operating income
|
53,885
|
|
|
51,612
|
|
|
48,641
|
|
|
53,906
|
|
||||
Net income
|
45,630
|
|
|
43,853
|
|
|
57,126
|
|
|
46,934
|
|
||||
Net income per share
|
|
|
|
|
|
|
|
||||||||
Basic(1)
|
$
|
0.88
|
|
|
$
|
0.84
|
|
|
$
|
1.09
|
|
|
$
|
0.88
|
|
Diluted(1)
|
$
|
0.82
|
|
|
$
|
0.79
|
|
|
$
|
1.02
|
|
|
$
|
0.83
|
|
MASIMO CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 28, 2019, December 29, 2018 and December 30, 2017
(in thousands)
|
||||||||||||||||
Description
|
Balance at
Beginning of Period
|
|
Additions Charged to
Expense and Other Accounts
|
|
Amounts Charged
Against Reserve
|
|
Balance at
End of Period
|
|||||||||
Year ended December 28, 2019
|
|
|
|
|
|
|
|
|||||||||
|
Allowance for doubtful accounts(1)
|
$
|
1,535
|
|
|
$
|
1,021
|
|
|
$
|
(350
|
)
|
|
$
|
2,206
|
|
|
Allowance for sales returns and allowances
|
432
|
|
|
1,696
|
|
|
(1,428
|
)
|
|
700
|
|
||||
Year ended December 29, 2018
|
|
|
|
|
|
|
|
|||||||||
|
Allowance for doubtful accounts
|
2,116
|
|
|
(486
|
)
|
|
(95
|
)
|
|
1,535
|
|
||||
|
Allowance for sales returns and allowances
|
424
|
|
|
1,416
|
|
|
(1,408
|
)
|
|
432
|
|
||||
Year ended December 30, 2017
|
|
|
|
|
|
|
|
|||||||||
|
Allowance for doubtful accounts
|
1,698
|
|
|
251
|
|
|
167
|
|
|
2,116
|
|
||||
|
Allowance for sales returns and allowances
|
605
|
|
|
1,646
|
|
|
(1,827
|
)
|
|
424
|
|
(1)
|
In connection with its adoption of ASC 842 on December 30, 2018, the Company recorded allowance for credit loss for lease receivable which is included in the allowance for doubtful accounts for the year ended December 28, 2019. See “Recently Adopted Accounting Pronouncements” in Note 2 to these consolidated financial statements for additional information related to the Company’s adoption of ASC 842.
|
•
|
100,000,000 shares of common stock, $0.001 par value (“Common Stock”); and
|
•
|
5,000,000 shares of preferred stock, $0.001 par value (“Preferred Stock”).
|
l
|
Dividend rights. The holders of outstanding shares of Common Stock are entitled to receive ratably the dividends out of funds legally available if the Company’s board of directors, in its discretion, determines to issue dividends and only at the times and in the amounts that the Company’s board of directors may determine and will depend upon the Company’s earnings, if any, capital requirements, operating and financial conditions and on such other factors as the Company’s board of directors deems relevant.
|
l
|
Liquidation rights. Upon the Company’s liquidation, dissolution or winding-up, the holders of Common Stock will be entitled to share ratably in all assets remaining, subject to the prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of Preferred Stock.
|
l
|
No preemptive or similar rights. The Common Stock does not carry any preemptive, conversion or subscription rights enabling a holder to subscribe for, or receive shares of, any class of Common Stock or any other securities convertible into shares of any class of Common Stock. The Common Stock is not subject to redemption or sinking fund provisions.
|
l
|
Anti-Takeover Provisions. The section below titled “Anti-Takeover Effects of Provisions of the Company’s Certificate of Incorporation and Delaware Law” is incorporated herein by reference.
|
•
|
the title and stated value of the Preferred Stock;
|
•
|
the number of shares of the Preferred Stock offered, the liquidation preference per share and the offering price of the Preferred Stock;
|
•
|
the dividend rate(s), period(s) or payment date(s) or method(s) of calculation applicable to the Preferred Stock;
|
•
|
whether dividends are cumulative or non-cumulative and, if cumulative, the date from which dividends on the Preferred Stock will accumulate;
|
•
|
the Company’s right, if any, to defer payment of dividends and the maximum length of any such deferral period;
|
•
|
the procedures for any auction and remarketing, if any, for the Preferred Stock;
|
•
|
the provisions for a sinking fund, if any, for the Preferred Stock;
|
•
|
the provision for redemption, if applicable, of the Preferred Stock;
|
•
|
any listing of the Preferred Stock on any securities exchange;
|
•
|
the terms and conditions, if applicable, upon which the Preferred Stock will be convertible into Common Stock, including the conversion price or manner of calculation and conversion period;
|
•
|
voting rights, if any, of the Preferred Stock;
|
•
|
whether interests in the Preferred Stock will be represented by depositary shares;
|
•
|
the relative ranking and preferences of the Preferred Stock as to dividend rights and rights upon the liquidation, dissolution or winding up of the Company’s affairs;
|
•
|
any limitations on issuance of any class or series of Preferred Stock ranking senior to or on a parity with the class or series of Preferred Stock as to dividend rights and rights upon liquidation, dissolution or winding up of the Company’s affairs; and
|
•
|
any other specific terms, preferences, rights, limitations or restrictions of the Preferred Stock.
|
•
|
senior to all classes or series of the Common Stock and to all of the Company’s equity securities ranking junior to the Preferred Stock;
|
•
|
on a parity with all of the equity securities the terms of which specifically provide that the Company’s equity securities rank on a parity with the Preferred Stock; and
|
•
|
junior to all of Company’s equity securities the terms of which specifically provide that the equity securities rank senior to the Preferred Stock.
|
Subsidiaries of the Registrant - 2019
|
|
The following are wholly-owned subsidiaries of the registrant, Masimo Corporation, a Delaware corporation:
|
|
|
|
Name of Subsidiary
|
State or Jurisdiction of Incorporation or Organization
|
Masimo Americas, Inc.
|
Delaware
|
Masimo de Mexico Holdings I LLC
|
Delaware
|
Masimo de Mexico Holdings II LLC
|
Delaware
|
Masimo Holdings LLC
|
Delaware
|
SpO2.com, Inc.
|
Delaware
|
SEDLine, Inc.
|
Delaware
|
Masimo Australia Pty Ltd
|
Australia
|
Masimo Öesterreich GmbH
|
Austria
|
Masimo Importacao e Distribuicao de Produtos Medicos Ltda
|
Brazil
|
Masimo Holdings LP
|
Cayman
|
Masimo China Medical Technology Co., Ltd.
|
China
|
Masimo Europe Ltd.
|
England and Wales
|
Masimo Hong Kong Limited
|
Hong Kong
|
Masimo Medical Technologies India Private Limited
|
India
|
Masimo Japan Kabushiki Kaisha
|
Japan
|
Masimo Mexico, S. de R.L. de C.V.
|
Mexico
|
Masimo Canada ULC
|
Nova Scotia
|
Masimo Peru Srl
|
Peru
|
Masimo Asia Pacific PTE. Ltd.
|
Singapore
|
Masimo International SARL
|
Switzerland
|
Masimo International Technologies SARL
|
Switzerland
|
Masimo Medikal Ürünler Ticaret Limited Şirketi
|
Turkey
|
Masimo Semiconductor, Inc.
|
Delaware
|
Masimo Sweden AB
|
Sweden
|
52 Discovery, LLC
|
California
|
Masimo 25 Sagamore, LLC
|
New Hampshire
|
Masimo Korea, LLC
|
South Korea
|
Masimo Polska sp. Z.o.o.
|
Poland
|
Masimo 17, LLC
|
California
|
Masimo (Shanghai) Industrial Co., Ltd.
|
China
|
Patient Doctor Technologies, Inc.
|
Delaware
|
Name of Subsidiary
|
State or Jurisdiction of Incorporation or Organization
|
Alton Office Property, LLC
|
Delaware
|
Alton Office Holdings, LLC
|
Delaware
|
OC Property Ventures LLC
|
Delaware
|
OC Property Shelter LLC
|
Delaware
|
Masimo Saudi Arabia for Trading, LLC
|
Saudi Arabia
|
VCCB Holdings, Inc.
|
Delaware
|
(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.
|
Dated: February 19, 2020
|
|
/s/ JOE KIANI
|
|
|
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.
|
Dated: February 19, 2020
|
|
/s/ MICAH YOUNG
|
|
|
Micah Young
|
|
|
Executive Vice President, Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
|
Dated: February 19, 2020
|
/s/ JOE KIANI
|
|
Joe Kiani
|
|
Chairman of the Board and Chief Executive Officer
|
|
(Principal Executive Officer)
|
Dated: February 19, 2020
|
/s/ MICAH YOUNG
|
|
Micah Young
|
|
Executive Vice President, Chief Financial Officer
|
|
(Principal Financial Officer)
|