Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2017shares | |
Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Sep. 30, 2017 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | MASI |
Entity Registrant Name | MASIMO CORP |
Entity Central Index Key | 937,556 |
Current Fiscal Year End Date | --12-30 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 51,671,144 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 289,944 | $ 305,970 |
Accounts receivable, net of allowance for doubtful accounts of $1,413 and $1,698 at September 30, 2017 and December 31, 2016, respectively. | 110,614 | 101,667 |
Inventories | 99,078 | 72,542 |
Other current assets | 46,844 | 27,048 |
Total current assets | 546,480 | 507,227 |
Deferred Costs, Noncurrent | 96,464 | 79,948 |
Property and equipment, net | 164,579 | 135,996 |
Intangible assets, net | 27,489 | 29,376 |
Goodwill | 20,676 | 19,780 |
Deferred tax assets | 39,029 | 38,975 |
Other non-current assets | 11,354 | 9,223 |
Total assets | 906,071 | 820,525 |
Current liabilities | ||
Accounts payable | 40,251 | 34,334 |
Accrued compensation | 34,660 | 43,180 |
Accrued and other current liabilities | 40,189 | 104,654 |
Deferred revenue | 57,369 | 38,198 |
Total current liabilities | 172,469 | 220,366 |
Deferred Credits and Other Liabilities | 16,059 | 14,587 |
Deferred Revenue, Noncurrent | 261 | 25,336 |
Total liabilities | 188,789 | 260,289 |
Commitments and contingencies | ||
Masimo Corporation stockholders’ equity: | ||
Preferred stock, $0.001 par value; 5,000 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016 | 0 | 0 |
Common stock, $0.001 par value; 100,000 shares authorized; 51,671 and 50,188 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 52 | 50 |
Treasury stock, 14,788 and 14,255 shares at September 30, 2017 and December 31, 2016, respectively | (449,537) | (404,276) |
Additional paid-in capital | 449,050 | 382,263 |
Accumulated other comprehensive loss | (2,757) | (7,027) |
Retained earnings | 720,474 | 589,226 |
Stockholders' Equity Attributable to Parent | 717,282 | 560,236 |
Total liabilities and equity | $ 906,071 | $ 820,525 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 1,413 | $ 1,698 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares outstanding | 51,671 | 50,188 |
Treasury stock, shares | 14,788 | 14,255 |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Income Statement - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Total product revenue | $ 181,271 | $ 160,286 | $ 542,170 | $ 488,183 |
Royalty and other revenue | 7,335 | 23,241 | ||
Royalty and other revenue | 12,421 | 30,757 | ||
Total revenue | 193,692 | 167,621 | 572,927 | 511,424 |
Cost of goods sold | 65,027 | 57,499 | 191,692 | 171,954 |
Gross profit | 128,665 | 110,122 | 381,235 | 339,470 |
Selling, general and administrative | 65,390 | 57,845 | 197,339 | 184,244 |
Research and development | 15,300 | 15,673 | 45,859 | 44,856 |
Total operating expenses | 80,690 | 73,518 | 243,198 | 229,100 |
Operating income | 47,975 | 36,604 | 138,037 | 110,370 |
Non-operating income (expense) | 287 | (546) | 1,319 | 423 |
Income before provision for income taxes | 48,262 | 36,058 | 139,356 | 110,793 |
Provision for income taxes | 9,027 | 8,285 | 8,108 | 25,420 |
Net income including noncontrolling interest | 39,235 | 27,773 | 131,248 | 85,373 |
Net income | 39,235 | 27,773 | 131,248 | 85,373 |
Foreign currency translation adjustments | 1,405 | (470) | 4,270 | (280) |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | $ 40,640 | $ 27,303 | $ 135,518 | $ 85,093 |
Basic | $ 0.75 | $ 0.56 | $ 2.55 | $ 1.73 |
Diluted | $ 0.70 | $ 0.52 | $ 2.35 | $ 1.62 |
Basic | 52,079 | 49,477 | 51,469 | 49,386 |
Diluted | 56,163 | 53,565 | 55,967 | 52,837 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Income Statement [Abstract] | ||||
Net income including noncontrolling interest | $ 39,235 | $ 27,773 | $ 131,248 | $ 85,373 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | $ 1,405 | $ (470) | $ 4,270 | $ (280) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Oct. 01, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 131,248 | $ 85,373 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 14,384 | 12,355 |
Stock-based compensation | 11,192 | 9,693 |
Gain (Loss) on Disposition of Property Plant Equipment | 420 | 478 |
Deconsolidation, Gain (Loss), Amount | 0 | (273) |
Deferred Income Tax Expense (Benefit) | 0 | 5,002 |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable | (17,277) | (13,398) |
Increase in inventories | (25,998) | (5,092) |
Increase (Decrease) in Other Current Assets | (11,099) | (12,911) |
Increase in deferred cost of goods sold | (16,166) | (11,278) |
Increase (Decrease) in Other Noncurrent Assets | (964) | (2,117) |
Increase in accounts payable | 3,748 | 9,386 |
Decrease in accrued compensation | (9,094) | (810) |
Decrease in accrued liabilities | (66,918) | (384) |
(Decrease) increase in deferred revenue | (5,905) | 10,934 |
Increase in other non-current liabilities | 1,456 | 1,072 |
Net cash provided by operating activities | 9,027 | 88,030 |
Cash flows from investing activities: | ||
Purchases of property and equipment, net | (37,830) | (13,697) |
Increase in intangible assets | (2,220) | (3,969) |
Payments to Acquire Long-term Investments | (1,145) | (200) |
Deconsolidation, Variable Interest Entity, Reduction of Cash | 0 | (763) |
Net cash used in investing activities | (41,195) | (18,629) |
Cash flows from financing activities: | ||
Proceeds from (Repayments of) Lines of Credit | 0 | 45,000 |
Repayments of Lines of Credit | 0 | (77,500) |
Payments of Debt Issuance Costs | 0 | (621) |
Repayments of capital lease obligations | (71) | (72) |
Proceeds from issuance of common stock | 55,709 | 26,063 |
Repurchases of common stock | (42,608) | (68,218) |
Net cash provided by (used in) financing activities | 13,030 | (75,348) |
Effect of foreign currency exchange rates on cash | 3,112 | (382) |
Net decrease in cash and cash equivalents | (16,026) | (6,329) |
Cash and cash equivalents at beginning of period | 305,970 | 132,317 |
Cash and cash equivalents at end of period | $ 289,944 | $ 125,988 |
Description of the Company
Description of the Company | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Description of the Company | Description of the Company Masimo Corporation (the Company) is a global medical technology company that develops, manufactures and markets a variety of noninvasive patient monitoring technologies. The Company’s mission is to improve patient outcomes and reduce cost of care by taking noninvasive monitoring to new sites and applications ® . The Company’s patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software and/or cables. The Company primarily sells its products to hospitals, emergency medical service providers, home care providers, physician offices, veterinarians, long term care facilities and consumers through its direct sales force, distributors and original equipment manufacturer (OEM) partners. The Company invented Masimo Signal Extraction Technology ® (SET ® ), which provides the capabilities of Measure-through Motion and Low Perfusion ™ pulse oximetry to address the primary limitations of conventional pulse oximetry. Over the years, the Company’s product offerings have expanded significantly to also include noninvasive optical blood constituent monitoring, optical organ oximetry monitoring, electrical brain function monitoring, acoustic respiration monitoring and optical gas monitoring. The Company also developed the Root ® patient monitoring and connectivity platform and the Masimo Patient SafetyNet 1 remote patient surveillance monitoring system. These solutions and related products are based upon Masimo SET ® , rainbow ® and other proprietary algorithms. These software-based technologies are incorporated into a variety of product platforms depending on customers’ specifications. In addition, these technologies are supported by a substantial intellectual property portfolio that the Company has built through internal development, acquisitions and license agreements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, including normal recurring accruals, necessary to present fairly the Company’s condensed consolidated financial statements. The accompanying condensed consolidated balance sheet as of December 31, 2016 was derived from the Company’s audited consolidated financial statements at that date. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (fiscal year 2016 ), filed with the SEC on February 15, 2017 . The results for the nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the fiscal year ending December 30, 2017 (fiscal year 2017 ) or for any other interim period or for any future year. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In accordance with GAAP, current authoritative guidance is applied when determining whether an entity is subject to consolidation. Fiscal Periods The Company follows a conventional 52/53 week fiscal year. Under a conventional 52/53 week fiscal year, a 52 week fiscal year includes four quarters of 13 fiscal weeks while a 53 week fiscal year includes three 13 fiscal week quarters and one 14 fiscal week quarter. The Company’s last 53 week fiscal year was fiscal year 2014. Fiscal year 2017 is a 52 week fiscal year. All references to years in these notes to condensed consolidated financial statements are fiscal years unless otherwise noted. 1 The use of the trademark Patient SafetyNet is under license from the University HealthSystem Consortium. Use of Estimates The Company prepares its financial statements in conformity with GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the determination of accounts receivable allowances, inventory reserves, warranty reserves, rebate accruals, valuation of the Company’s stock options, goodwill valuation, deferred taxes and any associated valuation allowances, distributor channel inventory, royalty revenues, deferred revenue, uncertain income tax positions, litigation costs and related accruals. Actual results could differ from such estimates. Reclassifications Certain amounts in the accompanying condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. Fair Value Measurements Authoritative guidance describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value: ● 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. Pursuant to current authoritative guidance, entities are allowed an irrevocable option to elect the fair value for the initial and subsequent measurement for specified financial assets and liabilities on a contract-by-contract basis. The Company did not elect to apply the fair value option under this guidance to specific assets or liabilities on a contract-by-contract basis. There were no transfers between Level 1, Level 2 and Level 3 inputs during the nine months ended September 30, 2017 . The Company carries cash and cash equivalents at cost, which approximates fair value. As of September 30, 2017 and December 31, 2016 , the Company did not have any short-term investments or other financial assets that were required to be measured under the fair value hierarchy. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity from date of purchase of three months or less , or highly liquid investments that are readily convertible into known amounts of cash, to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consist of trade receivables recorded upon recognition of revenue for product revenues, reduced by reserves for estimated bad debts and returns. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Credit is extended based on evaluation of the customer’s financial condition. Collateral is generally not required. The allowance for doubtful accounts is determined based on historical write-off experience, current customer information and other relevant factors, including specific identification of past due accounts, based on the age of the receivable in excess of the contemplated or contractual due date. Accounts are charged off against the allowance when the Company believes they are uncollectible. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using a standard cost method, which approximates the first in, first out method, and includes material, labor and overhead costs. Inventory reserves are recorded for inventory items that have become excess or obsolete or are no longer used in current production and for inventory items that have a market price less than carrying value in inventory. Property and Equipment Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows: Useful Lives Aircraft and components 10 to 20 years Buildings 39 years Building improvements 7 to 15 years Computer equipment 2 to 6 years Demonstration units 3 years Furniture and office equipment 2 to 6 years Leasehold improvements Lesser of useful life or term of lease Machinery and equipment 5 to 7 years Tooling 3 years Vehicles 5 years Land is not depreciated and construction-in-progress is not depreciated until placed in service. Normal repair and maintenance costs are expensed as incurred, whereas significant improvements that materially increase values or extend useful lives are capitalized and depreciated over the remaining estimated useful lives of the related assets. Upon sale or retirement of depreciable assets, the related cost and accumulated depreciation or amortization are removed from the accounts and any gain or loss on the sale or retirement is recognized in income. Intangible Assets The Company’s policy is to renew its patents and trademarks. Total renewal costs for patents and trademarks for the nine months ended September 30, 2017 and October 1, 2016 were $0.5 million and $0.4 million , respectively. As of September 30, 2017 , the weighted-average number of years until the next renewal was one year for patents and six years for trademarks. Costs to renew patents and trademarks are capitalized and amortized over the remaining useful life of the intangible asset. The Company continually evaluates the amortization period and carrying basis of patents and trademarks to determine whether any events or circumstances warrant a revised estimated useful life or reduction in value. Capitalized application costs are charged to operations when it is determined that the patent or trademark will not be obtained or is abandoned. Impairment of Goodwill, Intangible Assets and Other Long-Lived Assets Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets. Goodwill is not amortized, but instead is tested annually for impairment, or more frequently when events or changes in circumstances indicate that goodwill might be impaired. In assessing goodwill impairment for each of its reporting units, the Company has the option to first assess the qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company’s qualitative assessment of the recoverability of goodwill considers various macroeconomic, industry-specific and Company-specific factors, including: (i) severe adverse industry or economic trends; (ii) significant Company-specific actions; (iii) current, historical or projected deterioration of the Company’s financial performance; or (iv) a sustained decrease in the Company’s market capitalization below its net book value. If, after assessing the totality of events or circumstances, the Company determines it is unlikely that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, then the Company is required to perform the first step of the two-step impairment test by comparing the fair value of the reporting unit, determined using future projected discounted operating cash flows, with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired; otherwise, goodwill is considered impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit goodwill with the carrying amount of goodwill. The Company also has the option to bypass the qualitative assessment and proceed directly to performing the first step of the two-step goodwill impairment test. The Company may resume performing the qualitative assessment in any subsequent period. The annual impairment test is performed during the fourth fiscal quarter. The Company reviews long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. No impairment of goodwill, intangible assets or other long-lived assets was recorded during the three and nine months ended September 30, 2017 and October 1, 2016 . Revenue Recognition and Deferred Revenue The Company follows the current authoritative guidance for revenue recognition. Based on these requirements, the Company recognizes revenue from the sale of products or services when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured. In the case of the license or sale of software that does not function together with hardware components to provide the essential functionality of the hardware, revenue is recognized pursuant to the software revenue recognition guidance. The Company derives the majority of its revenue from four primary sources: (i) direct sales under long-term sensor purchase agreements with end-user hospitals where the Company provides up-front monitoring equipment at no up-front charge in exchange for a multi-year sensor purchase commitment, (ii) other direct sales of noninvasive monitoring solutions to end-user hospitals, emergency medical response organizations and other direct customers; (iii) sales of noninvasive monitoring solutions to distributors who then typically resell to end-user hospitals, emergency medical response organizations and other direct customers; and (iv) sales of integrated circuit boards to OEM customers who incorporate the Company’s embedded software technology into their multiparameter monitoring devices. The Company enters into agreements to sell its noninvasive monitoring solutions and services, sometimes as part of multiple deliverable arrangements that include various combinations of products and services. While the majority of the Company’s sales transactions contain standard business terms and conditions, there are some transactions that contain non-standard business terms and conditions. As a result, contract interpretation and analysis is sometimes required to determine the appropriate accounting, including: (i) how the arrangement consideration should be allocated among the deliverables when multiple deliverables exist, (ii) when to recognize revenue on the deliverables, and (iii) whether undelivered elements are essential to the functionality of the delivered elements. Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition. In the case of multiple deliverable arrangements, the authoritative guidance provides a hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence (VSOE) of selling price, (ii) third-party evidence of selling price (TPE), and (iii) best estimate of the selling price (ESP). VSOE of selling price is defined as the price charged when the same element is sold separately. VSOE generally exists only when the deliverable is sold separately and is the price actually charged for that deliverable. TPE generally does not exist for the majority of the Company’s products. The objective of ESP is to determine the price at which the Company would transact a sale if the product was sold on a stand-alone basis. In the absence of VSOE and TPE, the Company determines ESP for its products by considering multiple factors including, but not limited to, features and functionality of the product, geographies, type of customer, contractual prices pursuant to Group Purchasing Organization (GPO) contracts, the Company’s pricing and discount practices, and market conditions. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. Most of the Company’s products in a multiple deliverable arrangement qualify as separate units of accounting. In the case of the Company’s monitoring equipment containing embedded Masimo SET ® or rainbow SET ™ software, the Company has determined that the hardware and software components function together to deliver the equipment’s essential functionality and, therefore, represent a single deliverable. However, software deliverables, such as rainbow ® parameter software, which do not function together with hardware components to provide the equipment’s essential functionality, are accounted for under software revenue recognition guidance. The revenue for these multiple-element arrangements is allocated to the software deliverables and the non-software deliverables based on the relative selling prices of all of the deliverables in the arrangement using the hierarchy in the revenue recognition accounting guidance for arrangements with multiple deliverables. Sales under long-term sensor purchase contracts are generally structured such that the Company agrees to provide at no up-front charge certain monitoring-related equipment, software, installation, training and/or warranty support in exchange for the hospital’s agreement to purchase sensors over the term of the agreement, which generally ranges from three to six years. These contracts generally do not provide for any payments that are not dependent upon the Company’s future delivery of sensors, which are essential to the functionality of the monitoring equipment and, therefore, represent a substantive performance obligation. As a result, the Company generally does not recognize any revenue when the monitoring and related equipment and software are delivered to the hospitals, but rather recognizes revenue for these delivered elements on a pro-rata basis as the sensors are delivered under the long-term purchase commitment, when installation and training are complete. Accordingly, the cost of the monitoring and related equipment initially placed at the hospitals is deferred and amortized to cost of goods sold over the life of the underlying long-term sensor purchase contract. In cases where such contracts do provide for guaranteed payments that are unrelated to the future delivery of sensors, the Company recognizes the net present value of such payments as revenue from the monitoring and related equipment and expenses the cost of such equipment to cost of goods sold, as the equipment is delivered and when installation and training are complete. Some of the Company’s long-term sensor contracts also contain provisions for certain payments to be made directly to the end-user hospital customer at the inception of the arrangement. These payments are generally treated as prepaid discounts which are deferred and amortized on a straight-line basis as contra-revenue over the life of the underlying long-term sensor purchase contract. Many of the Company’s distributors purchase sensor products that they then resell to end-user hospitals that are typically fulfilling their purchase obligations to the Company under such end-user hospital’s long-term sensor purchase commitments. Upon shipment to the distributor, revenue is deferred until the distributor ships the product to the Company’s end-user customers based on an estimate of the inventory held by these distributors at the end of the accounting period. The Company also earns revenue from the sale of integrated circuit boards and other products, as well as from rainbow ® parameter software licenses, to OEMs under various agreements. Revenue from the sale of products to the OEMs is generally recognized at the time of shipment. Revenue related to software licenses to OEMs is generally recognized upon shipment of the OEM’s product to its customers, as represented to the Company by the OEM. The Company also provides certain customers with the ability to purchase sensors under rebate programs. Under these programs, the customers may earn rebates based on their purchasing activity. The Company estimates and provides allowances for these programs at the time of sale as a reduction to revenue. In general, customers do not have a right of return for credit or refund. However, the Company allows returns under certain circumstances. At the end of each period, the Company estimates and accrues for these returns as a reduction to revenue and accounts receivable. The Company estimates returns based on several factors, including contractual limitations and past returns history. The majority of the Company’s royalty and other revenue arises from an agreement with Medtronic plc (Medtronic, formerly Covidien Ltd.) that provides for quarterly royalty payments to the Company based upon U.S. sales of certain Medtronic products. An estimate of these royalty revenues is recorded quarterly in the period earned based on the prior quarter’s historical results, adjusted for any new information or trends known to management at the time of estimation. This estimated revenue is adjusted prospectively when the Company receives the Medtronic royalty report, approximately sixty days after the end of the previous quarter. From time-to-time, the Company also recognizes revenue upon the achievement of pre-agreed milestones related to non-recurring engineering (NRE) services provided for certain OEM customers. Costs incurred by the Company related to these NRE services are generally deferred until such time that the milestones are achieved and the associated revenue is recognized. Product Warranty The Company generally provides a warranty against defects in material and workmanship for a period ranging fro m six to forty-eight months, depending on the product type. In traditional sales activities, including direct and OEM sales, the Company establishes an accrued liability for the estimated warranty costs at the time of revenue recognition, with a corresponding provision to cost of sales. Customers may also purchase extended warranty coverage separately or as part of a long-term sensor purchase agreement. Revenue related to extended warranty coverage is recognized over the extended life of the contract and the related extended warranty costs are expensed as incurred. Changes in the product warranty accrual were as follows (in thousands): Nine Months Ended September 30, October 1, Warranty accrual, beginning of period $ 910 $ 1,222 Accrual for warranties issued 712 722 Changes to pre-existing warranties (including changes in estimates) (116 ) 99 Settlements made (486 ) (751 ) Warranty accrual, end of period $ 1,020 $ 1,292 Litigation Costs and Contingencies The Company records a charge equal to at least the minimum estimated liability for a loss contingency or litigation settlement when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements, and (ii) the range of loss can be reasonably estimated. The determination of whether a loss contingency or litigation settlement is probable or reasonably possible involves a significant amount of management judgment, as does the estimation of the range of loss given the nature of contingencies. Liabilities related to litigation settlements with multiple elements are recorded based on the fair value of each element. Legal and other litigation related expenses are recognized as the services are provided. The Company records insurance and other indemnity recoveries for litigation expenses when both of the following conditions are met: (a) the recovery is probable, and (b) collectability is reasonably assured. Insurance recoveries are only recorded to the extent the litigation costs to which they relate have been incurred and recognized in the financial statements. Comprehensive Income Authoritative accounting guidance establishes requirements for reporting and disclosure of comprehensive income and its components. Comprehensive income includes foreign currency translation adjustments and any related tax benefits that have been excluded from net income and reflected in stockholders’ equity. The change in accumulated other comprehensive loss was as follows (in thousands): Nine Months Ended Accumulated other comprehensive loss, beginning of period $ (7,027 ) Unrealized gains from foreign currency translation 4,270 Accumulated other comprehensive loss, end of period $ (2,757 ) Net Income Per Share Basic net income per share is computed by dividing net income by the weighted-average number of shares outstanding during the period. Net income per diluted share i s computed by dividing the net income by the weighted-average number of shares and potential shares outstanding during the period, if the effect of potential shares is dilutive. Potential shares include incremental shares of stock issuable upon the exercise of stock options and the vesting of both restricted share units (RSUs) and performance share units (PSUs). For the three and nine months ended September 30, 2017 , weighted options to purchase 0.6 million and 0.2 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the effect of including such shares would have been antidilutive in the applicable period. For the three and nine months ended October 1, 2016 , weighted options to purchase less than 0.1 million and 1.4 million shares of common stock, respectively, were outstanding, but were not included in the computation of diluted net income per share because the effect of including such shares would have been antidilutive in the applicable period. For the three and nine months ended September 30, 2017 and October 1, 2016 , certain RSUs were considered contingently issuable shares as their vesting is contingent upon the occurrence of certain future events. Since such events had not occurred and were not considered probable of occurring as of September 30, 2017 and October 1, 2016 , 2.7 million weighted average shares related to such RSUs have been excluded from the calculation of potential shares. A reconciliation of basic and diluted net income per share is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Net income $ 39,235 $ 27,773 $ 131,248 $ 85,373 Basic net income per share: Weighted-average shares outstanding - basic 52,079 49,477 51,469 49,386 Net income per basic share $ 0.75 $ 0.56 $ 2.55 $ 1.73 Diluted net income per share: Weighted-average shares outstanding - basic 52,079 49,477 51,469 49,386 Diluted share equivalent: stock options and RSUs 4,084 4,088 4,498 3,451 Weighted-average shares outstanding - diluted 56,163 53,565 55,967 52,837 Net income per diluted share $ 0.70 $ 0.52 $ 2.35 $ 1.62 Supplemental Cash Flow Information Supplemental cash flow information includes the following (in thousands): Nine Months Ended September 30, October 1, Cash paid during the year for: Interest (net of amounts capitalized) $ 432 $ 2,603 Income taxes 86,759 25,753 Noncash investing and financing activities: Unpaid purchases of property, plant and equipment $ 3,349 $ 1,232 Unsettled common stock proceeds from option exercises 113 476 Unsettled stock repurchases 2,653 — Seasonality The healthcare business in the United States and overseas is subject to quarterly fluctuations in hospital and other alternative care admissions. Historically, the Company has typically experienced higher product revenues during the traditional “flu season” that often increases hospital and acute care facility admissions in the Company’s first and fourth fiscal quarters. At the same time, the Company has frequently experienced a sequential decline in product revenues in its second and/or third fiscal quarters, primarily due to the summer vacation season during which the flu season has moderated and people tend to avoid and/or delay elective procedures. Because the Company’s non-sales variable operating expenses often do not fluctuate in the same manner as its quarterly product sales, its quarterly operating income may fluctuate disproportionately to its quarterly revenue. Recently Issued Accounting Pronouncements In September 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The new standard, among other things, provides additional implementation guidance with respect to Accounting Standards Codification (ASC) Topic 606 and ASC Topic 842. ASU 2017-13 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard, but does not expect it to have a material impact on its implementation strategies or its consolidated financial statements upon adoption. In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic718): Scope of Modification Accounting (ASU 2017-09). The new standard is intended to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in ASC Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this new standard provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply “modification accounting” to such changes. ASU 2017-09 will become effective for all entities for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (ASU 2017-04) . The new standard is intended to eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, a goodwill impairment charge will be based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 is effective for annual and interim fiscal reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (ASU 2017-01) . The new standard is intended to clarify the definition of a business and requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the set of transferred assets and activities is not considered to be a business under ASU 2017-01. ASU 2017-01 also requires a business to include at least one substantive process and narrows the definition of business outputs. The new standard will be effective on January 1, 2018, and early adoption is permitted with prospective application to any business development transaction. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18). The new standard is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory (ASU 2016-16). The new standard eliminates the exception that allowed the income tax consequences of an intra-entity transfer of assets other than inventory to be deferred until the transferred asset was sold to a third party or otherwise recovered through use, and now requires recognition of such income tax consequences at the time the non-inventory asset is transferred. ASU 2016-16 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15) . The new standard amended the existing accounting standards for the Statement of Cash Flows and provides guidance on eight specific cash flow issues. ASU 2016-15 is |
Variable Interest Entity (VIE)
Variable Interest Entity (VIE) | 9 Months Ended |
Sep. 30, 2017 | |
Variable Interest Entity [Abstract] | |
Variable Interest Entity (VIE) | Variable Interest Entity (VIE) The Company follows authoritative guidance for the consolidation of a VIE, which requires an enterprise to determine whether its variable interest gives it a controlling financial interest in a VIE. Determination about whether an enterprise should consolidate a VIE is required to be evaluated continuously as changes to existing relationships or future transactions may result in consolidating or deconsolidating the VIE. Cercacor is an independent entity that was spun off from the Company to its stockholders in 1998. Joe Kiani, the Company’s Chairman and Chief Executive Officer (CEO), is also the Chairman and CEO of Cercacor. The Company is a party to a Cross-Licensing Agreement with Cercacor, which was most recently amended and restated effective January 1, 2007 (the Cross-Licensing Agreement), that governs each party’s rights to certain intellectual property held by the two companies. The Company is also a party to various other agreements with Cercacor. As a result of changes in the capital structure of Cercacor, as well as certain of its contractual relationships with the Company, the Company completed a re-evaluation of the authoritative consolidation guidance during the first quarter of 2016 and determined that although Cercacor remained a VIE, the Company was no longer its primary beneficiary as it could no longer be deemed to have the power to direct the activities of Cercacor that most significantly impact Cercacor’s economic performance and had no obligation to absorb Cercacor’s losses pursuant to the Company’s on-going contractual relationships with Cercacor. Based on such determination, the Company discontinued consolidating Cercacor within its consolidated financial statements effective as of January 3, 2016. However, Cercacor continues to be a related party following its deconsolidation. The Company recognized a gain of $0.3 million upon such deconsolidation, which has been reported within non-operating income in the accompanying condensed consolidated statement of operations. See Note 4 to these condensed consolidated financial statements for a description of the Company’s continuing business relationships with Cercacor. Cercacor is an independent entity that was spun off from the Company to its stockholders in 1998. Joe Kiani, the Company’s Chairman and Chief Executive Officer (CEO), is also the Chairman and CEO of Cercacor. The Company is a party to a Cross-Licensing Agreement with Cercacor, which was most recently amended and restated effective January 1, 2007 (the Cross-Licensing Agreement), that governs each party’s rights to certain intellectual property held by the two companies. The Company is also a party to various other agreements with Cercacor. As a result of changes in the capital structure of Cercacor, as well as certain of its contractual relationships with the Company, the Company completed a re-evaluation of the authoritative consolidation guidance during the first quarter of 2016 and determined that although Cercacor remained a VIE, the Company was no longer its primary beneficiary as it could no longer be deemed to have the power to direct the activities of Cercacor that most significantly impact Cercacor’s economic performance and had no obligation to absorb Cercacor’s losses pursuant to the Company’s on-going contractual relationships with Cercacor. Based on such determination, the Company discontinued consolidating Cercacor within its consolidated financial statements effective as of January 3, 2016. However, Cercacor continues to be a related party following its deconsolidation. The Company recognized a gain of $0.3 million upon such deconsolidation, which has been reported within non-operating income in the accompanying condensed consolidated statement of operations. See Note 4 to these condensed consolidated financial statements for a description of the Company’s continuing business relationships with Cercacor. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company’s Chairman and CEO is also the Chairman and CEO of Cercacor. The Company is a party to the following agreements with Cercacor: • 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 . Actual aggregate royalty liabilities to Cercacor under the license were $2.1 million and $1.6 million for the three months ended September 30, 2017 and October 1, 2016 , respectively. Actual aggregate royalty liabilities to Cercacor under the license were $5.6 million and $4.7 million for the nine months ended September 30, 2017 and October 1, 2016 , respectively. • Administrative Services Agreement - The Company is a party to an administrative services agreement with Cercacor (G&A Services Agreement), which governs certain general and administrative services that the Company provides to Cercacor. Amounts charged by the Company pursuant to the G&A Services Agreement were less than $0.1 million and $0.1 million for the three and nine months ended September 30, 2017 and October 1, 2016 , respectively. • Sublease Agreement - In March 2016, the Company entered into a sublease agreement with Cercacor for approximately 16,830 square feet of excess office and laboratory space located at 40 Parker, Irvine, California (Cercacor Sublease). The Cercacor Sublease began on May 1, 2016 and expires on November 30, 2019. The Company recognized less than $0.1 million and $0.3 million in sublease income for the three and nine months ended September 30, 2017 , respectively. The Company recognized $0.1 million and $0.2 million in sublease income for the three and nine months ended October 1, 2016 , respectively. Net amounts due to Cercacor at each of September 30, 2017 and December 31, 2016 were $1.0 million and $0.4 million , respectively. The Company’s CEO is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare (Masimo Foundation), a non-profit organization that was founded in 2010 to provide a platform for encouraging ethics, innovation and competition in healthcare. The Company’s former Chief Financial Officer (CFO) is also a Director of the Masimo Foundation. The Company’s CEO is the Chairman of both the Patient Safety Movement Foundation (PSMF), a non-profit organization that was founded in 2013 to work with hospitals, medical technology companies and patient advocates to unite the healthcare ecosystem and eliminate the more than 200,000 U.S. preventable hospital deaths that occur every year by 2020, and the Patient Safety Movement Coalition (PSMC), a not-for-profit social welfare organization that was founded in 2013 to promote patient safety legislation. The Company’s former CFO serves as the Treasurer and Secretary of PSMF, as well as the Secretary of PSMC. The Company’s CEO also serves on the board of directors of Atheer Labs, which is working with the Company on the development of next generation Root ® applications, and the board of directors of Children’s Hospital of Orange County and CHOC Children’s at Mission Hospital, two non-profit hospitals devoted exclusively to caring for children, both of which are also customers of the Company. In August 2017, the Company entered into an aircraft time share agreement, pursuant to which the Company has agreed from time to time to make its aircraft available to the CEO for lease on a time sharing basis. The Company charges the CEO for personal use based on agreed upon reimbursement rates. For each of the three and nine months ended September 30, 2017 , the Company charged the CEO less than $0.1 million related to such reimbursements. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following (in thousands): September 30, December 31, Raw materials $ 42,023 $ 32,647 Work-in-process 8,217 7,701 Finished goods 48,838 32,194 Total inventories $ 99,078 $ 72,542 |
Other Current Assets
Other Current Assets | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Current Assets | Other Current Assets Other current assets consist of the following (in thousands): September 30, December 31, Prepaid expenses $ 15,113 $ 13,051 Prepaid income taxes 9,622 981 Due from foreign agent 8,571 — Royalties receivable 7,800 7,500 Employee loans and advances 338 305 Due from related party 23 77 Other current assets 5,377 5,134 Total other current assets $ 46,844 $ 27,048 The Company is currently evaluating the collectability of certain amounts that have been paid by a foreign government customer to the Company’s appointed foreign agent in connection with a foreign government tender, but which have not been timely remitted by such agent to the Company in accordance with the agency agreement. The Company is actively working with such agent to arrange for payment, possibly under an extended payment plan, as well as exploring other potential remedies for recovery of this receivable. As of September 30, 2017, the net amount due the Company from such agent was approximately $8.6 million . The Company is currently unable to determine whether any loss will ultimately occur in connection with the resolution of this matter and has not accrued any loss in the accompanying condensed consolidated financial statements based on its current expectations regarding the collectability of the receivable. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment, net, consists of the following (in thousands): September 30, December 31, Building and building improvements $ 86,023 $ 85,966 Machinery and equipment 45,718 41,683 Aircraft and vehicles 25,329 45 Land 23,762 23,762 Leasehold improvements 15,015 8,289 Computer equipment 14,440 13,549 Tooling 13,667 12,895 Furniture and office equipment 10,821 9,669 Demonstration units 489 448 Construction-in-progress 8,434 7,923 Total property and equipment 243,698 204,229 Accumulated depreciation and amortization (79,119 ) (68,233 ) Property and equipment, net $ 164,579 $ 135,996 In August 2017, the Company completed its purchase of a corporate aircraft for $25.3 million . For the nine months ended September 30, 2017 and October 1, 2016 , depreciation expense of property and equipment was $10.8 million and $9.5 million , respectively. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets Intangible assets, net, consist of the following (in thousands): September 30, December 31, Patents $ 20,715 $ 19,950 Customer relationships 7,669 7,669 Licenses 7,500 7,500 Acquired technology 5,580 5,580 Trademarks 3,990 3,777 Capitalized software development costs 2,606 2,539 Other 3,681 3,674 Total intangible assets 51,741 50,689 Accumulated amortization (24,252 ) (21,313 ) Intangible assets, net $ 27,489 $ 29,376 Total amortization expense for the nine months ended September 30, 2017 and October 1, 2016 was $3.7 million and $2.8 million , respectively. All of these intangible assets have a 10 year weighted average amortization period. Estimated amortization expense for future fiscal years is as follows (in thousands): Fiscal year Amount 2017 (balance of year) $ 5,343 2018 4,769 2019 3,710 2020 3,362 2021 2,330 Thereafter 7,975 Total $ 27,489 |
Accrued and Other Current Liabi
Accrued and Other Current Liabilities | 9 Months Ended |
Sep. 30, 2017 | |
Accrued Liabilities [Abstract] | |
Accrued and Other Current Liabilities | Accrued and Other Current Liabilities Accrued and other current liabilities consist of the following (in thousands): September 30, December 31, Contract related payables $ 14,365 $ 10,673 Income taxes payable 5,179 76,316 Accrued taxes 4,990 5,135 Accrued customer rebates, fees and reimbursements 4,101 3,893 Accrued stock repurchases 2,653 — Accrued legal fees 1,263 1,362 Accrued warranty 1,220 910 Related party payable 1,028 525 Accrued donations 634 503 Other 4,756 5,337 Total accrued and other current liabilities $ 40,189 $ 104,654 |
Revolving Credit Facility
Revolving Credit Facility | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Restated Credit Facility | Restated Credit Facility In January 2016, the Company entered into an Amended and Restated Credit Agreement (Restated Credit Facility) with JPMorgan Chase Bank, N.A., as Administrative Agent and a Lender, Bank of America, N.A., as Syndication Agent and a Lender, Citibank, N.A., as Documentation Agent and a Lender, and various other Lenders (collectively, the Lenders). The Restated Credit Facility currently provides for up to $250.0 million in borrowings in multiple currencies, with an option, subject to certain conditions, for the Company to increase the aggregate borrowing capacity to up to $350.0 million in the future. All unpaid principal under the Restated Credit Facility will become due and payable on January 8, 2021. Borrowings under the Restated Credit Facility will be deemed, at the Company’s election, either: (i) an Alternate Base Rate (ABR) Loan, which bears interest at the ABR plus a spread (ABR Spread) based upon a Company leverage ratio, or (ii) a Eurodollar Loan, which bears interest at the Adjusted LIBO Rate (as defined below) plus a spread (Eurodollar Spread) based upon a Company leverage ratio. The ABR Spread is 0.125% to 1.00% and the Eurodollar Spread is 1.125% to 2.0% . Subject to certain conditions, the Company may also request swingline loans from time to time (Swingline Loans) that bear interest similar to an ABR Loan. The ABR is determined by taking the greatest of (i) the prime rate, (ii) the federal funds effective rate plus 0.50% , and (iii) the one-month Adjusted LIBO Rate plus 1.0% . The Adjusted LIBO Rate is equal to LIBOR for the applicable interest period multiplied by the statutory reserve rate for such period. The Company is obligated under the Restated Credit Facility to pay a fee ranging from 0.175% to 0.300% per annum, based upon a Company leverage ratio, with respect to any unused portion of the line of credit. This fee and interest on any ABR Loan are due and payable quarterly in arrears. Interest on any Eurodollar Loan is due and payable at the end of the applicable interest period (or at each three month interval in the case of loans with interest periods greater than three months). Interest on any Swingline Loan is due and payable on the date that the Swingline Loan is required to be repaid. The Company may prepay the loans and terminate the commitments in whole at any time, without premium or penalty, subject to reimbursement of certain costs in the case of Eurodollar Loans. Pursuant to the terms of the Restated Credit Facility, the Company is subject to certain covenants, including financial covenants related to a leverage ratio and an interest charge coverage ratio, and other customary negative covenants. The Company’s obligations under the Restated Credit Facility are secured by substantially all of the Company’s personal property, including certain equity interests in U.S. domestic and first-tier foreign subsidiaries. As of September 30, 2017 , the Restated Credit Facility had no outstanding draws and outstanding standby letters of credit totaling $0.3 million . The Company incurred interest expense related to the Restated Credit Facility of $0.5 million and $3.0 million for the nine months ended September 30, 2017 and October 1, 2016 , respectively. The Company was in compliance with all covenants under the Restated Credit Facility as of September 30, 2017 . |
Other Non-Current Liabilities
Other Non-Current Liabilities | 9 Months Ended |
Sep. 30, 2017 | |
Other Liabilities, Long Term [Abstract] | |
Other Non-Current Liabilities | Other Non-Current Liabilities Other non-current liabilities consist of the following (in thousands): September 30, December 31, Unrecognized tax benefit $ 14,078 $ 13,442 Deferred rent, long-term 1,350 558 Deferred tax liability, long-term 339 340 Other 292 247 Total other non-current liabilities $ 16,059 $ 14,587 Unrecognized tax benefit relates to the Company’s long-term portion of tax liability associated with uncertain tax positions. Authoritative guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. See Note 16 to these condensed consolidated financial statements for further details. |
Stock Repurchase Program
Stock Repurchase Program | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Stock Repurchase Program | Stock Repurchase Program In September 2015, the Company’s Board of Directors (Board) authorized a stock repurchase program, whereby the Company may purchase up to 5.0 million shares of its common stock over a period of up to three years (2015 Repurchase Program). The 2015 Repurchase Program may be carried out at the discretion of a committee comprised of the Company’s Chief Executive Officer and Chief Financial Officer through open market purchases, one or more Rule 10b5-1 trading plans, block trades and privately negotiated transactions. The total remaining shares authorized for repurchase under the 2015 Repurchase Program approximated 2.4 million shares as of September 30, 2017 . The Company expects to fund the 2015 Repurchase Program through its available cash, future cash from operations, funds available under the Restated Credit Facility or other potential sources of capital. The following table provides a summary of the Company’s stock repurchase activities during the three and nine months ended September 30, 2017 and October 1, 2016 (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Shares repurchased 533 — 533 1,496 Average cost per share $ 84.86 $ — $ 84.86 $ 42.39 Value of shares repurchased $ 45,261 $ — $ 45,261 $ 63,403 |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Stock-Based Compensation The total stock-based compensation expense for the nine months ended September 30, 2017 and October 1, 2016 was $11.2 million and $9.7 million , respectively. As of September 30, 2017 , an aggregate of 14.1 million shares of common stock were reserved for future issuance under the Company’s equity plans, of which 4.0 million shares were available for future grant under the Masimo Corporation 2017 Equity Incentive Plan (2017 Equity Plan). Additional information related to the Company’s current equity incentive plans, stock-based award activity and valuation of stock-based awards is included below. Equity Incentive Plans 2017 Equity Incentive Plan On June 1, 2017, the Company’s stockholders ratified and approved the 2017 Equity Plan. The 2017 Equity Plan permits the grant of stock options, restricted stock, restricted stock units (RSUs), stock appreciation rights, performance share units (PSUs), performance shares, performance bonus awards and other stock or cash awards to employees, directors and consultants of the Company and employees and consultants of any parent or subsidiary of the Company. The aggregate number of shares that may be awarded under the 2017 Equity Plan is 5.0 million shares. The 2017 Equity Plan provides that equity awards issued under the 2017 Equity Plan must generally vest over a period of not less than one year following the date of grant. The exercise price per share of each option granted under the 2017 Equity Plan may not be less than the fair market value of a share of the Company’s common stock on the date of grant, which is generally equal to the closing price of the Company’s common stock on the NASDAQ Global Select Market on the grant date. 2007 Stock Incentive Plan Effective June 1, 2017, upon the approval and ratification of the 2017 Equity Plan, the Company’s 2007 Stock Incentive Plan (2007 Equity Plan) terminated, provided that awards outstanding under the 2007 Equity Plan will continue to be governed by the terms of that plan. In addition, upon the effectiveness of the 2017 Equity Plan, an aggregate of 5.0 million shares of the Company’s common stock registered under prior registration statements for issuance pursuant to the 2007 Equity Plan were deregistered and concurrently registered under the 2017 Equity Plan. Stock-Based Award Activity Stock Options The number and weighted-average exercise price of options issued and outstanding under all of the Company’s equity plans are as follows (in thousands, except for exercise prices): Nine Months Ended Shares Average Exercise Price Options outstanding, beginning of period 8,521 $ 28.56 Granted 847 86.80 Canceled (220 ) 36.49 Exercised (2,009 ) 27.66 Options outstanding, end of period 7,139 $ 35.48 Options exercisable, end of period 3,991 $ 26.26 Total stock option expense for the three and nine months ended September 30, 2017 was $2.9 million and $8.2 million , respectively. As of September 30, 2017 , the Company had $35.7 million of unrecognized compensation cost related to non-vested stock options that are expected to vest over a weighted average period of approximately 3.7 years. The weighted-average remaining contractual term of options outstanding with an exercise price less than the closing price of the Company’s common stock as of September 30, 2017 was 6.0 years. The weighted-average remaining contractual term of options exercisable, with an exercise price less than the closing price of the Company’s common stock as of September 30, 2017 was 4.3 years. RSUs The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows (in thousands, except for grant date fair value amounts): Nine Months Ended Units Weighted Average Grant Date Fair Value RSUs outstanding, beginning of period 2,706 $ 41.45 Granted 33 86.42 Canceled (25 ) 85.79 Expired — — Vested (6 ) 43.09 RSUs outstanding, end of period 2,708 $ 41.59 Total RSU expense for the three and nine months ended September 30, 2017 was $0.2 million and $0.3 million , respectively. As of September 30, 2017 , the Company had $0.5 million of unrecognized compensation cost related to non-vested RSU awards expected to be recognized and vest over a weighted-average period of approximately 0.7 years. In July 2017, in connection with the First Amendment to November 4, 2015 Amended and Restated Employment Agreement (First Amendment), the Company and Mr. Kiani agreed to, among other things modify certain vesting provisions related to the previous award of 2.7 million RSUs to the Company’s Chairman and Chief Executive Officer (see “Employment and Severance Agreements” in Note 14 to these condensed consolidated financial statements for further details). PSUs The number of PSUs outstanding under all of the Company’s equity plans are as follows (in thousands, except for grant date fair value amounts): Nine Months Ended Units Weighted Average Grant Date Fair Value PSUs outstanding, beginning of period — $ — Granted 248 90.71 Canceled (15 ) 90.87 Expired — — Vested — — PSUs outstanding, end of period 233 $ 90.70 During the nine months ended September 30, 2017 , the Company awarded 233,000 PSUs that will vest in part over time based on the achievement of certain 2017 performance criteria approved by the Board. If earned, 20% of the PSUs granted will vest upon achievement of the performance criteria and the remaining award will vest in equal installments at the beginning of each of the following four years after the year in which the performance achievement level has been determined. The number of shares that may be earned can range from 0% to 100% of the target amount; therefore, the maximum number of shares that can be issued under these awards is 233,000 . Total PSU expense for the three and nine months ended September 30, 2017 was $2.0 million and $2.6 million , respectively. As of September 30, 2017 , the Company had $11.4 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 2.5 years. Valuation of Stock-Based Award Activity The Black-Scholes option pricing model is used to estimate the fair value of options granted under the Company’s stock-based compensation plans. The range of assumptions used and the resulting weighted-average fair value of options granted at the date of grant were as follows: Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Risk-free interest rate 1.7% to 2.0% 1.0% to 1.3% 1.7% to 2.2% 1.0% to 1.9% Expected term (in years) 5.5 5.7 5.5 5.7 Estimated volatility 30.3% to 32.1% 30.3% to 31.9% 29.7% to 32.1% 30.3% to 35.7% Expected dividends 0% 0% 0% 0% Weighted-average fair value of options granted $27.70 $17.99 $27.74 $13.42 The aggregate intrinsic value of options is calculated as the positive difference, if any, between the market value of the Company’s common stock on the date of exercise or the respective period end, as appropriate, and the exercise price of the options. The aggregate intrinsic value of options outstanding with an exercise price less than the closing price of the Company’s common stock as of September 30, 2017 was $365.9 million . The aggregate intrinsic value of options exercisable with an exercise price less than the closing price of the Company’s common stock as of September 30, 2017 was $240.7 million . The aggregate intrinsic value of options exercised during the nine months ended September 30, 2017 was $17.4 million . The fair value of each RSU and PSU award is determined based on the closing price of the Company’s common stock on the grant date, or the modification date, if any. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Leases The Company leases certain facilities in North and South America, Europe, the Middle East and Asia-Pacific regions under operating lease agreements expiring at various dates through November 2026 . Certain facility leases contain predetermined price escalations and in some cases renewal options. The Company recognizes the lease costs using a straight-line method based on total lease payments. The Company has received leasehold improvement incentives in connection with certain leased facilities in the U.S. These leasehold improvement incentives have been recorded as deferred rent and are being amortized as a reduction to rent expense on a straight-line basis over the life of the lease. As of each of September 30, 2017 and December 31, 2016 , accrued rent expense in excess of the amount paid aggregated $1.5 million and $0.7 million , respectively, which is classified within other current and non-current liabilities in the accompanying condensed consolidated balance sheets. In addition, the Company leases automobiles in the U.S. and Europe that are classified as operating leases and expire at various dates through November 2020 . The majority of these leases are non-cancellable. The Company also has outstanding capital leases for office equipment and computer equipment, all of which are non-cancellable. Future minimum lease payments, including interest, under operating and capital leases for each of the following fiscal years ending on or about December 31 are (in thousands): As of September 30, 2017 Operating Leases Capital Leases (1) Total 2017 (balance of year) $ 1,641 $ — $ 1,641 2018 6,347 — 6,347 2019 5,363 — 5,363 2020 3,165 — 3,165 2021 2,615 — 2,615 Thereafter 7,284 — 7,284 Total $ 26,415 $ — $ 26,415 ______________________ (1) As of September 30, 2017 , the Company had an outstanding capital lease of less than $0.1 million, which is not reflected in the above table due to rounding. Rental expense related to operating leases was $1.7 million and $5.0 million for the three and nine months ended September 30, 2017 , respectively, and $1.6 million and $4.5 million for the three and nine months ended October 1, 2016 , respectively. Included in the future capital lease payments as of September 30, 2017 is interest aggregating less than $0.1 million . Employee Retirement Savings Plan The Company sponsors a qualified defined contribution plan or 401(k) plan, the Masimo Retirement Savings Plan (MRSP), covering the Company’s full-time U.S. employees who meet certain eligibility requirements. In general, the Company matches an employee’s contribution up to 3% of the employee’s compensation, subject to a maximum amount. The Company may also contribute to the MRSP on a discretionary basis. The Company contributed $0.6 million and $1.8 million to the MRSP for the three and nine months ended September 30, 2017 , respectively, and $0.5 million and $1.6 million to the MRSP for the three and nine months ended October 1, 2016 , respectively. In addition, the Company also sponsors various defined contribution plans in certain locations outside of the United States (Subsidiary Plans). For the three and nine months ended September 30, 2017 , the Company contributed $0.1 million and $0.2 million , respectively. For the three and nine months ended October 1, 2016 , the Company contributed $0.1 million and $0.2 million to the Subsidiary Plans, respectively. Employment and Severance Agreements In July 2017, the Company entered into the First Amendment with Joe Kiani, the Company’s Chairman and Chief Executive Officer, which amended that certain Amended and Restated Employment Agreement entered into between the Company and Mr. Kiani on November 4, 2015 (together with the First Amendment, the Amended Employment Agreement). The First Amendment, among other things, eliminates Mr. Kiani’s eligibility for an automatic annual bonus equal to 100% of his base salary, imposes an annual cap on any annual bonus awarded by the Compensation Committee at 200% of his base salary, eliminates his guaranteed grant of 300,000 stock options in fiscal year 2017, modifies certain definitions and conditions related to Mr. Kiani’s ability to terminate his employment with the Company for “Good Reason”, and eliminates the annual 10% reduction of both: (1) the 2.7 million shares subject to the RSU award previously granted to Mr. Kiani (Award Shares) that will vest in certain circumstances, and (2) the $35.0 million cash payment (Cash Payment) that Mr. Kiani will be entitled to receive in certain circumstances. Pursuant to the terms of the Amended Employment Agreement, upon a “Qualifying Termination” (as defined in the Amended Employment Agreement), Mr. Kiani will be entitled to receive a cash severance benefit equal to two times the sum of his then-current base salary and the average annual bonus paid to Mr. Kiani during the immediately preceding three years, the full amount of the Award Shares and the full amount of the Cash Payment. In addition, in the event of a “Change in Control” (as defined in the Amended Employment Agreement) prior to a Qualifying Termination, on each of the one year and two year anniversaries of the Change in Control, 50% of the Cash Payment and 50% of the Award Shares will vest, subject in each case to Mr. Kiani’s continuous employment through each such anniversary date; however, in the event of a Qualifying Termination or a termination of Mr. Kiani’s employment due to death or disability prior to either of such anniversaries, any unvested amount of the Cash Payment and all of the unvested Award Shares shall vest and be paid in full. Additionally, in the event of a Change in Control prior to a Qualifying Termination, Mr. Kiani’s stock options and any other equity awards will vest in accordance with their terms, but in no event later than in two equal installments on each of the one year and two year anniversaries of the Change in Control, subject in each case to Mr. Kiani’s continuous employment through each such anniversary date. As of September 30, 2017 , the expense related to the Award Shares that would be recognized in the Company’s consolidated financial statements upon the occurrence of a Qualifying Termination under the Restated Employment Agreement was approximately $233.7 million . As of September 30, 2017 , the Company had severance plan participation agreements with six executive officers. The participation agreements (the Agreements) are governed by the terms and conditions of the Company’s 2007 Severance Protection Plan (the Severance Plan), which became effective on July 19, 2007 and which was amended effective December 31, 2008. Under each of the Agreements, the applicable executive officer may be entitled to receive certain salary, equity, medical and life insurance benefits if he is terminated by the Company without cause or if he terminates his employment for good reason under certain circumstances. The executive officers are also required to give the Company six months advance notice of their resignation under certain circumstances. Purchase Commitments Pursuant to contractual obligations with vendors, the Company had $81.6 million of purchase commitments as of September 30, 2017 , which are expected to be purchased within one year. These purchase commitments have been made for certain inventory items in order to secure sufficient levels of those items and to achieve better pricing. Other Contractual Commitments In the normal course of business, the Company may provide bank guarantees to support government hospital tenders in certain foreign jurisdictions. As of September 30, 2017 , the Company had approximately $0.3 million in unsecured bank guarantees. In certain circumstances, the Company also provides limited indemnification within its various customer contracts whereby the Company indemnifies the parties to whom it sells its products with respect to potential infringement of intellectual property, and against bodily injury caused by a defective Company product. It is not possible to predict the maximum potential amount of future payments under these or similar agreements, due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved. As of September 30, 2017 , the Company had not incurred any significant costs related to contractual indemnification of its customers. Concentrations of Risk The Company is exposed to credit loss for the amount of its cash deposits with financial institutions in excess of federally insured limits. The Company invests its excess cash in time deposits with major financial institutions. As of September 30, 2017 , the Company ha d $277.6 million of bank balances, of which $3.9 million was covered by either the U.S. Federal Deposit Insurance Corporation limit or foreign countries’ deposit insurance organizations. While the Company and its contract manufacturers rely on sole source suppliers for certain components, steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining a safety stock of inventory and designing products that could be modified to use different components. However, there can be no assurance that a shortage or stoppage of shipments of the materials or components that the Company purchases will not result in a delay in production or adversely affect the Company’s business. The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusively, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three and nine months ended September 30, 2017 , revenue from the sale of the Company’s products to U.S. hospitals that are members of GPOs amounted to $102.7 million and $308.0 million , respectively, and for the three and nine months ended October 1, 2016 , revenue from the sale of the Company’s products to U.S. hospitals that are members of GPOs amounted to $94.5 million and $279.8 million , respectively. For the three months ended September 30, 2017 , the Company had sales through two just-in-time distributors that represented 12.3% and 10.9% of total revenue, respectively. For the three months ended October 1, 2016 , the Company had sales through the same two just-in-time distributors that represented 14.0% and 13.2% of total revenue, respectively. For the nine months ended September 30, 2017 , the Company had sales through two just-in-time distributors that represented 13.2% and 11.4% of total revenue, respectively. For the nine months ended October 1, 2016 , the Company had sales through the same two just-in-time distributors that represented 15.0% and 12.4% of total revenue, respectively. As of September 30, 2017 , two just-in-time distributors represented 7.3% and 5.1% of the Company’s accounts receivable balance, respectively. As of December 31, 2016, two different just-in-time distributors represented 7.5% and 5.6% of the Company’s accounts receivable balance, respectively. For the nine months ended September 30, 2017 and October 1, 2016 , the Company recorded $25.7 million and $23.2 million , respectively, in royalty revenues from Medtronic. In exchange for these royalty payments, the Company has provided Medtronic the ability to ship its patent infringing product with a covenant not to sue Medtronic as long as Medtronic abides by the terms of the settlement agreement between the companies. Litigation On July 26, 2017, a patent infringement complaint was filed against the Company in the U.S. District Court for the District of Delaware by Silkeen, LLC (Silkeen). The complaint alleges that the Company’s pulse oximetry products infringe certain claims of U.S. Patent No. 7,944,469 titled “System and Method for Using Self-Learning Rules to Enable Adaptive Security Monitoring.” The Company’s policy is and has been not to settle patent infringement claims where it does not believe there is infringement of a valid patent, even if the cost of litigation would exceed the cost of settlement. On October 18, 2017, Silkeen dismissed the case against the Company with prejudice. On January 2, 2014, a putative class action complaint was filed against the Company in the U.S. District Court for the Central District of California by Physicians Healthsource, Inc. (PHI). The complaint alleges that the Company sent unsolicited facsimile advertisements in violation of the Junk Fax Protection Act of 2005 and related regulations. The complaint seeks $500 for each alleged violation, treble damages if the District Court finds the alleged violations to be knowing, plus interest, costs and injunctive relief. On April 14, 2014, the Company filed a motion to stay the case pending a decision on a related petition filed by the Company with the Federal Communications Commission (FCC). On May 22, 2014, the District Court granted the motion and stayed the case pending a ruling by the FCC on the petition. On October 30, 2014, the FCC granted some of the relief and denied some of the relief requested in the Company’s petition. Both parties appealed the FCC’s decision on the petition. On November 25, 2014, the District Court granted the parties’ joint request that the stay remain in place pending a decision on the appeal. On March 31, 2017, the D.C. Circuit Court of Appeals vacated and remanded the FCC’s decision, holding that the applicable FCC rule was unlawful to the extent it requires opt-out notices on solicited faxes. On April 28, 2017, PHI filed a petition seeking rehearing by the D.C. Circuit Court of Appeals. The D.C. Circuit Court of Appeals denied the requested rehearing on June 6, 2017. The plaintiffs filed a petition for a writ of certiorari with the United States Supreme Court on September 5, 2017 seeking review of the D.C. Circuit Court of Appeals’ opinion. The Supreme Court has not yet ruled on the petition, and the stay of the District Court litigation has not yet been lifted. The Company believes it has good and substantial defenses to the claims in the District Court litigation, but there is no guarantee that the Company will prevail. The Company is unable to determine whether any loss will ultimately occur or to estimate the range of such loss; therefore, no amount of loss has been accrued by the Company in the accompanying condensed consolidated financial statements. On January 31, 2014, an amended putative class action complaint was filed against the Company in the U.S. District Court for the Northern District of Alabama by and on behalf of two participants in the Surfactant, Positive Pressure, and Oxygenation Randomized Trial at the University of Alabama. On April 21, 2014, a further amended complaint was filed adding a third participant. The complaint alleges product liability and negligence claims in connection with pulse oximeters the Company modified and provided at the request of study investigators for use in the trial. On August 13, 2015, the U.S. District Court for the Northern District of Alabama granted summary judgment in favor of the Company on all claims. The plaintiffs have appealed the U.S. District Court for the Northern District of Alabama’s decision. The appellate hearing before the Eleventh Circuit Court of Appeals was held on December 13, 2016, and the parties are awaiting a decision. On July 7, 2017, the Eleventh Circuit Court of Appeals (Eleventh Circuit) issued a Certification to the Supreme Court of Alabama seeking guidance on a legal question. In that Certification, the Eleventh Circuit stated that the plaintiffs failed to establish that participation in the clinical study caused any injuries, and that the negligence, negligence per se, breach of fiduciary duty and products liability claims, which includes the claims currently alleged against the Company, were properly dismissed. On September 7, 2017, the Supreme Court of Alabama issued an order declining to answer the legal question posted by the Eleventh Court. The Company is unable to determine whether any loss will ultimately occur or to estimate the range of such loss; therefore, no amount of loss has been accrued by the Company in the accompanying consolidated financial statements. From time to time, the Company may be involved in other litigation and investigations relating to claims and matters arising out of its operations in the normal course of business. The Company believes that it currently is not a party to any other legal proceedings which, individually or in the aggregate, would have a material adverse effect on its condensed consolidated financial position, results of operations or cash flows. |
Segment Information and Enterpr
Segment Information and Enterprise Reporting | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment Information and Enterprise Reporting | Segment Information and Enterprise Reporting The Company’s chief decision maker, the Chief Executive Officer, reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by geographic region, for purposes of making operating decisions and assessing financial performance. Accordingly, the Company considers itself to be in a single reporting segment, specifically noninvasive patient monitoring solutions and related products. The Company does not assess the performance of its geographic regions on other measures of income or expense, such as depreciation and amortization, operating income or net income including noncontrolling interest. In addition, the Company’s assets are primarily located in the U.S. The Company does not produce reports for, or measure the performance of, its geographic regions on any asset-based metrics. Therefore, geographic information is presented only for revenues and long-lived assets. The following schedule presents an analysis of the Company’s product revenues based upon the geographic area to which the product was shipped (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Geographic area by destination: United States $ 119,266 65.8 % $ 114,563 71.5 % $ 370,403 68.3 % $ 345,113 70.7 % Europe, Middle East and Africa 38,127 21.0 23,929 14.9 102,322 18.9 81,887 16.8 Asia and Australia 18,078 10.0 16,630 10.4 51,801 9.6 46,815 9.6 North and South America (excluding United States) 5,800 3.2 5,164 3.2 17,644 3.2 14,368 2.9 Total product revenue $ 181,271 100.0 % $ 160,286 100.0 % $ 542,170 100.0 % $ 488,183 100.0 % The Company’s consolidated long-lived assets (total non-current assets excluding deferred taxes, goodwill and intangible assets) by geographic area are (in thousands, except percentages): September 30, 2017 December 31, 2016 Long-lived assets by geographic area: United States $ 262,249 96.3 % $ 216,784 96.3 % International 10,148 3.7 8,383 3.7 Total $ 272,397 100.0 % $ 225,167 100.0 % |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company has provided for income taxes in fiscal 2017 interim periods based on the estimated effective income tax rate for the complete fiscal year and adjusted for discrete tax events, including excess tax benefits or deficiencies related to stock-based compensation, in the period such events occur. The income tax provision is computed on the estimated pretax income of the consolidated entities located within each taxing jurisdiction based on legislation enacted as of the balance sheet date. For the nine months ended September 30, 2017 and October 1, 2016 , the Company recorded discrete tax benefits of approximately $35.1 million and $7.7 million , respectively, related to excess tax benefits realized from stock-based compensation. Deferred tax assets and liabilities are determined based on the future tax consequences associated with temporary differences between income and expenses reported for accounting and tax purposes. A valuation allowance for deferred tax assets is recorded to the extent that the Company cannot determine that the ultimate realization of the net deferred tax assets is more likely than not. Realization of deferred tax assets is principally dependent upon the achievement of future taxable income, the estimation of which requires significant judgment by the Company’s management. The judgment of the Company’s management regarding future profitability may change due to many factors, including future market conditions and the Company’s ability to successfully execute its business plans or tax planning strategies. These changes, if any, may require material adjustments to these deferred tax asset balances. As of September 30, 2017 , the liability for income taxes associated with uncertain tax positions was approximately $15.2 million . If fully recognized, approximately $13.5 million (net of federal benefit on state taxes) would impact the Company’s effective tax rate. The remaining balance relates to timing differences. It is reasonably possible that the amount of unrecognized tax benefits in various jurisdictions may change in the next twelve months due to the expiration of statutes of limitation and audit settlements. However, due to the uncertainty surrounding the timing of these events, an estimate of the change within the next twelve months cannot currently be made. The Company conducts business in multiple jurisdictions and, as a result, one or more of the Company’s subsidiaries files income tax returns in U.S. federal, various state, local and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters through fiscal year 2012. All material state, local and foreign income tax matters have been concluded through fiscal year 2009. The Company does not believe that the results of any tax authority examination would have a significant impact on its consolidated financial statements. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, including normal recurring accruals, necessary to present fairly the Company’s condensed consolidated financial statements. The accompanying condensed consolidated balance sheet as of December 31, 2016 was derived from the Company’s audited consolidated financial statements at that date. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (fiscal year 2016 ), filed with the SEC on February 15, 2017 . The results for the nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the fiscal year ending December 30, 2017 (fiscal year 2017 ) or for any other interim period or for any future year. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In accordance with GAAP, current authoritative guidance is applied when determining whether an entity is subject to consolidation. |
Fiscal Periods | Fiscal Periods The Company follows a conventional 52/53 week fiscal year. Under a conventional 52/53 week fiscal year, a 52 week fiscal year includes four quarters of 13 fiscal weeks while a 53 week fiscal year includes three 13 fiscal week quarters and one 14 fiscal week quarter. The Company’s last 53 week fiscal year was fiscal year 2014. Fiscal year 2017 is a 52 week fiscal year. All references to years in these notes to condensed consolidated financial statements are fiscal years unless otherwise noted. |
Use of Estimates | Use of Estimates The Company prepares its financial statements in conformity with GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include the determination of accounts receivable allowances, inventory reserves, warranty reserves, rebate accruals, valuation of the Company’s stock options, goodwill valuation, deferred taxes and any associated valuation allowances, distributor channel inventory, royalty revenues, deferred revenue, uncertain income tax positions, litigation costs and related accruals. Actual results could differ from such estimates. |
Reclassification, Policy [Policy Text Block] | Reclassifications Certain amounts in the accompanying condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. |
Fair Value Measurements | Fair Value Measurements Authoritative guidance describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value: ● 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. Pursuant to current authoritative guidance, entities are allowed an irrevocable option to elect the fair value for the initial and subsequent measurement for specified financial assets and liabilities on a contract-by-contract basis. The Company did not elect to apply the fair value option under this guidance to specific assets or liabilities on a contract-by-contract basis. There were no transfers between Level 1, Level 2 and Level 3 inputs during the nine months ended September 30, 2017 . The Company carries cash and cash equivalents at cost, which approximates fair value. As of September 30, 2017 and December 31, 2016 , the Company did not have any short-term investments or other financial assets that were required to be measured under the fair value hierarchy. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable consist of trade receivables recorded upon recognition of revenue for product revenues, reduced by reserves for estimated bad debts and returns. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Credit is extended based on evaluation of the customer’s financial condition. Collateral is generally not required. The allowance for doubtful accounts is determined based on historical write-off experience, current customer information and other relevant factors, including specific identification of past due accounts, based on the age of the receivable in excess of the contemplated or contractual due date. Accounts are charged off against the allowance when the Company believes they are uncollectible. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using a standard cost method, which approximates the first in, first out method, and includes material, labor and overhead costs. Inventory reserves are recorded for inventory items that have become excess or obsolete or are no longer used in current production and for inventory items that have a market price less than carrying value in inventory. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows: Useful Lives Aircraft and components 10 to 20 years Buildings 39 years Building improvements 7 to 15 years Computer equipment 2 to 6 years Demonstration units 3 years Furniture and office equipment 2 to 6 years Leasehold improvements Lesser of useful life or term of lease Machinery and equipment 5 to 7 years Tooling 3 years Vehicles 5 years Land is not depreciated and construction-in-progress is not depreciated until placed in service. Normal repair and maintenance costs are expensed as incurred, whereas significant improvements that materially increase values or extend useful lives are capitalized and depreciated over the remaining estimated useful lives of the related assets. Upon sale or retirement of depreciable assets, the related cost and accumulated depreciation or amortization are removed from the accounts and any gain or loss on the sale or retirement is recognized in income. |
Intangible Assets | Intangible Assets The Company’s policy is to renew its patents and trademarks. Total renewal costs for patents and trademarks for the nine months ended September 30, 2017 and October 1, 2016 were $0.5 million and $0.4 million , respectively. As of September 30, 2017 , the weighted-average number of years until the next renewal was one year for patents and six years for trademarks. Costs to renew patents and trademarks are capitalized and amortized over the remaining useful life of the intangible asset. The Company continually evaluates the amortization period and carrying basis of patents and trademarks to determine whether any events or circumstances warrant a revised estimated useful life or reduction in value. Capitalized application costs are charged to operations when it is determined that the patent or trademark will not be obtained or is abandoned. |
Impairment of Goodwill and Intangible assets | Impairment of Goodwill, Intangible Assets and Other Long-Lived Assets Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets. Goodwill is not amortized, but instead is tested annually for impairment, or more frequently when events or changes in circumstances indicate that goodwill might be impaired. In assessing goodwill impairment for each of its reporting units, the Company has the option to first assess the qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company’s qualitative assessment of the recoverability of goodwill considers various macroeconomic, industry-specific and Company-specific factors, including: (i) severe adverse industry or economic trends; (ii) significant Company-specific actions; (iii) current, historical or projected deterioration of the Company’s financial performance; or (iv) a sustained decrease in the Company’s market capitalization below its net book value. If, after assessing the totality of events or circumstances, the Company determines it is unlikely that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if the Company concludes otherwise, then the Company is required to perform the first step of the two-step impairment test by comparing the fair value of the reporting unit, determined using future projected discounted operating cash flows, with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired; otherwise, goodwill is considered impaired and the loss is measured by performing step two. Under step two, the impairment loss is measured by comparing the implied fair value of the reporting unit goodwill with the carrying amount of goodwill. The Company also has the option to bypass the qualitative assessment and proceed directly to performing the first step of the two-step goodwill impairment test. The Company may resume performing the qualitative assessment in any subsequent period. The annual impairment test is performed during the fourth fiscal quarter. The Company reviews long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. No impairment of goodwill, intangible assets or other long-lived assets was recorded during the three and nine months ended September 30, 2017 and October 1, 2016 . |
Revenue Recognition | Revenue Recognition and Deferred Revenue The Company follows the current authoritative guidance for revenue recognition. Based on these requirements, the Company recognizes revenue from the sale of products or services when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured. In the case of the license or sale of software that does not function together with hardware components to provide the essential functionality of the hardware, revenue is recognized pursuant to the software revenue recognition guidance. The Company derives the majority of its revenue from four primary sources: (i) direct sales under long-term sensor purchase agreements with end-user hospitals where the Company provides up-front monitoring equipment at no up-front charge in exchange for a multi-year sensor purchase commitment, (ii) other direct sales of noninvasive monitoring solutions to end-user hospitals, emergency medical response organizations and other direct customers; (iii) sales of noninvasive monitoring solutions to distributors who then typically resell to end-user hospitals, emergency medical response organizations and other direct customers; and (iv) sales of integrated circuit boards to OEM customers who incorporate the Company’s embedded software technology into their multiparameter monitoring devices. The Company enters into agreements to sell its noninvasive monitoring solutions and services, sometimes as part of multiple deliverable arrangements that include various combinations of products and services. While the majority of the Company’s sales transactions contain standard business terms and conditions, there are some transactions that contain non-standard business terms and conditions. As a result, contract interpretation and analysis is sometimes required to determine the appropriate accounting, including: (i) how the arrangement consideration should be allocated among the deliverables when multiple deliverables exist, (ii) when to recognize revenue on the deliverables, and (iii) whether undelivered elements are essential to the functionality of the delivered elements. Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition. In the case of multiple deliverable arrangements, the authoritative guidance provides a hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence (VSOE) of selling price, (ii) third-party evidence of selling price (TPE), and (iii) best estimate of the selling price (ESP). VSOE of selling price is defined as the price charged when the same element is sold separately. VSOE generally exists only when the deliverable is sold separately and is the price actually charged for that deliverable. TPE generally does not exist for the majority of the Company’s products. The objective of ESP is to determine the price at which the Company would transact a sale if the product was sold on a stand-alone basis. In the absence of VSOE and TPE, the Company determines ESP for its products by considering multiple factors including, but not limited to, features and functionality of the product, geographies, type of customer, contractual prices pursuant to Group Purchasing Organization (GPO) contracts, the Company’s pricing and discount practices, and market conditions. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. Most of the Company’s products in a multiple deliverable arrangement qualify as separate units of accounting. In the case of the Company’s monitoring equipment containing embedded Masimo SET ® or rainbow SET ™ software, the Company has determined that the hardware and software components function together to deliver the equipment’s essential functionality and, therefore, represent a single deliverable. However, software deliverables, such as rainbow ® parameter software, which do not function together with hardware components to provide the equipment’s essential functionality, are accounted for under software revenue recognition guidance. The revenue for these multiple-element arrangements is allocated to the software deliverables and the non-software deliverables based on the relative selling prices of all of the deliverables in the arrangement using the hierarchy in the revenue recognition accounting guidance for arrangements with multiple deliverables. Sales under long-term sensor purchase contracts are generally structured such that the Company agrees to provide at no up-front charge certain monitoring-related equipment, software, installation, training and/or warranty support in exchange for the hospital’s agreement to purchase sensors over the term of the agreement, which generally ranges from three to six years. These contracts generally do not provide for any payments that are not dependent upon the Company’s future delivery of sensors, which are essential to the functionality of the monitoring equipment and, therefore, represent a substantive performance obligation. As a result, the Company generally does not recognize any revenue when the monitoring and related equipment and software are delivered to the hospitals, but rather recognizes revenue for these delivered elements on a pro-rata basis as the sensors are delivered under the long-term purchase commitment, when installation and training are complete. Accordingly, the cost of the monitoring and related equipment initially placed at the hospitals is deferred and amortized to cost of goods sold over the life of the underlying long-term sensor purchase contract. In cases where such contracts do provide for guaranteed payments that are unrelated to the future delivery of sensors, the Company recognizes the net present value of such payments as revenue from the monitoring and related equipment and expenses the cost of such equipment to cost of goods sold, as the equipment is delivered and when installation and training are complete. Some of the Company’s long-term sensor contracts also contain provisions for certain payments to be made directly to the end-user hospital customer at the inception of the arrangement. These payments are generally treated as prepaid discounts which are deferred and amortized on a straight-line basis as contra-revenue over the life of the underlying long-term sensor purchase contract. Many of the Company’s distributors purchase sensor products that they then resell to end-user hospitals that are typically fulfilling their purchase obligations to the Company under such end-user hospital’s long-term sensor purchase commitments. Upon shipment to the distributor, revenue is deferred until the distributor ships the product to the Company’s end-user customers based on an estimate of the inventory held by these distributors at the end of the accounting period. The Company also earns revenue from the sale of integrated circuit boards and other products, as well as from rainbow ® parameter software licenses, to OEMs under various agreements. Revenue from the sale of products to the OEMs is generally recognized at the time of shipment. Revenue related to software licenses to OEMs is generally recognized upon shipment of the OEM’s product to its customers, as represented to the Company by the OEM. The Company also provides certain customers with the ability to purchase sensors under rebate programs. Under these programs, the customers may earn rebates based on their purchasing activity. The Company estimates and provides allowances for these programs at the time of sale as a reduction to revenue. In general, customers do not have a right of return for credit or refund. However, the Company allows returns under certain circumstances. At the end of each period, the Company estimates and accrues for these returns as a reduction to revenue and accounts receivable. The Company estimates returns based on several factors, including contractual limitations and past returns history. The majority of the Company’s royalty and other revenue arises from an agreement with Medtronic plc (Medtronic, formerly Covidien Ltd.) that provides for quarterly royalty payments to the Company based upon U.S. sales of certain Medtronic products. An estimate of these royalty revenues is recorded quarterly in the period earned based on the prior quarter’s historical results, adjusted for any new information or trends known to management at the time of estimation. This estimated revenue is adjusted prospectively when the Company receives the Medtronic royalty report, approximately sixty days after the end of the previous quarter. From time-to-time, the Company also recognizes revenue upon the achievement of pre-agreed milestones related to non-recurring engineering (NRE) services provided for certain OEM customers. Costs incurred by the Company related to these NRE services are generally deferred until such time that the milestones are achieved and the associated revenue is recognized. |
Product Warranty | Product Warranty The Company generally provides a warranty against defects in material and workmanship for a period ranging fro m six to forty-eight months, depending on the product type. In traditional sales activities, including direct and OEM sales, the Company establishes an accrued liability for the estimated warranty costs at the time of revenue recognition, with a corresponding provision to cost of sales. Customers may also purchase extended warranty coverage separately or as part of a long-term sensor purchase agreement. Revenue related to extended warranty coverage is recognized over the extended life of the contract and the related extended warranty costs are expensed as incurred. Changes in the product warranty accrual were as follows (in thousands): Nine Months Ended September 30, October 1, Warranty accrual, beginning of period $ 910 $ 1,222 Accrual for warranties issued 712 722 Changes to pre-existing warranties (including changes in estimates) (116 ) 99 Settlements made (486 ) (751 ) Warranty accrual, end of period $ 1,020 $ 1,292 |
Litigation Costs and Contingencies | Litigation Costs and Contingencies The Company records a charge equal to at least the minimum estimated liability for a loss contingency or litigation settlement when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements, and (ii) the range of loss can be reasonably estimated. The determination of whether a loss contingency or litigation settlement is probable or reasonably possible involves a significant amount of management judgment, as does the estimation of the range of loss given the nature of contingencies. Liabilities related to litigation settlements with multiple elements are recorded based on the fair value of each element. Legal and other litigation related expenses are recognized as the services are provided. The Company records insurance and other indemnity recoveries for litigation expenses when both of the following conditions are met: (a) the recovery is probable, and (b) collectability is reasonably assured. Insurance recoveries are only recorded to the extent the litigation costs to which they relate have been incurred and recognized in the financial statements. |
Comprehensive Income | Comprehensive Income Authoritative accounting guidance establishes requirements for reporting and disclosure of comprehensive income and its components. Comprehensive income includes foreign currency translation adjustments and any related tax benefits that have been excluded from net income and reflected in stockholders’ equity. The change in accumulated other comprehensive loss was as follows (in thousands): |
Net Income Per Share | Net Income Per Share Basic net income per share is computed by dividing net income by the weighted-average number of shares outstanding during the period. Net income per diluted share i s computed by dividing the net income by the weighted-average number of shares and potential shares outstanding during the period, if the effect of potential shares is dilutive. Potential shares include incremental shares of stock issuable upon the exercise of stock options and the vesting of both restricted share units (RSUs) and performance share units (PSUs). For the three and nine months ended September 30, 2017 , weighted options to purchase 0.6 million and 0.2 million shares of common stock, respectively, were outstanding but not included in the computation of diluted net income per share because the effect of including such shares would have been antidilutive in the applicable period. For the three and nine months ended October 1, 2016 , weighted options to purchase less than 0.1 million and 1.4 million shares of common stock, respectively, were outstanding, but were not included in the computation of diluted net income per share because the effect of including such shares would have been antidilutive in the applicable period. For the three and nine months ended September 30, 2017 and October 1, 2016 , certain RSUs were considered contingently issuable shares as their vesting is contingent upon the occurrence of certain future events. Since such events had not occurred and were not considered probable of occurring as of September 30, 2017 and October 1, 2016 , 2.7 million weighted average shares related to such RSUs have been excluded from the calculation of potential shares. A reconciliation of basic and diluted net income per share is as follows (in thousands, except per share amounts): |
New Accounting Pronouncement | Recently Issued Accounting Pronouncements In September 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). The new standard, among other things, provides additional implementation guidance with respect to Accounting Standards Codification (ASC) Topic 606 and ASC Topic 842. ASU 2017-13 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the new standard, but does not expect it to have a material impact on its implementation strategies or its consolidated financial statements upon adoption. In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic718): Scope of Modification Accounting (ASU 2017-09). The new standard is intended to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in ASC Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this new standard provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply “modification accounting” to such changes. ASU 2017-09 will become effective for all entities for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (ASU 2017-04) . The new standard is intended to eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, a goodwill impairment charge will be based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 is effective for annual and interim fiscal reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (ASU 2017-01) . The new standard is intended to clarify the definition of a business and requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the set of transferred assets and activities is not considered to be a business under ASU 2017-01. ASU 2017-01 also requires a business to include at least one substantive process and narrows the definition of business outputs. The new standard will be effective on January 1, 2018, and early adoption is permitted with prospective application to any business development transaction. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18). The new standard is intended to reduce diversity in practice by adding or clarifying guidance on classification and presentation of changes in restricted cash on the statement of cash flows. ASU 2016-18 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory (ASU 2016-16). The new standard eliminates the exception that allowed the income tax consequences of an intra-entity transfer of assets other than inventory to be deferred until the transferred asset was sold to a third party or otherwise recovered through use, and now requires recognition of such income tax consequences at the time the non-inventory asset is transferred. ASU 2016-16 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard, but does not expect it to have a material impact on its consolidated financial statements upon adoption. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15) . The new standard amended the existing accounting standards for the Statement of Cash Flows and provides guidance on eight specific cash flow issues. ASU 2016-15 is effective for annual and interim fiscal reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the expected impact of this standard but does not expect it to have a material impact on its consolidated financial statements upon adoption. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The new standard requires entities to use a current expected credit loss model, which is a new impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect. The entity’s estimate would consider relevant information about past events, current conditions, and reasonable and supportable forecasts. ASU 2016-13 is effective for annual and interim fiscal reporting periods beginning after December 15, 2019, with early adoption permitted for annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the expected impact of this standard but does not expect it to have a material impact on its consolidated financial statements upon adoption. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). The new standard requires lessees to recognize most leases on their balance sheets but continue to recognize lease expenses in their income statement in a manner similar to current practice. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. Expense related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. ASU 2016-02 is effective for annual and interim fiscal reporting periods beginning after December 15, 2018, and early application is permitted. The Company is currently evaluating the expected impact of this standard on its consolidated financial statements, but anticipates that, among other things, the required recognition of a lease liability and related right-of-use asset will significantly increase both the assets and liabilities recognized and reported on its balance sheet. In addition, the Company anticipates that the classification of certain leases for which the Company is the lessor may change under the new guidance, resulting in the immediate expensing of certain costs that are currently deferred and expensed over the life of the lease. The Company currently expects to complete its assessment of the full financial impact of the new lease accounting guidance during the next fifteen months. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, ( ASU 2016-01). The new standard requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value in net income and (ii) changes in fair value due to instrument-specific credit risk be recognized separately in other comprehensive income when the fair value option has been elected for financial liabilities. ASU 2016-01 is effective for annual and interim fiscal reporting periods beginning after December 15, 2017. The Company is currently evaluating the expected impact of this standard but does not expect it to have a material impact on its consolidated financial statements upon adoption. In May 2014, the FASB issued ASU No. 2014-09, Revenue (Topic 606): Revenue from Contracts with Customers (ASU 2014-09). The new standard provides a single, principles-based five-step model to be applied to all contracts with customers while enhancing disclosures about revenue, providing additional guidance for transactions that were not previously addressed comprehensively and improving guidance for multiple-element arrangements. ASU 2014-09 will replace most existing revenue recognition guidance under GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method upon adoption. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which amended ASU 2014-09, providing for a one year deferral period for the implementation of ASU 2014-09. ASU 2014-09 will now be effective for annual and interim periods beginning on or after December 15, 2017. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations under FASB ASC Topic 606 , which provides guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing , which amended ASU 2014-09 by providing clarity in identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606) – Narrow-Scope Improvements and Practical Expedients, which further amended ASU 2014-09 by providing additional clarity in recognizing revenue from contracts that have been modified prior to the transition period to the new standard, as well as providing additional disclosure requirements for businesses and other organizations that make the transition to the new standard by adjusting amounts from prior reporting periods via retrospective application. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (ASU 2016-20). ASU 2016-20 affects narrow aspects of ASC Topic 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables. The Company is continuing to evaluate the expected impact of the new revenue guidance contained in ASC Topic 606 on its consolidated financial statements and anticipates, among other things, that the adoption of such standard will result in the acceleration of certain revenue from product sales to distributors that is currently deferred under the “sell-through” method, as well as the capitalization and deferral of certain contract-related costs that are currently expensed when incurred. The Company is also further evaluating the impact of the new revenue guidance on associated processes, systems and internal controls over financial reporting. The Company currently expects to complete its assessment of the impact of the new revenue recognition guidance, including the method of adoption, during the next three months and to adopt the guidance when it becomes effective for the Company on December 31, 2017 (fiscal year 2018). |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Property, Plant and Equipment | Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows: Useful Lives Aircraft and components 10 to 20 years Buildings 39 years Building improvements 7 to 15 years Computer equipment 2 to 6 years Demonstration units 3 years Furniture and office equipment 2 to 6 years Leasehold improvements Lesser of useful life or term of lease Machinery and equipment 5 to 7 years Tooling 3 years Vehicles 5 years Property and equipment, net, consists of the following (in thousands): September 30, December 31, Building and building improvements $ 86,023 $ 85,966 Machinery and equipment 45,718 41,683 Aircraft and vehicles 25,329 45 Land 23,762 23,762 Leasehold improvements 15,015 8,289 Computer equipment 14,440 13,549 Tooling 13,667 12,895 Furniture and office equipment 10,821 9,669 Demonstration units 489 448 Construction-in-progress 8,434 7,923 Total property and equipment 243,698 204,229 Accumulated depreciation and amortization (79,119 ) (68,233 ) Property and equipment, net $ 164,579 $ 135,996 |
Changes in Product Warranty Accrual | Changes in the product warranty accrual were as follows (in thousands): Nine Months Ended September 30, October 1, Warranty accrual, beginning of period $ 910 $ 1,222 Accrual for warranties issued 712 722 Changes to pre-existing warranties (including changes in estimates) (116 ) 99 Settlements made (486 ) (751 ) Warranty accrual, end of period $ 1,020 $ 1,292 |
Schedule of Change in Accumulated Other Comprehensive Income | The change in accumulated other comprehensive loss was as follows (in thousands): Nine Months Ended Accumulated other comprehensive loss, beginning of period $ (7,027 ) Unrealized gains from foreign currency translation 4,270 Accumulated other comprehensive loss, end of period $ (2,757 ) |
Reconciliation of Basic and Diluted Net Income Per Share | reconciliation of basic and diluted net income per share is as follows (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Net income $ 39,235 $ 27,773 $ 131,248 $ 85,373 Basic net income per share: Weighted-average shares outstanding - basic 52,079 49,477 51,469 49,386 Net income per basic share $ 0.75 $ 0.56 $ 2.55 $ 1.73 Diluted net income per share: Weighted-average shares outstanding - basic 52,079 49,477 51,469 49,386 Diluted share equivalent: stock options and RSUs 4,084 4,088 4,498 3,451 Weighted-average shares outstanding - diluted 56,163 53,565 55,967 52,837 Net income per diluted share $ 0.70 $ 0.52 $ 2.35 $ 1.62 |
Schedule of Cash Flow, Supplemental Disclosures [Table Text Block] | Supplemental cash flow information includes the following (in thousands): Nine Months Ended September 30, October 1, Cash paid during the year for: Interest (net of amounts capitalized) $ 432 $ 2,603 Income taxes 86,759 25,753 Noncash investing and financing activities: Unpaid purchases of property, plant and equipment $ 3,349 $ 1,232 Unsettled common stock proceeds from option exercises 113 476 Unsettled stock repurchases 2,653 — |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Components of Inventory | Inventories consist of the following (in thousands): September 30, December 31, Raw materials $ 42,023 $ 32,647 Work-in-process 8,217 7,701 Finished goods 48,838 32,194 Total inventories $ 99,078 $ 72,542 |
Other Current Assets (Tables)
Other Current Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Assets [Table Text Block] | Other current assets consist of the following (in thousands): September 30, December 31, Prepaid expenses $ 15,113 $ 13,051 Prepaid income taxes 9,622 981 Due from foreign agent 8,571 — Royalties receivable 7,800 7,500 Employee loans and advances 338 305 Due from related party 23 77 Other current assets 5,377 5,134 Total other current assets $ 46,844 $ 27,048 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows: Useful Lives Aircraft and components 10 to 20 years Buildings 39 years Building improvements 7 to 15 years Computer equipment 2 to 6 years Demonstration units 3 years Furniture and office equipment 2 to 6 years Leasehold improvements Lesser of useful life or term of lease Machinery and equipment 5 to 7 years Tooling 3 years Vehicles 5 years Property and equipment, net, consists of the following (in thousands): September 30, December 31, Building and building improvements $ 86,023 $ 85,966 Machinery and equipment 45,718 41,683 Aircraft and vehicles 25,329 45 Land 23,762 23,762 Leasehold improvements 15,015 8,289 Computer equipment 14,440 13,549 Tooling 13,667 12,895 Furniture and office equipment 10,821 9,669 Demonstration units 489 448 Construction-in-progress 8,434 7,923 Total property and equipment 243,698 204,229 Accumulated depreciation and amortization (79,119 ) (68,233 ) Property and equipment, net $ 164,579 $ 135,996 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | Intangible assets, net, consist of the following (in thousands): September 30, December 31, Patents $ 20,715 $ 19,950 Customer relationships 7,669 7,669 Licenses 7,500 7,500 Acquired technology 5,580 5,580 Trademarks 3,990 3,777 Capitalized software development costs 2,606 2,539 Other 3,681 3,674 Total intangible assets 51,741 50,689 Accumulated amortization (24,252 ) (21,313 ) Intangible assets, net $ 27,489 $ 29,376 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for future fiscal years is as follows (in thousands): Fiscal year Amount 2017 (balance of year) $ 5,343 2018 4,769 2019 3,710 2020 3,362 2021 2,330 Thereafter 7,975 Total $ 27,489 |
Accrued and Other Current Lia29
Accrued and Other Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accrued Liabilities [Abstract] | |
Schedule of Accrued Liabilities [Table Text Block] | Accrued and other current liabilities consist of the following (in thousands): September 30, December 31, Contract related payables $ 14,365 $ 10,673 Income taxes payable 5,179 76,316 Accrued taxes 4,990 5,135 Accrued customer rebates, fees and reimbursements 4,101 3,893 Accrued stock repurchases 2,653 — Accrued legal fees 1,263 1,362 Accrued warranty 1,220 910 Related party payable 1,028 525 Accrued donations 634 503 Other 4,756 5,337 Total accrued and other current liabilities $ 40,189 $ 104,654 |
Other Non-Current Liabilities (
Other Non-Current Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Other Liabilities, Long Term [Abstract] | |
Components Of Other Liabilities Long Term Table [Table Text Block] | Other non-current liabilities consist of the following (in thousands): September 30, December 31, Unrecognized tax benefit $ 14,078 $ 13,442 Deferred rent, long-term 1,350 558 Deferred tax liability, long-term 339 340 Other 292 247 Total other non-current liabilities $ 16,059 $ 14,587 |
Stock Repurchase Program (Table
Stock Repurchase Program (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Class of Stock [Line Items] | |
Treasury Stock [Text Block] | The following table provides a summary of the Company’s stock repurchase activities during the three and nine months ended September 30, 2017 and October 1, 2016 (in thousands, except per share amounts): Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Shares repurchased 533 — 533 1,496 Average cost per share $ 84.86 $ — $ 84.86 $ 42.39 Value of shares repurchased $ 45,261 $ — $ 45,261 $ 63,403 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Number and Weighted Average Exercise Price of Options Issued and Outstanding under all Stock Option Plans | The number and weighted-average exercise price of options issued and outstanding under all of the Company’s equity plans are as follows (in thousands, except for exercise prices): Nine Months Ended Shares Average Exercise Price Options outstanding, beginning of period 8,521 $ 28.56 Granted 847 86.80 Canceled (220 ) 36.49 Exercised (2,009 ) 27.66 Options outstanding, end of period 7,139 $ 35.48 Options exercisable, end of period 3,991 $ 26.26 |
Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block] | The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows (in thousands, except for grant date fair value amounts): Nine Months Ended Units Weighted Average Grant Date Fair Value RSUs outstanding, beginning of period 2,706 $ 41.45 Granted 33 86.42 Canceled (25 ) 85.79 Expired — — Vested (6 ) 43.09 RSUs outstanding, end of period 2,708 $ 41.59 |
Schedule of Nonvested Performance-based Units Activity [Table Text Block] | The number of PSUs outstanding under all of the Company’s equity plans are as follows (in thousands, except for grant date fair value amounts): Nine Months Ended Units Weighted Average Grant Date Fair Value PSUs outstanding, beginning of period — $ — Granted 248 90.71 Canceled (15 ) 90.87 Expired — — Vested — — PSUs outstanding, end of period 233 $ 90.70 |
Range of Assumptions Used and Resulting Weighted-Average Fair Value of Options Granted at Date of Grant | The range of assumptions used and the resulting weighted-average fair value of options granted at the date of grant were as follows: Three Months Ended Nine Months Ended September 30, October 1, September 30, October 1, Risk-free interest rate 1.7% to 2.0% 1.0% to 1.3% 1.7% to 2.2% 1.0% to 1.9% Expected term (in years) 5.5 5.7 5.5 5.7 Estimated volatility 30.3% to 32.1% 30.3% to 31.9% 29.7% to 32.1% 30.3% to 35.7% Expected dividends 0% 0% 0% 0% Weighted-average fair value of options granted $27.70 $17.99 $27.74 $13.42 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Revenue from External Customer [Line Items] | |
Future Minimum Lease Payments Under Operating and Capital Leases | Future minimum lease payments, including interest, under operating and capital leases for each of the following fiscal years ending on or about December 31 are (in thousands): As of September 30, 2017 Operating Leases Capital Leases (1) Total 2017 (balance of year) $ 1,641 $ — $ 1,641 2018 6,347 — 6,347 2019 5,363 — 5,363 2020 3,165 — 3,165 2021 2,615 — 2,615 Thereafter 7,284 — 7,284 Total $ 26,415 $ — $ 26,415 ______________________ (1) As of September 30, 2017 , the Company had an outstanding capital lease of less than $0.1 million, which is not reflected in the above table due to rounding. |
Segment Information and Enter34
Segment Information and Enterprise Reporting (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block] | The following schedule presents an analysis of the Company’s product revenues based upon the geographic area to which the product was shipped (in thousands, except percentages): Three Months Ended Nine Months Ended September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 Geographic area by destination: United States $ 119,266 65.8 % $ 114,563 71.5 % $ 370,403 68.3 % $ 345,113 70.7 % Europe, Middle East and Africa 38,127 21.0 23,929 14.9 102,322 18.9 81,887 16.8 Asia and Australia 18,078 10.0 16,630 10.4 51,801 9.6 46,815 9.6 North and South America (excluding United States) 5,800 3.2 5,164 3.2 17,644 3.2 14,368 2.9 Total product revenue $ 181,271 100.0 % $ 160,286 100.0 % $ 542,170 100.0 % $ 488,183 100.0 % |
Long-lived Assets by Geographic Areas [Table Text Block] | The Company’s consolidated long-lived assets (total non-current assets excluding deferred taxes, goodwill and intangible assets) by geographic area are (in thousands, except percentages): September 30, 2017 December 31, 2016 Long-lived assets by geographic area: United States $ 262,249 96.3 % $ 216,784 96.3 % International 10,148 3.7 8,383 3.7 Total $ 272,397 100.0 % $ 225,167 100.0 % |
Summary of Significant Accoun35
Summary of Significant Accounting Policies - Additional Information (Detail) shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($)shares | Oct. 01, 2016USD ($)shares | Sep. 30, 2017USD ($)segmentshares | Oct. 01, 2016USD ($)shares | |
Summary Of Significant Accounting Policies [Line Items] | ||||
Number of Sources of Product Revenue | segment | 4 | |||
Depreciation | $ 10,800,000 | $ 9,500,000 | ||
Impairment of goodwill, intangible assets and other long-lived assets | $ 0 | $ 0 | $ 0 | $ 0 |
Number of days royalty revenue is adjusted subsequent to quarter end | 60 days | |||
Options to purchase of shares of common stock | shares | 200 | 100 | 600 | 1,400 |
Income taxes | $ 86,759,000 | $ 25,753,000 | ||
Interest (net of amounts capitalized) | 432,000 | 2,603,000 | ||
Unpaid purchases of property, plant and equipment | 3,349,000 | 1,232,000 | ||
Unsettled common stock proceeds from option exercises | 113,000 | 476,000 | ||
Unsettled stock repurchases | 2,653,000 | 0 | ||
Patents | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Finite-Lived Intangible Assets, Cost Incurred to Renew or Extend | $ 500,000 | $ 400,000 | ||
Weighted average number of years until the next renewal | 1 year | |||
Trademarks | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Weighted average number of years until the next renewal | 6 years | |||
Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Warranty period for defects in material and workmanship | 6 months | |||
Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Warranty period for defects in material and workmanship | 48 months | |||
Buildings | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 39 years | |||
Land, Buildings and Improvements | Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 7 years | |||
Land, Buildings and Improvements | Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 15 years | |||
Computer equipment | Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 2 years | |||
Computer equipment | Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 6 years | |||
Vehicles | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 5 years | |||
Tooling | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 3 years | |||
Furniture and Office Equipment | Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 2 years | |||
Furniture and Office Equipment | Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 6 years | |||
Demonstration units | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 3 years | |||
Machinery and equipment | Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 5 years | |||
Machinery and equipment | Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 7 years | |||
Aircraft | Minimum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 10 years | |||
Aircraft | Maximum | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property, Plant and Equipment, Useful Life | 20 years | |||
Restricted Stock Units (RSUs) [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares | 33 | |||
Restricted Stock Units (RSUs) [Member] | Chief Executive Officer [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares | 2,700 | 2,700 |
Summary of Significant Accoun36
Summary of Significant Accounting Policies - Changes in Product Warranty Accrual (Detail) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Oct. 01, 2016 | |
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward] | ||
Warranty accrual, beginning of period | $ 910 | $ 1,222 |
Accrual for warranties issued | 712 | 722 |
Changes to pre-existing warranties (including changes in estimates) | (116) | 99 |
Settlements made | (486) | (751) |
Warranty accrual, end of period | $ 1,020 | $ 1,292 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies - Schedule of Change in Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Accounting Policies [Abstract] | ||||
Accumulated other comprehensive loss, beginning of period | $ (7,027) | |||
Foreign currency translation adjustments | $ 1,405 | $ (470) | 4,270 | $ (280) |
Accumulated other comprehensive loss, end of period | $ (2,757) | $ (2,757) |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Reconciliation of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Accounting Policies [Abstract] | ||||
Options to purchase of shares of common stock | 200 | 100 | 600 | 1,400 |
Net income attributable to stockholders of Masimo Corporation: | ||||
Net income | $ 39,235 | $ 27,773 | $ 131,248 | $ 85,373 |
Net income attributable to Masimo Corporation stockholders | 39,235 | 27,773 | 131,248 | 85,373 |
Net income | ||||
Net income attributable to Masimo Corporation stockholders | $ 39,235 | $ 27,773 | $ 131,248 | $ 85,373 |
Weighted-average shares outstanding - basic | 52,079 | 49,477 | 51,469 | 49,386 |
Net income per basic share | $ 0.75 | $ 0.56 | $ 2.55 | $ 1.73 |
Diluted net income per share: | ||||
Weighted-average shares outstanding - basic | 52,079 | 49,477 | 51,469 | 49,386 |
Diluted share equivalent: stock options and RSUs | 4,084 | 4,088 | 4,498 | 3,451 |
Weighted-average shares outstanding - diluted | 56,163 | 53,565 | 55,967 | 52,837 |
Net income per diluted share | $ 0.70 | $ 0.52 | $ 2.35 | $ 1.62 |
Variable Interest Entity (VIE)
Variable Interest Entity (VIE) - Additional Information (Detail) | Jan. 02, 2007company | Apr. 02, 2016USD ($) |
Variable Interest Entity [Abstract] | ||
Number of Companies with Rights to Intellectual Property | company | 2 | |
Deconsolidation, Revaluation of Retained Investment, Gain (Loss), Amount | $ | $ 0.3 |
Variable Interest Entity Variab
Variable Interest Entity Variable Interest Entity (VIE) -Consolidating Statement of Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Sales Revenue, Goods, Net | $ 181,271,000 | $ 160,286,000 | $ 542,170,000 | $ 488,183,000 |
Royalty and other revenue | 7,335,000 | 23,241,000 | ||
Total revenue | 193,692,000 | 167,621,000 | 572,927,000 | 511,424,000 |
Cost of goods sold | 65,027,000 | 57,499,000 | 191,692,000 | 171,954,000 |
Gross profit | 128,665,000 | 110,122,000 | 381,235,000 | 339,470,000 |
Selling, general and administrative | 65,390,000 | 57,845,000 | 197,339,000 | 184,244,000 |
Research and Development Expense | 15,300,000 | 15,673,000 | 45,859,000 | 44,856,000 |
Operating Expenses | 80,690,000 | 73,518,000 | 243,198,000 | 229,100,000 |
Operating income | 47,975,000 | 36,604,000 | 138,037,000 | 110,370,000 |
Non-operating income (expense) | 287,000 | (546,000) | 1,319,000 | 423,000 |
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest | 48,262,000 | 36,058,000 | 139,356,000 | 110,793,000 |
Provision for income taxes | 9,027,000 | 8,285,000 | 8,108,000 | 25,420,000 |
Net income including noncontrolling interest | 39,235,000 | 27,773,000 | 131,248,000 | 85,373,000 |
Net Income (Loss) Attributable to Parent | 39,235,000 | 27,773,000 | 131,248,000 | 85,373,000 |
Cercacor Laboratories [Member] | ||||
Operating Leases, Income Statement, Sublease Revenue | 100,000 | 300,000 | 200,000 | |
Payments for Royalties | $ 2,100,000 | $ 1,600,000 | $ 5,600,000 | $ 4,700,000 |
Related Party Transactions (Det
Related Party Transactions (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($)death | Oct. 01, 2016USD ($) | Sep. 30, 2017USD ($)ft²death | Oct. 01, 2016USD ($) | Dec. 31, 2016USD ($) | |
Related Party Transaction [Line Items] | |||||
Property Plant and Equipment, Occupied Square Feet | ft² | 16,830 | ||||
Estimate of Annual Preventable Hospital Deaths Prevented by 2020 | death | 200,000 | 200,000 | |||
Cercacor Laboratories [Member] | |||||
Related Party Transaction [Line Items] | |||||
Payments for Royalties | $ 2,100,000 | $ 1,600,000 | $ 5,600,000 | $ 4,700,000 | |
Payment for Administrative Fees | 100,000 | $ 100,000 | 100,000 | 100,000 | |
Operating Leases, Income Statement, Sublease Revenue | 100,000 | 300,000 | $ 200,000 | ||
Related Party Transaction, Due from (to) Related Party | 1,000,000 | 1,000,000 | $ 400,000 | ||
Reimbursement Fee [Member] | |||||
Related Party Transaction [Line Items] | |||||
Related Party Transaction, Due from (to) Related Party | $ 100,000 | 100,000 | |||
Variable Interest Entity, Not Primary Beneficiary [Member] | Minimum | |||||
Related Party Transaction [Line Items] | |||||
Payments for Royalties | $ 5,000,000 |
Inventories - Components of Inv
Inventories - Components of Inventory (Detail) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 42,023 | $ 32,647 |
Work-in-process | 8,217 | 7,701 |
Finished goods | 48,838 | 32,194 |
Total inventories | $ 99,078 | $ 72,542 |
Other Current Assets (Details)
Other Current Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 15,113 | $ 13,051 |
Prepaid income taxes | 9,622 | 981 |
Due from foreign agent | 8,571 | 0 |
Royalties receivable | 7,800 | 7,500 |
Employee loans and advances | 338 | 305 |
Due from related party | 23 | 77 |
Other current assets | 5,377 | 5,134 |
Total other current assets | 46,844 | $ 27,048 |
Loss Contingency, Estimate of Possible Loss | $ 8,600 |
Property and Equipment Property
Property and Equipment Property and Equipment (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 243,698 | $ 204,229 |
Accumulated depreciation and amortization | (79,119) | (68,233) |
Property and equipment, net | 164,579 | 135,996 |
Building and building improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 86,023 | 85,966 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 45,718 | 41,683 |
Aircraft and vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 25,329 | |
Aircraft and vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 45 | |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 23,762 | 23,762 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 15,015 | 8,289 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 14,440 | 13,549 |
Tooling | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 13,667 | 12,895 |
Furniture and office equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 10,821 | 9,669 |
Demonstration units | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 489 | 448 |
Construction-in-progress | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 8,434 | $ 7,923 |
Property and Equipment Proper45
Property and Equipment Property and Equipment Narrative (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | ||
Aug. 31, 2017 | Sep. 30, 2017 | Oct. 01, 2016 | Dec. 31, 2016 | |
Property, Plant and Equipment [Line Items] | ||||
Depreciation | $ 10,800 | $ 9,500 | ||
Depreciation and amortization | 14,384 | $ 12,355 | ||
Total property and equipment | 243,698 | $ 204,229 | ||
Accumulated depreciation | $ 79,119 | $ 68,233 | ||
Aircraft | ||||
Property, Plant and Equipment [Line Items] | ||||
Property, Plant and Equipment, Additions | $ 25,300 |
Intangible Assets Intangible As
Intangible Assets Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of Intangible Assets | $ 3,700 | $ 2,800 | |
Total intangible assets | 51,741 | $ 50,689 | |
Accumulated amortization | (24,252) | (21,313) | |
Intangible assets, net | 27,489 | 29,376 | |
Patents | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | 20,715 | 19,950 | |
Customer relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | 7,669 | 7,669 | |
Customer relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | 7,500 | 7,500 | |
Acquired technology | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | 5,580 | 5,580 | |
Trademarks | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | 3,990 | 3,777 | |
Capitalized software development costs | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | 2,606 | 2,539 | |
Other | |||
Finite-Lived Intangible Assets [Line Items] | |||
Total intangible assets | $ 3,681 | $ 3,674 |
Intangible Assets Intangible 47
Intangible Assets Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2017 | Oct. 01, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 10 years | |
Amortization of Intangible Assets | $ 3.7 | $ 2.8 |
Intangible Assets Intangible 48
Intangible Assets Intangible Assets - Future Amortization Expense (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2017 (balance of year) | $ 5,343 | |
2,018 | 4,769 | |
2,019 | 3,710 | |
2,020 | 3,362 | |
2,021 | 2,330 | |
Thereafter | 7,975 | |
Intangible assets, net | $ 27,489 | $ 29,376 |
Accrued and Other Current Lia49
Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accrued Liabilities [Abstract] | ||
Contract related payables | $ 14,365 | $ 10,673 |
Income taxes payable | 5,179 | 76,316 |
Accrued taxes | 4,990 | 5,135 |
Accrued customer rebates, fees and reimbursements | 4,101 | 3,893 |
Accrued stock repurchases | 2,653 | 0 |
Accrued legal fees | 1,263 | 1,362 |
Accrued warranty | 1,220 | 910 |
Related party payable | 1,028 | 525 |
Accrued donations | 634 | 503 |
Other | 4,756 | 5,337 |
Total accrued and other current liabilities | $ 40,189 | $ 104,654 |
Revolving Credit Facility Debt
Revolving Credit Facility Debt Instrument (Details) - USD ($) | Jan. 08, 2016 | Sep. 30, 2017 | Oct. 01, 2016 |
Line of Credit Facility [Line Items] | |||
Line of Credit, Current | $ 0 | ||
Letters of Credit Outstanding, Amount | 300,000 | ||
Adjusted London Interbank Offered Rate (LIBOR) | Minimum | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 1.125% | ||
Adjusted London Interbank Offered Rate (LIBOR) | Maximum | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 2.00% | ||
Revolving Credit Facility [Member] | |||
Line of Credit Facility [Line Items] | |||
Line of Credit Facility, Current Borrowing Capacity | 250,000,000 | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 350,000,000 | ||
Interest Expense, Debt | $ 500,000 | $ 3,000,000 | |
Revolving Credit Facility [Member] | Base Rate | Minimum | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 0.125% | ||
Revolving Credit Facility [Member] | Base Rate | Maximum | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 1.00% | ||
Revolving Credit Facility [Member] | Minimum | |||
Line of Credit Facility [Line Items] | |||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.175% | ||
Revolving Credit Facility [Member] | Maximum | |||
Line of Credit Facility [Line Items] | |||
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage | 0.30% | ||
Revolving Credit Facility [Member] | One Month Adjusted London Interbank Offered Rate (LIBOR) | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 1.00% | ||
Revolving Credit Facility [Member] | Federal Fund | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Basis Spread on Variable Rate | 0.50% |
Other Non-Current Liabilities O
Other Non-Current Liabilities Other Liabilities, Long Term - Components of Other Liabilities (Detail) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Other Liabilities, Long Term [Abstract] | ||
Unrecognized tax benefit | $ 14,078 | $ 13,442 |
Deferred rent, long-term | 1,350 | 558 |
Deferred tax liability, long-term | 339 | 340 |
Other | 292 | 247 |
Total other non-current liabilities | $ 16,059 | $ 14,587 |
Stock Repurchase Program - Addi
Stock Repurchase Program - Additional Information (Detail) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | Sep. 01, 2015 | |
Class of Stock [Line Items] | |||||
Shares repurchased | 533,000 | 0 | 533,000 | 1,496,000 | |
Average cost per share | $ 84.86 | $ 0 | $ 84.86 | $ 42.39 | |
Value of shares repurchased | $ 45,261,000 | $ 0 | $ 45,261,000 | $ 63,403,000 | |
Number of common shares authorized to be repurchased under new stock repurchase program | 5,000,000 | ||||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 2,400,000 | $ 2,400,000 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions | Jul. 27, 2017 | Nov. 04, 2015 | Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | Dec. 31, 2016 | Sep. 01, 2015 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Percentage Of Revenue Two Customer | 10.90% | 13.20% | 11.40% | 12.40% | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | $ 11.2 | $ 9.7 | ||||||
Common Stock, Capital Shares Reserved for Future Issuance | 14,100,000 | 14,100,000 | ||||||
Options to purchase of shares of common stock | 200,000 | 100,000 | 600,000 | 1,400,000 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 7,139,000 | 7,139,000 | 8,521,000 | |||||
Number of common shares authorized to be repurchased under new stock repurchase program | 5,000,000 | |||||||
Exercised | $ 27.66 | |||||||
Options available for grant, end of period | 4,000,000 | 4,000,000 | ||||||
Aggregate intrinsic value of options outstanding | $ 365.9 | $ 365.9 | ||||||
Aggregate intrinsic value of options exercisable | $ 240.7 | 240.7 | ||||||
Aggregate intrinsic value of options exercised | $ 17.4 | |||||||
Maximum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Options available for grant, end of period | 5,000,000 | 5,000,000 | ||||||
Employee Stock Option [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | $ 2.9 | $ 8.2 | ||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 3 years 8 months 12 days | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term | 6 years | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term | 4 years 3 months 19 days | |||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $ 35.7 | $ 35.7 | ||||||
Restricted Stock Units (RSUs) [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 2,708,000 | 2,708,000 | 2,706,000 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value | $ 41.59 | $ 41.59 | $ 41.45 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Exercised in Period | (6,000) | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value | $ 43.09 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | $ 0.2 | $ 0.3 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 33,000 | |||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 0.5 | $ 0.5 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 86.42 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | 25,000 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value | $ 85.79 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Expired in Period | 0 | |||||||
Performance Shares [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value | $ 90.70 | $ 90.70 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Exercised in Period | 0 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value | $ 0 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | $ 2 | $ 2.6 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 248,000 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 233 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage | 20.00% | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period | 4 years | |||||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 11.4 | $ 11.4 | ||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 90.71 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | 15,000 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value | $ 90.87 | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Expired in Period | 0 | |||||||
Performance Shares [Member] | Minimum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Options available for grant, end of period | 0 | 0 | ||||||
Performance Shares [Member] | Maximum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Options available for grant, end of period | 1 | 1 | ||||||
Employment Contracts [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 2.7 | |||||||
Chief Executive Officer [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Employment Agreement, Severance Terms | 10.00% | |||||||
Chief Executive Officer [Member] | Employee Stock Option [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 300,000 | |||||||
Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 2,700,000 | 2,700,000 | ||||||
Employment Agreement, Severance Terms | 50.00% | |||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 2.7 |
Stock-Based Compensation - Numb
Stock-Based Compensation - Number and Weighted Average Exercise Price of Options Issued and Outstanding under all Stock Option Plans (Detail) shares in Thousands | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Options outstanding, beginning of period | 8,521 |
Granted | 847 |
Canceled | (220) |
Exercised | (2,009) |
Options outstanding, end of period | 7,139 |
Options exercisable, end of period | 3,991 |
Options available for grant, end of period | 4,000 |
Average Exercise Price | |
Options outstanding, beginning of period | $ / shares | $ 28.56 |
Granted | $ / shares | 86.80 |
Canceled | $ / shares | 36.49 |
Exercised | $ / shares | 27.66 |
Options outstanding, end of period | $ / shares | 35.48 |
Options exercisable, end of period | $ / shares | $ 26.26 |
Stock-Based Compensation Stock-
Stock-Based Compensation Stock-Based Compensaiton - Summary of Unvested RSU Activity (Details) - USD ($) $ / shares in Units, $ in Millions | Nov. 04, 2015 | Oct. 01, 2016 | Sep. 30, 2017 | Dec. 31, 2016 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common Stock, Capital Shares Reserved for Future Issuance | 14,100,000 | |||
Employee Stock Option [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $ 35.7 | |||
Restricted Stock Units (RSUs) [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 2,708,000 | 2,706,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value | $ 41.59 | $ 41.45 | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 0.5 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 33,000 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms | 8 months 12 days | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 86.42 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | (25,000) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value | $ 85.79 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Expired in Period | 0 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Exercised in Period | (6,000) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value | $ 43.09 | |||
Performance Shares [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value | $ 90.70 | |||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 11.4 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 248,000 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Outstanding, Weighted Average Remaining Contractual Terms | 2 years 6 months | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 90.71 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period | (15,000) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value | $ 90.87 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Expired in Period | 0 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Exercised in Period | 0 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Weighted Average Grant Date Fair Value | $ 0 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 233 | |||
Chief Executive Officer [Member] | Employee Stock Option [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 300,000 | |||
Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 2,700,000 | 2,700,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 2.7 |
Stock-Based Compensation - Rang
Stock-Based Compensation - Range of Assumptions Used and Resulting Weighted-Average Fair Value of Options Granted at Date of Grant (Detail) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Range of assumptions used and resulting weighted-average fair value of options granted at the date of grant | ||||
Risk-free interest rate, minimum | 1.00% | 1.50% | 1.00% | 1.30% |
Risk-free interest rate, maximum | 1.30% | 1.80% | 1.90% | 1.90% |
Expected term (in years) | 5 years 6 months | 5 years 8 months 12 days | 5 years 6 months | 5 years 8 months 12 days |
Estimated volatility, minimum | 30.30% | 32.30% | 30.30% | 32.00% |
Estimated volatility, maximum | 31.90% | 35.60% | 35.70% | 37.40% |
Expected dividends | 0.00% | 0.00% | 0.00% | 0.00% |
Weighted-average fair value of options granted | $ 27.70 | $ 17.99 | $ 27.74 | $ 13.42 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) shares in Millions | Jul. 27, 2017 | Nov. 04, 2015USD ($) | Jan. 03, 2014USD ($) | Sep. 30, 2017USD ($)distributorAgreementshares | Oct. 01, 2016USD ($)distributorshares | Sep. 30, 2017USD ($)ft²distributorAgreementshares | Oct. 01, 2016USD ($)distributorshares | Dec. 31, 2016USD ($)distributor | Jan. 31, 2014participant |
Contingencies And Commitments [Line Items] | |||||||||
Long-Lived Assets | $ 272,397,000 | $ 272,397,000 | $ 225,167,000 | ||||||
Concentration Risk, Long-lived Asset Geographic Area, Percentage | 100.00% | 100.00% | 100.00% | ||||||
Sales Revenue, Goods, Net | $ 181,271,000 | $ 160,286,000 | $ 542,170,000 | $ 488,183,000 | |||||
Concentration Risk, Percentage | 100.00% | 100.00% | 100.00% | 100.00% | |||||
Options to purchase of shares of common stock | shares | 0.2 | 0.1 | 0.6 | 1.4 | |||||
Property Plant and Equipment, Occupied Square Feet | ft² | 16,830 | ||||||||
Accrued rent expense | $ 1,500,000 | $ 1,500,000 | $ 700,000 | ||||||
Rental expense related to operating leases | 1,700,000 | $ 1,600,000 | 5,000,000 | $ 4,500,000 | |||||
Capital Leases, Future Minimum Payments, Interest Included in Payments | $ 100,000 | $ 100,000 | |||||||
Company contribution percentage based on employee contribution of up to 3% of employee's compensation | 3.00% | ||||||||
Severance plan participation agreements | Agreement | 6 | 6 | |||||||
Supplemental Unemployment Benefits, Severance Benefits, Required Notice of Resignation | 6 months | ||||||||
Purchase Commitment, Remaining Minimum Amount Committed | $ 81,600,000 | $ 81,600,000 | |||||||
Other Commitment | 300,000 | 300,000 | |||||||
Bank balances | 277,600,000 | 277,600,000 | |||||||
Bank balance covered by Federal Deposit Insurance Corporation limit | $ 3,900,000 | 3,900,000 | |||||||
Royalty Revenue | $ 25,700,000 | ||||||||
Royalty and other revenue | $ 7,335,000 | $ 23,241,000 | |||||||
Number of participants in the surfactant, positive pressure, and oxygenation randomized trial | participant | 2 | ||||||||
Percentage Of Revenue One Customer | 12.30% | 14.00% | 13.20% | 15.00% | |||||
Percentage Of Revenue Two Customer | 10.90% | 13.20% | 11.40% | 12.40% | |||||
Number of days royalty revenue is adjusted subsequent to quarter end | 60 days | ||||||||
Contractual Obligation | $ 26,415,000 | $ 26,415,000 | |||||||
Sales [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Concentration Risk, Just-in-time Distributors | distributor | 2 | 2 | 2 | 2 | |||||
Accounts Receivable [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Concentration Risk, Just-in-time Distributors | distributor | 2 | 2 | |||||||
Sales Revenue, Product Line [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Revenue Customer Concentration | $ 102,700,000 | $ 94,500,000 | $ 308,000,000 | $ 279,800,000 | |||||
Just in time distributor one [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Percentage Of Accounts Receivable Balance From Two Just In Time Distributor | 7.30% | 7.50% | |||||||
Just in time distributor two [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Percentage Of Accounts Receivable Balance From Two Just In Time Distributor | 5.10% | 5.60% | |||||||
Masimo vs. Physicians Healthsource, Inc. | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Loss contingency, damages sought | $ 500 | ||||||||
Employment Contracts [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 2.7 | ||||||||
International | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Company's contribution to employee retirement savings plan | 100,000 | 100,000 | $ 200,000 | 200,000 | |||||
United States | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Company's contribution to employee retirement savings plan | 600,000 | 500,000 | 1,800,000 | 1,600,000 | |||||
Chief Executive Officer [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Employment Agreement, Severance Terms | $ 0 | ||||||||
Employment Agreement, Severance Terms | 10.00% | ||||||||
Employment Agreement, Severance Benefits, Special Payment, Qualifying Termination | 233,700,000 | ||||||||
Chief Executive Officer [Member] | Deferred Bonus [Member] | Maximum | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Employment Agreement, Severance Terms | 200.00% | 100.00% | |||||||
Chief Executive Officer [Member] | Employee Stock Option [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 300,000 | ||||||||
Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award | 2.7 | ||||||||
Employment Agreement, Severance Terms | 50.00% | ||||||||
Chief Executive Officer [Member] | Cash Distribution [Member] | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Employment Agreement, Severance Terms | 50.00% | ||||||||
Reportable Geographical Components | International | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Long-Lived Assets | $ 10,148,000 | $ 10,148,000 | $ 8,383,000 | ||||||
Concentration Risk, Long-lived Asset Geographic Area, Percentage | 3.70% | 3.70% | 3.70% | ||||||
Reportable Geographical Components | United States | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Long-Lived Assets | $ 262,249,000 | $ 262,249,000 | $ 216,784,000 | ||||||
Concentration Risk, Long-lived Asset Geographic Area, Percentage | 96.30% | 96.30% | 96.30% | ||||||
Sales Revenue, Goods, Net | $ 119,266,000 | $ 114,563,000 | $ 370,403,000 | $ 345,113,000 | |||||
Concentration Risk, Percentage | 65.80% | 71.50% | 68.30% | 70.70% | |||||
Reportable Geographical Components | Europe, Middle East and Africa | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Sales Revenue, Goods, Net | $ 38,127,000 | $ 23,929,000 | $ 102,322,000 | $ 81,887,000 | |||||
Concentration Risk, Percentage | 21.00% | 14.90% | 18.90% | 16.80% | |||||
Reportable Geographical Components | Asia and Australia | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Sales Revenue, Goods, Net | $ 18,078,000 | $ 16,630,000 | $ 51,801,000 | $ 46,815,000 | |||||
Concentration Risk, Percentage | 10.00% | 10.40% | 9.60% | 9.60% | |||||
Reportable Geographical Components | North and South America (excluding United States) | |||||||||
Contingencies And Commitments [Line Items] | |||||||||
Sales Revenue, Goods, Net | $ 5,800,000 | $ 5,164,000 | $ 17,644,000 | $ 14,368,000 | |||||
Concentration Risk, Percentage | 3.20% | 3.20% | 3.20% | 2.90% |
Commitments and Contingencies58
Commitments and Contingencies - Future Minimum Lease Payments Under Operating and Capital Leases (Detail) $ in Thousands | Sep. 30, 2017USD ($) |
Operating Leases | |
2017 (balance of year) | $ 1,641 |
2,018 | 6,347 |
2,019 | 5,363 |
2,020 | 3,165 |
2,021 | 2,615 |
Thereafter | 7,284 |
Total | 26,415 |
Capital Leases(1) | |
2017 (balance of year) | 0 |
2,018 | 0 |
2,019 | 0 |
2,020 | 0 |
2,021 | 0 |
Thereafter | 0 |
Total | 0 |
Total | |
2017 (balance of year) | 1,641 |
2,018 | 6,347 |
2,019 | 5,363 |
2,020 | 3,165 |
2,021 | 2,615 |
Thereafter | 7,284 |
Total | $ 26,415 |
Segment Information and Enter59
Segment Information and Enterprise Reporting - Analysis of Product Revenues Based upon Geographic Area Shipped (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Oct. 01, 2016 | Sep. 30, 2017 | Oct. 01, 2016 | |
Analysis of Product Revenues Based upon the Geographic Area Shipped | ||||
Total product revenue | $ 181,271 | $ 160,286 | $ 542,170 | $ 488,183 |
Total product revenue, in percentage | 100.00% | 100.00% | 100.00% | 100.00% |
United States | Reportable Geographical Components | ||||
Analysis of Product Revenues Based upon the Geographic Area Shipped | ||||
Total product revenue | $ 119,266 | $ 114,563 | $ 370,403 | $ 345,113 |
Total product revenue, in percentage | 65.80% | 71.50% | 68.30% | 70.70% |
Europe, Middle East and Africa | Reportable Geographical Components | ||||
Analysis of Product Revenues Based upon the Geographic Area Shipped | ||||
Total product revenue | $ 38,127 | $ 23,929 | $ 102,322 | $ 81,887 |
Total product revenue, in percentage | 21.00% | 14.90% | 18.90% | 16.80% |
Asia and Austrialia | Reportable Geographical Components | ||||
Analysis of Product Revenues Based upon the Geographic Area Shipped | ||||
Total product revenue | $ 18,078 | $ 16,630 | $ 51,801 | $ 46,815 |
Total product revenue, in percentage | 10.00% | 10.40% | 9.60% | 9.60% |
North and South America (excluding United States) | Reportable Geographical Components | ||||
Analysis of Product Revenues Based upon the Geographic Area Shipped | ||||
Total product revenue | $ 5,800 | $ 5,164 | $ 17,644 | $ 14,368 |
Total product revenue, in percentage | 3.20% | 3.20% | 3.20% | 2.90% |
Segment Information and Enter60
Segment Information and Enterprise Reporting Long-lived assets by geographic area (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | $ 272,397 | $ 225,167 |
Concentration Risk, Long-lived Asset Geographic Area, Percentage | 100.00% | 100.00% |
Reportable Geographical Components | United States | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | $ 262,249 | $ 216,784 |
Concentration Risk, Long-lived Asset Geographic Area, Percentage | 96.30% | 96.30% |
Reportable Geographical Components | International | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long-Lived Assets | $ 10,148 | $ 8,383 |
Concentration Risk, Long-lived Asset Geographic Area, Percentage | 3.70% | 3.70% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2017 | Oct. 01, 2016 | |
Income Tax Disclosure [Abstract] | ||
Other Tax Expense (Benefit) | $ 35.1 | $ 7.7 |
Gross unrecognized tax benefit | 15.2 | |
Unrecognized tax benefit that would affect effective tax rate | $ 13.5 |