Cover
Cover | 3 Months Ended |
Apr. 01, 2023 shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Apr. 01, 2023 |
Document Transition Report | false |
Entity File Number | 001-33642 |
Entity Registrant Name | MASIMO CORP |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 33-0368882 |
Entity Address, Address Line One | 52 Discovery |
Entity Address, City or Town | Irvine, |
Entity Address, State or Province | CA |
Entity Address, Postal Zip Code | 92618 |
City Area Code | (949) |
Local Phone Number | 297-7000 |
Title of 12(b) Security | Common Stock, $0.001 par value |
Trading Symbol | MASI |
Security Exchange Name | NASDAQ |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Smaller Reporting Company | false |
Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 52,779,770 |
Amendment Flag | false |
Document Fiscal Year Focus | 2023 |
Document Fiscal Period Focus | Q1 |
Entity Central Index Key | 0000937556 |
Current Fiscal Year End Date | --12-30 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents | $ 174.1 | $ 202.9 |
Trade accounts receivable, net of allowance for credit losses of $8.0 million and $7.7 million at April 1, 2023 and December 31, 2022, respectively | 411.2 | 445.9 |
Inventories | 503.5 | 501 |
Other current assets | 172 | 158.8 |
Total current assets | 1,260.8 | 1,308.6 |
Lease receivable, non-current | 81.9 | 73.1 |
Deferred costs and other contract assets | 42.9 | 41.9 |
Property and equipment, net | 402.1 | 402.5 |
Intangible assets, net | 437.5 | 460.6 |
Trademarks - (Note 9) | 252.3 | 262 |
Goodwill | 421.9 | 445.4 |
Deferred tax assets | 111.9 | 102.5 |
Other non-current assets | 104.2 | 114 |
Total assets | 3,115.5 | 3,210.6 |
Current liabilities | ||
Accounts payable | 249.1 | 276.8 |
Accrued compensation | 72.9 | 89.3 |
Deferred revenue and other contract liabilities, current | 81.7 | 80.6 |
Other current liabilities | 179.5 | 183.3 |
Total current liabilities | 583.2 | 630 |
Long-term debt | 897.5 | 941.6 |
Deferred tax liabilities | 168.4 | 163.6 |
Other non-current liabilities | 136.1 | 136.5 |
Total liabilities | 1,785.2 | 1,871.7 |
Commitments and contingencies - (Note 24) | ||
Stockholders’ equity | ||
Preferred stock, $0.001 par value; 5.0 million shares authorized; 0 shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value; 100.0 million shares authorized; 52.8 million and 52.5 million shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively | 0.1 | 0.1 |
Treasury stock, 19.5 million and 19.5 million shares at April 1, 2023 and December 31, 2022, respectively | (1,169.2) | (1,169.2) |
Additional paid-in capital | 781.6 | 782.2 |
Accumulated other comprehensive (loss) income | (17.8) | 11.5 |
Retained earnings | 1,735.6 | 1,714.3 |
Total stockholders’ equity | 1,330.3 | 1,338.9 |
Total liabilities and stockholders’ equity | 3,115.5 | 3,210.6 |
Customer relationships | ||
Current assets | ||
Intangible assets, net | 191 | 201.6 |
Acquired technologies | ||
Current assets | ||
Intangible assets, net | 146.8 | 160.1 |
Other intangible assets, net | ||
Current assets | ||
Intangible assets, net | $ 99.7 | $ 98.9 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Millions, $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 8 | $ 7.7 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5 | 5 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 100 | 100 |
Common stock, shares, issued (in shares) | 52.8 | 52.5 |
Common stock, shares, outstanding (in shares) | 52.8 | 52.5 |
Treasury stock, shares (in shares) | 19.5 | 19.5 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Income Statement [Abstract] | ||
Revenue | $ 565 | $ 304.2 |
Cost of goods sold | 280.2 | 99.5 |
Gross profit | 284.8 | 204.7 |
Selling, general and administrative | 196.3 | 108.9 |
Research and development | 50.5 | 36.1 |
Total operating expenses | 246.8 | 145 |
Operating income | 38 | 59.7 |
Non-operating loss | (11.8) | (0.6) |
Income before provision for income taxes | 26.2 | 59.1 |
Provision for income taxes | 4.9 | 12.5 |
Net income | $ 21.3 | $ 46.6 |
Net income per share: | ||
Basic (in dollars per share) | $ 0.40 | $ 0.84 |
Diluted (in dollars per share) | $ 0.39 | $ 0.81 |
Weighted-average shares used in per share calculations: | ||
Basic (in shares) | 52.6 | 55.4 |
Diluted (in shares) | 54.4 | 57.3 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Income Statement [Abstract] | ||
Net income | $ 21.3 | $ 46.6 |
Other comprehensive (loss) income, net of tax: | ||
Unrealized losses from foreign currency translation adjustments | (22.8) | (2.9) |
Change in pension benefits | (2.2) | 0 |
Unrealized gain on cash flow hedge | (4.3) | 0 |
Total comprehensive income | $ (8) | $ 43.7 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Stockholders' Equity - USD ($) shares in Millions, $ in Millions | Total | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings |
Beginning balance (in shares) at Jan. 01, 2022 | 55.3 | |||||
Beginning balance (in shares) at Jan. 01, 2022 | 16.5 | |||||
Beginning balance at Jan. 01, 2022 | $ 1,550.3 | $ 0.1 | $ (767.7) | $ 752.5 | $ (5.5) | $ 1,570.9 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock options exercised (in shares) | 0.1 | |||||
Stock options exercised | 2.7 | 2.7 | ||||
Restricted/Performance stock units vested (in shares) | 0.2 | |||||
Shares paid for tax withholding (in shares) | (0.1) | |||||
Shares paid for tax withholding | (25.4) | (25.4) | ||||
Stock-based compensation | 10.9 | 10.9 | ||||
Net income | 46.6 | 46.6 | ||||
Foreign currency translation adjustment | (2.9) | (2.9) | ||||
Change in pension benefits | 0 | |||||
Ending balance (in shares) at Apr. 02, 2022 | 55.5 | |||||
Ending balance (in shares) at Apr. 02, 2022 | 16.5 | |||||
Ending balance at Apr. 02, 2022 | $ 1,582.2 | $ 0.1 | $ (767.7) | 740.7 | (8.4) | 1,617.5 |
Beginning balance (in shares) at Dec. 31, 2022 | 52.5 | 52.5 | ||||
Beginning balance (in shares) at Dec. 31, 2022 | 19.5 | |||||
Beginning balance at Dec. 31, 2022 | $ 1,338.9 | $ 0.1 | $ (1,169.2) | 782.2 | 11.5 | 1,714.3 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock options exercised (in shares) | 0 | 0.1 | ||||
Stock options exercised | $ 4.3 | 4.3 | ||||
Restricted/Performance stock units vested (in shares) | 0.2 | |||||
Shares paid for tax withholding (in shares) | 0 | |||||
Shares paid for tax withholding | (12.2) | (12.2) | ||||
Stock-based compensation | 7.3 | 7.3 | ||||
Net income | 21.3 | 21.3 | ||||
Foreign currency translation adjustment | (22.8) | (22.8) | ||||
Change in pension benefits | (2.2) | (2.2) | ||||
Unrealized loss on cash flow hedge | $ (4.3) | (4.3) | ||||
Ending balance (in shares) at Apr. 01, 2023 | 52.8 | 52.8 | ||||
Ending balance (in shares) at Apr. 01, 2023 | 19.5 | |||||
Ending balance at Apr. 01, 2023 | $ 1,330.3 | $ 0.1 | $ (1,169.2) | $ 781.6 | $ (17.8) | $ 1,735.6 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Cash flows from operating activities: | ||
Net income | $ 21.3 | $ 46.6 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 26.1 | 9.1 |
Stock-based compensation | 7.3 | 10.9 |
Gain on disposal of equipment, intangibles and other assets | 0 | 0.2 |
Provision for credit losses | 0.4 | 0.5 |
Amortization of debt issuance cost | 0.5 | 0 |
Changes in operating assets and liabilities: | ||
Decrease in accounts receivable | 34.8 | 0.4 |
Increase in inventories | (7.1) | (12.4) |
Increase in other current assets | (5.9) | (1.4) |
Increase in lease receivable, net | (8.8) | (0.2) |
Increase in deferred costs and other contract assets | (1) | (14.9) |
Increase in other non-current assets | (2.7) | 0 |
(Decrease) increase in accounts payable | (27.1) | 9.2 |
Decrease in accrued compensation | (16.5) | (20.7) |
Decrease in accrued liabilities | (21.8) | (3.5) |
(Decrease) increase in income tax payable | (8.3) | 1.3 |
Increase (decrease) in deferred revenue and other contract-related liabilities | 0.9 | (1.8) |
Increase (decrease) in other non-current liabilities | 8.3 | (0.1) |
Net cash provided by operating activities | 0.4 | 23.2 |
Cash flows from investing activities: | ||
Purchases of property and equipment, net | (8.5) | (20.5) |
Increase in intangible assets | (9.7) | (2.5) |
Business combinations, net of cash acquired | 7.5 | 0 |
Other strategic investing activities | (0.4) | (0.9) |
Net cash used in investing activities | (11.1) | (23.9) |
Cash flows from financing activities: | ||
Borrowings under line of credit | 44.4 | 0 |
Repayments on line of credit | (72.4) | 0 |
Proceeds from issuance of common stock | 4.9 | 3.2 |
Payroll tax withholdings on behalf of employees for vested equity awards | (12.1) | (25.4) |
Net cash used in financing activities | (35.2) | (22.2) |
Effect of foreign currency exchange rates on cash | 17.4 | (2.5) |
Net decrease in cash, cash equivalents and restricted cash | (28.5) | (25.4) |
Cash, cash equivalents and restricted cash at beginning of period | 209.6 | 748.4 |
Cash, cash equivalents and restricted cash at end of period | $ 181.1 | $ 723 |
Description of the Company
Description of the Company | 3 Months Ended |
Apr. 01, 2023 | |
Accounting Policies [Abstract] | |
Description of the Company | 1. Description of the Company Masimo Corporation is a global technology company that develops, manufactures and markets a wide array of patient monitoring technologies, as well as automation and connectivity solutions. The Company’s mission is to improve patient outcomes, reduce the cost of care and take 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. On April 11, 2022, the Company acquired Viper Holdings Corporation, the parent company of DEI Sales, Inc., d/b/a Sound United (Sound United), via the Company’s wholly-owned subsidiary, Sonic Boom Acquisition Corp (Sonic) (Sound United Acquisition). For additional information on the Company’s acquisition of Sound United, see Note 18, “Business Combinations”. The terms “the Company” and “Masimo” refer to Masimo Corporation and, where applicable, its consolidated subsidiaries. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Apr. 01, 2023 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. 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, 2022 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, 2022 (fiscal year 2022), filed with the SEC on March 1, 2023. The results for the three months ended April 1, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending December 30, 2023 (fiscal year 2023) or for any other interim period or for any future year. 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 weeks while a 53 week fiscal year includes three 13 week fiscal quarters and one 14 week fiscal quarter. The Company’s last 53 week fiscal year was fiscal year 2020. Fiscal year 2023 is a 52 week fiscal year ending December 30, 2023. All references to years in these notes to condensed consolidated financial statements are fiscal years unless otherwise noted. 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 standalone selling prices, variable consideration, total consideration allocated to each performance obligation within a contract, inventory valuation, valuation of the Company’s equity awards, valuation of identifiable assets and liabilities connected with business combinations, derivative instruments, deferred taxes and any associated valuation allowances, deferred revenue, accounting for pensions, uncertain income tax positions, litigation costs, and related accruals. Actual results could differ from such estimates. Business Combinations The Company accounts for business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) Topic 805, Business Combinations , which requires that once control is obtained, assets acquired, liabilities assumed and noncontrolling interests in the acquired entity, if applicable, are recorded at their respective fair values at the date of acquisition, with the exception of acquired contract assets and contract liabilities (i.e., deferred revenue) from contracts with customers. These are recognized and measured in accordance with ASC Topic 606, Revenue from Contracts with Customers. The excess of the purchase price over fair values of identifiable assets, liabilities and noncontrolling interests in the acquired entity, if applicable, is recorded as goodwill. Fair Value Measurements The Company accounts for certain financial instruments at their fair values as either assets or liabilities on the balance sheet. The Company determines the fair value of its financial instruments using the framework prescribed by ASC Topic 820, Fair Value Measurements and Disclosures , and considers the estimated amount the Company would receive or pay to transfer these instruments at the reporting date with respect to current currency exchange rates, interest rates, the creditworthiness of the counterparty for unrealized gain positions and the Company’s creditworthiness for unrealized loss positions. In certain instances, the Company may utilize financial models to measure the fair value of its financial instruments. In doing so, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. Recurring Fair Value Measurement On a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices. Where quoted market prices or other observable inputs are not available, the Company applies valuation techniques to estimate fair value. 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. The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at April 1, 2023: Total Carrying Fair Value Measurement Hierarchy (in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 116.8 $ 116.8 $ — $ — Money market funds 57.3 57.3 — — Pension assets 22.2 14.8 7.4 — Derivative instruments - cash flow hedges 14.2 — 14.2 — Total assets $ 210.5 $ 188.9 $ 21.6 $ — Liabilities None $ — $ — $ — $ — Total liabilities $ — $ — $ — $ — The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at December 31, 2022: Total Carrying Fair Value Measurement Hierarchy (in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 148.5 $ 148.5 $ — $ — Money market funds 54.4 54.4 — — Pension assets 22.2 14.8 7.4 — Derivative instruments - cash flow hedges 19.7 — 19.7 — Total assets $ 244.8 $ 217.7 $ 27.1 $ — Liabilities None $ — $ — $ — $ — Total liabilities $ — $ — $ — $ — The Company invests in checking, savings and money market fund accounts, which are classified within Level 1 of the fair value hierarchy as they are valued using quoted market prices. These investments are classified as cash and cash equivalents within the Company’s accompanying condensed consolidated balance sheets, in accordance with GAAP and its accounting policies. The Company’s pension assets consist of Level 1 and Level 2 investments. The fair value of Level 2 assets is based on observable inputs such as prices or quotes for similar assets, adjusted for any differences in terms or conditions that may affect the value of the instrument being valued. The valuation techniques used for Level 2 assets may include the use of models or other valuation techniques, but these methods are all based on observable market inputs. Non-Recurring Fair Value Measurements For certain other financial assets and liabilities, including restricted cash, accounts receivable, accounts payable and other current assets and liabilities, the carrying amounts approximate their fair value primarily due to the relatively short maturity of these balances. The Company also measures certain non-financial assets at fair value on a non-recurring basis, primarily goodwill, intangible assets and operating lease right-of-use assets, in connection with periodic evaluations for potential impairment. Furthermore, the Company did not elect to apply the fair value option to specific assets or liabilities on a contract-by-contract basis. The Company did not have any transfers between Level 2 and Level 3 during the three months ended April 1, 2023. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity from the 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. The Company carries cash and cash equivalents at cost, which approximates fair value, and they are Level 1 under the fair value hierarchy. Accounts Receivable and Allowance for Credit Losses Accounts receivable consist of trade receivables recorded at the time of invoicing of product sales, 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 an evaluation of the customer’s financial condition. Collateral is generally not required. The Company records an allowance for credit losses that it does not expect to collect based on relevant information, including historical experience, current conditions, and reasonable and supportable forecasts. Accounts are charged off against the allowance when the Company believes they are uncollectible. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. Based on the risk characteristics, the Company has identified U.S. and international customers as separate portfolios for both segments, and measures expected credit losses on such receivables using an aging methodology . 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 valuation adjustments 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. The Company generally determines inventory valuation adjustments based on an evaluation of the expected future use of its inventory on an item by item basis and applies historical obsolescence rates to estimate the loss on inventory expected to have a recovery value below cost. The Company also records other specific inventory valuation adjustments when it becomes aware of unique events or circumstances that result in an expected recovery value below cost. For inventory items that have been written down, the reduced value becomes the new cost basis. 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 Buildings and building improvements 7 to 39 years Computer equipment and software 2 to 12 years Demonstration units 2 to 3 years Furniture and office equipment 2 to 15 years Leasehold improvements Lesser of useful life or term of lease Machinery, equipment and tooling 3 to 20 years Operating lease assets Lesser of useful life or term of lease Transportation, vehicles and other 1 to 20 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. Lessee Right-of-Use (ROU) Assets and Lease Liabilities The Company determines if an arrangement contains a lease at inception. ROU assets represent the Company’s right to use an asset underlying an operating lease for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from an operating lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company generally estimates the applicable discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. Many of the Company’s lessee agreements include options to extend the lease, which the Company does not include in its lease terms unless they are reasonably certain to be exercised. The Company utilizes a portfolio approach to account for the ROU assets and liabilities associated with certain equipment leases. The Company has also made an accounting policy election not to separate lease and non-lease components for its real estate leases and to exclude short-term leases with a term of twelve months or less from its ROU assets and lease liabilities. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. Intangible Assets Intangible assets consist primarily of patents, trademarks, software development costs, customer relationships and acquired technology. Costs related to patents and trademarks, which include legal and application fees, are ca pitalized and amortized over the estimated useful lives using the straight-line method. Patent and tradema rk amortization commences once final approval of the patent or trademark has been obtained. Patent costs are amortized over the lesser of 10 years or the patent’s remaining legal life, which assumes renewals, and trademark costs are amortized over 17 years, and their associated amortization cost is included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations. For intangibles purchased in an asset acquisition or business combination, which mainly include patents, trademarks, customer relationships and acquired technologies, the useful life is determined largely by valuation estimates of remaining economic life. The Company’s policy is to renew its patents and trademarks. Costs to renew patents and trademarks are capitalized and amortized over the remaining useful life of the intangible asset. The Company periodically 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. Intangibles purchased as part of an asset acquisition or business combination historically have included patents, trademarks, customer relationships, developed technologies and contractual licenses. In certain circumstances the Company also has acquired non-compete agreements tied to certain employment relationships. The useful life for all of these is largely determined by valuation estimates of remaining economic life. In connection with the Sound United Acquisition, the Company acquired certain trademarks/tradenames, which are intangible assets with indefinite useful lives. These brands are expected to maintain brand value for an indefinite period of time. 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, 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 has two reporting units, healthcare and non-healthcare. 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 the qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, or if the Company elects to bypass the qualitative analysis, then the Company performs a quantitative analysis that compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired; otherwise, a goodwill impairment loss is recognized for the lesser of: (a) the amount that the carrying amount of such reporting unit exceeds its fair value; or (b) the amount of the goodwill allocated to such reporting unit. The annual impairment test is performed during the fourth fiscal quarter. Similar to goodwill, indefinite-lived intangible assets are not amortized but instead are subject to annual impairment testing, unless circumstances dictate more frequent testing, if impairment indicators exist. Impairment for indefinite-lived assets exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. Determining whether impairment indicators exist and estimating the fair value of the Company’s indefinite-lived intangible assets if necessary for impairment testing require significant judgment. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors. The Company reviews finite lived intangible assets and long-lived assets 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 flows 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. Employee Defined Benefit Plans The Company maintains noncontributory defined benefit plans that cover certain employees in certain international locations. The Company recognizes the funded status, or the difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the condensed consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive (loss) income. If the projected benefit obligation exceeds the fair value of plan assets, the difference or underfunded status represents the pension liability. The Company records a net periodic pension cost in the condensed consolidated statement of operations. The liabilities and annual income or expense are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of asset return. The Company’s accounting policy includes an annual re-measurement of pension assets and obligations. In addition, the Company r e-measures pension assets and obligations for significant events, as of the nearest month-end date on the calendar. The fair values of plan assets are determined based on prevailing market prices. See Note 21, “Employee Benefits”, for further details. Income Taxes The Company accounts for income taxes using the asset and liability method, under which the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for net operating loss and tax credit carryforwards. Tax positions that meet a more-likely-than-not recognition threshold are recognized in the first reporting period that it becomes more-likely-than-not such tax position will be sustained upon examination. A tax position that meets this more-likely-than-not recognition threshold is recorded at the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Previously recognized income tax positions that fail to meet the recognition threshold in a subsequent period are derecognized in that period. Differences between actual results and the Company’s assumptions, or changes in the Company’s assumptions in future periods, are recorded in the period they become known. The Company records potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. As a multinational corporation, the Company is subject to complex tax laws and regulations in various jurisdictions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from the Company’s estimates, which could result in the need to record additional liabilities or potentially to reverse previously recorded tax liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is recorded against any deferred tax assets when, in the judgment of management, it is more likely than not that all or part of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies. Income taxes are highly susceptible to changes from period to period, requiring management to make assumptions about the Company’s future income over the lives of its deferred tax assets and the impact of changes in valuation allowances. Any difference in the assumptions, judgments and estimates mentioned above could result in changes to the Company’s results of operations. Revenue Recognition, Deferred Revenue and Other Contract Liabilities The Company generally recognizes revenue following a single, principles-based five-step model to be applied to all contracts with customers and generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers that are remitted to government authorities, when control over the promised goods or services are transferred to the customer. Healthcare segment While the majority of the Company’s healthcare segment revenue contracts and transactions contain standard business terms and conditions, there are some transactions that contain non-standard business terms and conditions. As a result, contract interpretation, judgment and analysis are required to determine the appropriate accounting, including: (i) the amount of the total consideration, as well as variable consideration, (ii) whether the arrangement contains an embedded lease, and if so, whether such embedded lease is a sales-type lease or an operating lease, (iii) the identification of the distinct performance obligations contained within the arrangement, (iv) how the arrangement consideration should be allocated to each performance obligation when multiple performance obligations exist, including the determination of standalone selling price, and (v) when to recognize revenue on the performance obligations. Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition. Revenue from fixed lease payments related to equipment supplied under sales-type lease arrangements is recognized once control over the equipment is transferred to the customer, while revenue from fixed lease payments related to equipment supplied under operating-type lease arrangements is generally recognized on a straight-line basis over the term of the lease and variable lease payments are recognized as they occur. The Company derives the majority of its healthcare segment revenue from four primary sources: (i) direct sales under deferred equipment 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 customers; and (iv) sales of integrated circuit boards to OEM customers who incorporate the Company’s embedded software technology into their multiparameter monitoring devices. Subject to customer credit considerations, the majority of such sales are made on open accounts using industry standard payment terms based on the geography within which the specific customer is located. The Company enters into agreements to sell its monitoring solutions and services, sometimes as a part of arrangements with multiple performance obligations that include various combinations of product sales, equipment leases and services. In the case of contracts with multiple performance obligations, the authoritative guidance provides that the total consideration be allocated to each performance obligation on the basis of relative standalone selling prices. When a standalone selling price is not readily observable, the Company estimates the standalone selling price 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 other market conditions. Sales under deferred equipment agreements are generally structured such that the Company agrees to provide certain monitoring-related equipment, software, installation, training and/or warranty support at no up-front charge in exchange for the customer’s commitment to purchase sensors over the term of the agreement, which generally ranges from three years to six years. The Company allocates contract consideration under deferred equipment agreements containing fixed annual sensor purchase commitments to the underlying lease and non-lease components at contract inception. In determining whether any underlying lease components are related to a sales-type lease or an operating lease, the Company evaluates the customer’s rights and ability to control the use of the underlying equipment throughout the contract term, including any equipment substitution rights retained by the Company, as well as the Company’s expectations surrounding potential contract/lease extensions or renewals and the customer’s likelihood to exercise any purchase options. Beginning in 2022, for contracts that contain variable lease payments that are not dependent on an index or rate, the Company classifies as operating leases any lease components that would have otherwise been classified as sales-type leases that would result in a selling loss upon lease commencement. Revenue allocable to non-lease performance obligations is generally recognized as such non-lease performance obligations are satisfied. Revenue allocable to lease components under sales-type lease arrangements is generally recognized when control over the equipment is transferred to the customer. Revenue allocable to lease components under operating lease arrangements is generally recognized over the term of the operating lease. The Company generally does not expect to derive any significant value in excess of such asset’s unamortized book value from equipment underlying its operating lease arrangements after the end of the agreement. Revenue from the sale of products to end-user hospitals, emergency medical response organizations, other direct customers, distributors and OEM customers, is recognized by the Company when control of such products transfer to the customer based upon the terms of the contract or underlying purchase order. Revenue related to OEM rainbow ® parameter software licenses is recognized by the Company upon the OEM’s shipment of its product to its customer, as reported to the Company by the OEM. The Company provides certain customers with various sales incentives that may take the form of discounts or rebates. The Company records estimates related to these programs as a reduction to revenue at the time of sale. 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. The Company estimates the revenue constraints related to these forms of variable consideration based on various factors, including expected purchasing volumes, prior sales and returns history, and specific contractual terms and limitations. Non-healthcare segment Non-healthcare segment revenue is related to hardware and embedded software that is integrated into final products that are manufactured and sold by the Company. Products and related software are accounted for as a single performance obligation and all intended functionality is available to the customer upon purchase. Non-healthcare segment revenue is recognized upon transfer of control of promised products or service to customers, which is either upon shipment or upon delivery to the customers, depending on delivery terms. The Company offers sales incentives and has customer programs consisting primarily of discounts and market development fund programs, and records them as a contra revenue. Estimates for sales incentives are developed using the most likely amount and are included in the transaction price to the extent that a significant reversal of revenue would not result once the uncertainty is resolved. In developing its estimates, the Company also considers the susceptibility of the incentive to outside influences, the length of time until the uncertainty is resolved and the Company’s experience with similar contracts. Reductions in revenue related to discounts are allocated to products on a relative basis based on their respective standard selling price if there are undelivered products in a contract. Judgement is required to determine the timing and amount of recognition of marketing funds which the Company estimates based on past practice of providing similar funds. Payment terms and conditions vary among the Company’s distribution channels although terms generally include a requirement of payment within 30 to 60 days of product shipment. Sales made directly to customers from the Company’s website are paid at the time of product shipment. Prior to determining payment terms for each customer, an evaluation of such customer’s credit risk is performed. Contractual allowances are an offset to accounts receivable. Shippin |
Related Party Disclosures
Related Party Disclosures | 3 Months Ended |
Apr. 01, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 3. Related Party Transactions The Company’s Chairman and Chief Executive Officer (CEO) is also the Chairman and CEO of Cercacor Laboratories, Inc. (Cercacor). The Company is a party to the following agreements with Cercacor: • Cross-Licensing Agreement - The Company and Cercacor are parties to a cross-licensing agreement (Cross-Licensing Agreement), which governs each party’s rights to certain intellectual property held by the two companies. The Company is subject to certain annual minimum aggregate royalty obligations for use of the rainbow ® licensed technology. The current annual minimum royalty obligation is $5.0 million. Aggregate liabilities payable to Cercacor arising under the Cross-Licensing Agreement were $5.6 million and $3.5 million for the three months ended April 1, 2023 and April 2, 2022, 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 $0.1 million for each of the three months ended April 1, 2023 and April 2, 2022. • Lease Agreement - Effective December 2019, the Company entered into a lease agreement with Cercacor for approximately 34,000 square feet of office, research and development space at one of the Company’s owned facilities in Irvine (Cercacor Lease). The term of the Cercacor Lease expires on December 31, 2024. The Company recognized approximately $0.3 million of lease income for each of the three months ended April 1, 2023 and April 2, 2022. Net amounts due to Cercacor at April 1, 2023 and December 31, 2022 were approximately $5.6 million and $3.8 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. In addition, the Company’s Executive Vice President (EVP), Chief Financial Officer (CFO) serves as the Treasurer of the Masimo Foundation and the Company’s EVP, General Counsel and Corporate Secretary serves as the Secretary for the Masimo Foundation. During the three months ended April 1, 2023 the Company made no cash contributions to the Masimo Foundation. During the three months ended April 2, 2022, the Company made cash contributions of approximately $1.0 million to the Masimo Foundation. During the three months ended April 1, 2023 and April 2, 2022 , the Company made various in-kind contributions to the Masimo Foundation, mainly in the form of donated administrative services. The Company’s CEO is also a co-founder and a member of the board of directors of Like Minded Media Ventures (LMMV), a team of storytellers that create content focused in the areas of true stories, social causes and science . LMMV creates stories with a multi-platform strategy, bridging the gap between film, television, digital and social media. The Company entered into a marketing service agreement with LMMV for audiovisual production services promoting brand awareness, including television commercials and digital advertising, during the second quarter of 2020. During each of the three months ended April 1, 2023 and April 2, 2022, the Company incurred no marketing expenses to LMMV under the marketing service agreement. At each of April 1, 2023 and December 31, 2022, there was no amount due to LMMV for services rendered. The Company entered into a software license and professional services agreement with Like Minded Labs (LML), a subsidiary of LMMV, during the second quarter of 2021. Pursuant to the software license agreement, LML granted the Company a perpetual, non-exclusive and fully paid-up right and license to integrate LML’s software into the Company’s products in exchange for a $3.0 million one-time license fee. Pursuant to the professional services agreement, LML will provide professional services to the Company, including the development of custom software intended to support the integration of the licensed software into the Company’s products, as well as future support services upon the Company’s acceptance of deliverables. In July 2021, the Company entered into a patent purchase and option agreement with Vantrix Corporation (Vantrix), an acquiree of LML, for certain patents for $0.5 million, and the right to purchase two pools of additional patents from Vantrix for an exercise fee of up to $1.1 million. The agreements with LML and Vantrix include sublicensing provisions whereby the software and patents are licensed back to LML or Vantrix, respectively, for further advancement of the technologies. The Company maintains an aircraft time share agreement, pursuant to which the Company has agreed from time to time to make its aircraft available to the Company’s CEO for lease on a time-sharing basis. The Company charges the Company’s CEO for personal use based on agreed upon reimbursement rates. For the three months ended April 1, 2023, the Company charged the Company’s CEO less than $0.1 million pursuant to this Agreement. For the three months ended April 1, 2023 and April 2, 2022, the Company’s CEO did not incur charges pursuant to this agreement. |
Inventories
Inventories | 3 Months Ended |
Apr. 01, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | 4. Inventories Inventories consist of the following: (in millions) April 1, December 31, Raw materials $ 240.5 $ 209.9 Work-in-process 30.8 30.4 Finished goods 232.2 260.7 Total inventories $ 503.5 $ 501.0 |
Other Current Assets
Other Current Assets | 3 Months Ended |
Apr. 01, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Current Assets | 5. Other Current Assets Other current assets consist of the following: (in millions) April 1, December 31, Prepaid expenses $ 78.7 $ 77.5 Lease receivable, current 30.4 28.5 Indirect taxes receivable 23.3 26.8 Prepaid income taxes 21.7 12.4 Prepaid rebates and royalties, current 4.8 3.7 Contract assets, current 4.7 3.9 Restricted cash (1) 2.4 2.4 Other current assets 6.0 3.6 Total other current assets $ 172.0 $ 158.8 ______________ (1) Restricted cash includes funds received from the Bill and Melinda Gates Foundation. As the Company incurs costs associated with research and development related to this project, on a quarterly basis, the Company reclasses amounts from the grant to offset costs incurred. |
Lease Receivable
Lease Receivable | 3 Months Ended |
Apr. 01, 2023 | |
Leases [Abstract] | |
Lease Receivable | 6. Lease Receivable For deferred equipment agreements that contain embedded operating leases, upon lease commencement, the Company defers and records the equipment cost of operating lease assets within property, plant and equipment, net of accumulated depreciation. These operating lease assets are subsequently amortized to cost of goods sold over the lease term on a straight-line basis. For deferred equipment agreements that contain embedded sales-type leases, the Company recognizes lease revenue and costs, as well as a lease receivable, at the time the lease commences. Lease revenue related to both operating-type and sales-type leases for the three months ended April 1, 2023 and April 2, 2022 was approximately $20.0 million and $13.0 million, respectively, and is included within revenue in the accompanying condensed consolidated statements of operations. Costs related to embedded leases within the Company’s deferred equipment agreements are included in cost of goods sold in the accompanying condensed consolidated statements of operations. Lease receivable from sales-type leases consists of the following: (in millions) April 1, December 31, Lease receivable $ 112.6 $ 101.8 Allowance for credit loss (0.3) (0.2) Lease receivable, net 112.3 101.6 Less: current portion of lease receivable (30.4) (28.5) Lease receivable, non-current $ 81.9 $ 73.1 As of April 1, 2023, estimated future maturities of customer sales-type lease receivables and operating lease payments for each of the following fiscal years are as follows: Future Lease Receivables/Payments Fiscal year Sales-Type Leases Operating Leases 2023 (balance of year) $ 23.1 $ 5.1 2024 28.1 5.8 2025 22.8 5.1 2026 16.6 4.6 2027 10.6 3.6 Thereafter 11.1 4.5 Total $ 112.3 $ 28.7 Less: imputed interest (1) — Present value of total lease payments $ 112.3 ______________ (1) The calculation of the rates implicit in the leases resulted in negative discount rates. Therefore, the Company as a lessor used a 0% discount rate to measure the net investment in the lease. |
Deferred Costs and Other Contra
Deferred Costs and Other Contract Assets | 3 Months Ended |
Apr. 01, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Deferred Costs and Other Contract Assets | 7. Deferred Costs and Other Contract Assets Deferred costs and other contract assets consist of the following: (in millions) April 1, December 31, Deferred commissions $ 17.6 $ 17.1 Prepaid contract allowances 14.1 13.7 Unbilled contract receivables 9.5 9.4 Deferred equipment agreements, net 1.7 1.7 Deferred costs and other contract assets $ 42.9 $ 41.9 |
Property and Equipment, net
Property and Equipment, net | 3 Months Ended |
Apr. 01, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | 8. Property and Equipment, net Property and equipment, net, consists of the following: (in millions) April 1, December 31, Building and building improvements $ 150.9 $ 151.0 Machinery, equipment and tooling 150.2 149.4 Land 66.2 65.1 Operating lease assets 51.9 50.2 Computer equipment and software 43.6 42.1 Leasehold improvements 33.7 32.3 Transportation, vehicles and other 33.2 32.7 Furniture and office equipment 19.8 19.4 Demonstration units 9.7 11.2 Construction-in-progress (CIP) 58.2 50.6 Total property and equipment 617.4 604.0 Accumulated depreciation (215.3) (201.5) Property and equipment, net $ 402.1 $ 402.5 For the three months ended April 1, 2023 and April 2, 2022, depreciation expense of property and equipment was $11.8 million and $6.5 million, respectively. For the three months ended April 1, 2023 and April 2, 2022, depreciation expense of operating lease assets was $3.0 million and $0.2 million, respectively. The balance in CIP at April 1, 2023 and December 31, 2022 related primarily to the capitalized implementation costs related to a new enterprise resource planning software system, costs related to facility improvements and the expansion of certain manufacturing facilities and equipment at the Company’s corporate headquarters, as well as costs associated with anew research and development facility, the underlying assets for which have not been completed or placed into service. On February 14, 2022, the Company’s wholly owned subsidiary, Masimo Canada ULC, entered into a Purchase and Sale Agreement (Purchase Agreement) with Ke ltic (Prior) Development Limited Partnership (Vendor) for the purchase of a property in Vancouver, British Columbia, Canada for a purchase price of CAD 123.0 million, plus GST (Purchase Price), subject to certain adjustments. The Company has paid CAD 21.0 million as a deposit towards the purchase . The balance of the Purchase Price will be due and payable upon the closing of the transaction, which is currently expected to occur during the second half of 2024. |
Intangible Assets, net
Intangible Assets, net | 3 Months Ended |
Apr. 01, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets, net | 9. Intangible Assets, net Intangible assets, net, consist of the following: April 1, December 31, (in millions) Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying Intangible assets subject to amortization: Customer relationships $ 213.3 $ (22.3) $ 191.0 $ 220.9 $ (19.3) $ 201.6 Acquired technologies 177.0 (30.2) 146.8 185.3 (25.2) 160.1 Patents 36.1 (13.9) 22.2 35.2 (13.9) 21.3 Licenses 37.9 (5.1) 32.8 39.0 (4.4) 34.6 Trademarks 39.4 (7.4) 32.0 39.3 (5.8) 33.5 Licenses-related party 7.5 (6.4) 1.1 7.5 (6.3) 1.2 Non-compete agreements 6.0 (1.4) 4.6 6.3 (1.1) 5.2 Capitalized software development costs 9.6 (3.0) 6.6 5.5 (2.9) 2.6 Other 1.5 (1.1) 0.4 1.6 (1.1) 0.5 Total intangible assets subject to amortization, net $ 528.3 $ (90.8) $ 437.5 $ 540.6 $ (80.0) $ 460.6 Intangible assets not subject to amortization: Trademarks 252.3 262.0 Intangible assets, net $ 689.8 $ 722.6 Finite lived intangible assets have a weighted-average amortization period ranging from twelve years to fourteen years. Total amortization expense for the three months ended April 1, 2023 and April 2, 2022 was $14.3 million and $2.5 million, respectively. Total renewal costs for patents and trademarks for the three months ended April 1, 2023 and April 2, 2022 were $0.3 million and $0.4 million, respectively. As of April 1, 2023, the weighted-average number of years until the next renewal was two years for patents and six years for trademarks. Estimated amortization expense for each of the next fiscal years is as follows: Fiscal year Amount 2023 (balance of year) $ 35.8 2024 46.5 2025 45.5 2026 43.9 2027 43.2 Thereafter 222.6 Total $ 437.5 |
Goodwill
Goodwill | 3 Months Ended |
Apr. 01, 2023 | |
Goodwill [Abstract] | |
Goodwill | 10. Goodwill Changes in goodwill were as follows: Three Months Ended (in millions) Healthcare Non-healthcare Total Goodwill, beginning of period $ 97.6 $ 347.8 $ 445.4 Adjustments to goodwill from purchase price allocation — (9.8) (9.8) Foreign currency translation adjustment 0.3 (14.0) (13.7) Goodwill, end of period $ 97.9 $ 324.0 $ 421.9 |
Lessee ROU Assets and Lease Lia
Lessee ROU Assets and Lease Liabilities | 3 Months Ended |
Apr. 01, 2023 | |
Leases [Abstract] | |
Lessee ROU Assets and Lease Liabilities | 11. Lessee ROU Assets and Lease Liabilities 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 January 2032. In addition, the Company leases equipment in the U.S. and Europe pursuant to leases that are classified as operating leases and expire at various dates through August 2026. The majority of these leases are non-cancellable and generally do not contain any material restrictive covenants, material residual value guarantees or other material guarantees. The Company recognizes lease costs under these agreements using a straight-line method based on total lease payments. Certain facility leases contain predetermined price escalations and in some cases renewal options, the longest of which is for five years. The Company generally estimates the applicabl e discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. As of April 1, 2023, the weighted-average discount rate used by the Company for all operating leases was approximately 3.8%. The balance sheet classifications for amounts related to the Company’s operating leases for which it is the lessee are as follows: (in millions) Balance sheet classification April 1, December 31, Lessee ROU assets Other non-current assets $ 66.6 $ 69.6 Lessee current lease liabilities Other current liabilities 22.8 18.7 Lessee non-current lease liabilities Other non-current liabilities 55.4 53.4 Total operating lease liabilities $ 78.2 $ 72.1 As of April 1, 2023 and December 31, 2022, accumulated amortization for lessee ROU assets was $41.0 million and $36.6 million, respectively. The weighted-average remaining lease term for the Company’s operating leases was 5.8 years as of April 1, 2023. As of April 1, 2023, estimated future operating lease payments for each of the following fiscal years were as follows: Fiscal year Amount 2023 (balance of year) $ 17.7 2024 19.0 2025 14.9 2026 10.6 2027 5.2 Thereafter (1) 19.8 Total 87.2 Imputed interest (9.0) Present value $ 78.2 ______________ (1) Includes optional renewal period for certain leases. During the three months ended April 1, 2023 and April 2, 2022, operating lease costs were approximately $5.1 million and $2.4 million, respectively. |
Other Non-Current Assets
Other Non-Current Assets | 3 Months Ended |
Apr. 01, 2023 | |
Other Assets, Longterm [Abstract] | |
Other Non-Current Assets | 12. Other Non-Current Assets Other non-current assets consist of the following: (in millions) April 1, December 31, Lessee ROU assets, net $ 66.6 $ 69.6 Strategic investments 13.7 13.8 Derivative assets - non-current 13.6 19.3 Prepaid deposits and other 9.9 11.0 Other non-current assets 0.4 0.3 Total non-current assets $ 104.2 $ 114.0 |
Deferred Revenue and Other Cont
Deferred Revenue and Other Contract Liabilities, Current | 3 Months Ended |
Apr. 01, 2023 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Deferred Revenue and Other Contract Liabilities, Current | 13. Deferred Revenue and Other Contract Liabilities, Current Deferred revenue and other contract liabilities, current, consist of the following: (in millions) April 1, December 31, Deferred revenue $ 61.3 $ 61.0 Accrued rebates and allowances 37.9 38.5 Accrued customer reimbursements 8.0 6.1 Total deferred revenue and other contract liabilities 107.2 105.6 Less: Non-current portion of deferred revenue (25.5) (25.0) Deferred revenue and other contract liabilities, current $ 81.7 $ 80.6 Deferred revenue relates to contracted amounts that have been invoiced to customers for which remaining performance obligations must be completed before the Company can recognize revenue. Generally, both healthcare and non-healthcare segments record deferred revenue when revenue is to be recognized subsequent to invoicing. Healthcare Deferred Revenue Healthcare deferred revenue primarily relates to undelivered equipment, sensors and services under deferred equipment agreements, extended warranty agreements, and maintenance agreements. Expected revenue from remaining contractual performance obligations (Unrecognized Contract Revenue) includes deferred revenue, as well as other amounts that will be invoiced and recognized as revenue in future periods when the Company completes its performance obligations. Unrecognized Contract Revenue excludes revenue allocable to monitoring-related equipment that is effectively leased to customers under deferred equipment agreements and other contractual obligations for which neither party has performed. The estimated timing of this revenue is based, in part, on management’s estimates and assumptions about when its performance obligations will be completed. As a result, the actual timing of this revenue in future periods may vary, possibly materially. As of April 1, 2023, the Company had approximately $1,363.9 million of Unrecognized Contract Revenue related to executed contracts with an original duration of one year or more. The Company expects to recognize approximately $357.7 million of this amount as revenue within the next twelve months and the remaining balance thereafter. Non-Healthcare Deferred Revenue In October 2020, Bowers and Wilkins (B&W), a subsidiary of Sound United, entered into an amendment to a licensing agreement, whereby B&W received a $20.0 million royalty prepayment in relation to sound system units manufactured by B&W for various high-end car manufacturers with a total commitment of $35.0 million to be received by September 30, 2028. As of April 1, 2023, deferred revenu e was $17.0 million. Changes in deferred revenue were as follows: (in millions) Three Months Ended Deferred revenue, beginning of the period $ 61.0 Revenue deferred during the period 9.7 Recognition of revenue deferred in prior periods (9.4) Deferred revenue, end of the period $ 61.3 |
Other Current Liabilities
Other Current Liabilities | 3 Months Ended |
Apr. 01, 2023 | |
Accrued Liabilities [Abstract] | |
Other Current Liabilities | 14. Other Current Liabilities Other current liabilities consist of the following: (in millions) April 1, December 31, Current portion of long-term debt $ 31.6 $ 15.1 Accrued expenses 29.6 39.9 Income tax payable 27.1 32.1 Accrued indirect taxes payable 23.4 28.2 Lessee lease liabilities, current 22.8 18.7 Accrued warranty 10.2 10.6 Accrued legal fees 9.5 11.4 Accrued property taxes 8.4 12.1 Related party payables 5.7 4.0 Accrued donations 4.1 5.1 Other current liabilities 7.1 6.1 Total other current liabilities $ 179.5 $ 183.3 |
Debt
Debt | 3 Months Ended |
Apr. 01, 2023 | |
Debt Disclosure [Abstract] | |
Debt | 15. Debt (in millions) April 1, December 31, Term loan - current portion $ 7.5 $ 7.5 Japanese loans - current portion 24.1 7.6 Short-term debt 31.6 15.1 Term loan - long-term 277.5 278.9 Revolver - long-term 609.2 651.0 Japanese loans - long-term 10.8 11.7 Long-term debt 897.5 941.6 Total debt $ 929.1 $ 956.7 Credit Facility On April 11, 2022, concurrently with the closing of the Sound United acquisition, the Company entered into a credit agreement (Credit Facility) with financial institutions party thereto as initial lenders (collectively, the Initial Lenders), Citibank, N.A., as Administrative Agent, Citibank, N.A., JPMorgan Chase Bank, N.A., Bank of the West and BofA Securities, Inc., as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A., Bank of the West and BofA Securities, Inc., as co-syndication agents. The Credit Facility provides for an unsecured term loan of $300.0 million (Term Loan) and $500.0 million of ongoing unsecured revolving commitments (Revolver), with an option, subject to certain conditions, for the Company to increase the aggregate borrowing capacity by an additional $400.0 million (plus additional unlimited amounts if certain incurrence tests are met) in the future with the Initial Lenders and additional lenders, as required. Debt issuance costs of $8.4 million were recorded as a reduction to the carrying amount of the Credit Facility, and are being amortized to interest expense using the effective interest method. The Credit Facility also provides for a sublimit of up to $50.0 million for the issuance of letters of credit. Borrowings under the Credit Facility will be deemed, at the Company’s election, either: (a) an Alternate Base Rate (ABR) Loan, which bears interest at the ABR, plus a spread of 0.000% to 0.750% based upon a Company leverage ratio, or (b) a Term SOFR Loan, which bears interest at the Adjusted Term SOFR Rate (as defined below), plus a spread of 1.000% to 1.750% based upon a Company net leverage ratio. Pursuant to the terms of the Credit Facility, the ABR is equal to the greatest of (i) the prime rate, (ii) the Federal Reserve Bank of New York effective rate plus 0.50%, and (iii) the one-month Adjusted Term SOFR plus 1.0%. The Adjusted Term SOFR Rate is equal to the Term SOFR Rate (as defined in the Credit Facility) for the applicable interest period plus a spread adjustment of 0.10%, 0.15% and 0.25% for the interest periods ending one, three and six months, respectively. The Company is also obligated under the Credit Facility to pay an unused fee ranging from 0.150% to 0.275% per annum, based upon a Company leverage ratio, with respect to any non-utilized portion of the Credit Facility. The Company is subject to certain covenants, including financial covenants related to a net leverage ratio and an interest charge coverage ratio, and other customary negative covenants. The Credit Facility also includes customary events of default which, upon the occurrence of any such event of default, provide the Initial Lenders (and any additional lenders) with the right to take either or both of the following actions: (a) immediately terminate the commitments, and (b) declare the loans then outstanding immediately due and payable in full. All unpaid principal under the Credit Facility will become due and payable on April 12, 2027. On May 16, 2022, the Company entered into the First Amendment to the Credit Agreement (First Amendment) with the Initial Lenders and Citibank, N.A., as the administrative agent, which amended the Credit Facility. The First Amendment provides for an additional $205 million of unsecured revolving commitments, increasing the aggregate amount of the Revolver from $500 million to $705 million. Borrowing rates, financial covenants, affirmative and negative covenants and other restricted terms remain unchanged from the Credit Facility. All unpaid principal under the First Amendment will become due and payable on April 12, 2027. The Company was in full compliance with the financial covenants contained in its debt or Credit Facility agreements as of April 1, 2023. For the three months ended April 1, 2023 and April 2, 2022, the Company incurred total interest expense of $10.9 million and $0.1 million interest expense under the Credit Facility, respectively. Furthermore, in connection with the Sound United acquisition, the Company assumed three outstanding loans as follows: Japanese Revolving Loan In March 2020, Sound United entered into a secured revolving loan (Japanese Revolving Loan) with Mizuho bank, which allows Sound United to borrow up to ¥800 million (approximately $6.0 million). The Japanese Revolving Loan is an evergreen agreement that terminates upon request by either the financial institution or the borrower and is collateralized with land and buildings in Shirakawa-Shi owned by the borrower. Interest accrues at a rate equal to the Mizuho Tokyo Interbank Offered Rate (TIBOR) plus a fixed spread of 0.50% per annum. In connection with the execution of the Japanese Revolving Loan, the Company incurred debt issuance costs of ¥7.2 million (approximately $0.1 million). On February 28, 2023, the Company and Mizuho Bank executed an amendment to the Japanese Revolving Loan, to increase the maximum aggregate revolving loan to ¥3.00 billion (approximately $22.6 million). Under the amendment, the facility accrues interest at a rate equal to the TIBOR plus a fixed spread of 0.75% per annum. The Company also paid an upfront fee of ¥22.0 million (approximately $0.2 million) on the incremental amount of the revolving Credit Facility. The Japanese Revolving Loan agreement contains customary affirmative and negative covenants, such as financial reporting requirements and customary covenants that restrict the borrower’s ability to, among other things, provide collateral for obligations borne by the borrower, and determine the eligibility to declare, and amount of potential dividends to be paid during a given fiscal year. As of April 1, 2023, the Company was in compliance with all covenants under the Japanese Revolving Loan agreements. Japanese Government Loans In May and June 2020, Sound United received ¥1.48 billion (approximately $11.1 million) in non-collateralized Japanese Government Loan facilities (Japanese Government Loans) as part of its local Japanese stimulus program. Interest accrues at a weighted average rate of 1.33% and is repayable in installments with various maturities through June 2035. The non-current portion of the Japanese Government Loans is presented under long-term debt and the current portion is presented under short-term debt on the accompanying condensed consolidated balance sheets. The Company incurred no debt issuance costs in connection with the Japanese Government Loans. Japanese Equipment Loans In April and May 2021, Sound United entered into collateralized Japanese Equipment Loans of ¥150 million (approximately $1.1 million), payable in installments through March 2031 with an interest of 0.58%, and ¥80 million (approximately $0.6 million) payable in installments through April 2028 with interest of 1.2%. The non-current portion of the Japanese Equipment Loans is presented under long-term debt and the current portion is presented under short-term debt on the accompanying condensed consolidated balance sheets. The Company incurred no debt issuance costs in connection with these Japanese Equipment Loans. As of April 1, 2023, the aggregate maturities of principal on all debt for each of the next five years and thereafter are as follows: Fiscal year Amount 2023 (balance of the year) $ 29.2 2024 14.9 2025 16.8 2026 16.8 2027 847.3 Thereafter 4.1 Total $ 929.1 |
Other Non-Current Liabilities
Other Non-Current Liabilities | 3 Months Ended |
Apr. 01, 2023 | |
Other Liabilities, Long Term [Abstract] | |
Other Non-Current Liabilities | 16. Other Non-Current Liabilities Other non-current liabilities consist of the following: (in millions) April 1, December 31, Lessee non-current lease liabilities $ 55.4 $ 53.4 Deferred revenue, non-current 25.5 25.0 Unrecognized tax benefits 19.7 18.0 Income tax payable, non-current 12.7 12.7 Defined benefit obligation 9.6 10.1 Indirect tax payable, non-current 8.3 8.2 Other 4.9 9.1 Total other non-current liabilities $ 136.1 $ 136.5 Unrecognized tax benefits relate 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 23, “Income Taxes”,for further details. |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | 3 Months Ended |
Apr. 01, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities | 17. Derivative Instruments and Hedging Activities Derivative Instruments - Cash Flow Hedges The Company’s cash flow hedges are designed to mitigate the risk of exposure to variability in expected future cash flows of recognized assets, liabilities, or any unrecognized forecasted transactions. Since July 2022, the Company has entered into various interest rate swaps that are designated as cash flow hedges on a substantial portion of the outstanding debt. The interest rate swaps reduce the variability of cash flow payments for the Company by converting the variable interest rate on the Company’s long-term debt to an average fixed interest rate of 2.87%. These contracts, carried at fair value, have maturities of approximately four years. All hedging relationships were highly effective at achieving offsetting changes in cash flows attributable to the risk being hedged. The Company used a regression analysis at hedge inception to assess the effectiveness of cash flow hedge and periodically hereafter. The Company records gains and losses from the changes in the fair value of these instruments as a component of other comprehensive (loss) income. Deferred gains or losses from these designated cash flow hedges are reclassified into earnings in the period that the hedged items affects earnings. The Company does not offset fair value amounts recognized for derivative instruments in its condensed consolidated balance sheets for presentation purposes. The following table summarizes the fair value of the hedging instruments, presented on a gross basis, as of April 1, 2023 and December 31, 2022. Condensed Consolidated (in millions) Balance sheet classification April 1, December 31, Interest rate contracts, inclusive of accrued interest Other non-current assets $ 14.2 $ 19.7 Total $ 14.2 $ 19.7 The following table summarizes the gains (losses) reclassified from accumulated other comprehensive (loss) income to the condensed consolidated financial statements for the three months ended April 1, 2023 and April 2, 2022. Condensed Consolidated (in millions) Location of gains (losses) Three Months Ended Three Months Ended Cash flow hedges - interest rate contracts Non-operating (losses) $ (3.0) $ — Total $ (3.0) $ — The following tables summarize the changes in accumulated other comprehensive (losses) income related to the hedging instruments for the three months ended April 1, 2023 and April 2, 2022. (in millions) April 1, April 2, Beginning balance $ 19.3 $ — Amount recognized in other comprehensive (loss) income (2.7) — Amount reclassified into earnings (3.0) — Ending balance $ 13.6 $ — The net of tax unrealized loss was $4.3 million as of April 1, 2023. The Company expects to reclassify a net amount of gains of $11.4 million from accumulated other comprehensive (loss) income gain to non-operating loss within the next 12 months. |
Business Combinations
Business Combinations | 3 Months Ended |
Apr. 01, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Business Combinations | 18. Business Combinations Sound United Acquisition On April 11, 2022, the Company completed the previously announced acquisition of Sound United, pursuant to a Merger Agreement dated as of February 15, 2022 (Merger Agreement), by and among the Company, Sonic Boom Acquisition Corp., a wholly-owned subsidiary of the Company (Merger Sub), Viper Holdings Corporation (Sound United), and, solely in its capacity as the Seller Representative, Viper Holdings, LLC, Merger Sub merged with and into Sound United, with Sound United continuing as a wholly-owned subsidiary of the Company (Merger). Sound United is a leading innovator of premium, high-performance audio products for consumers around the world, which operates iconic consumer brands: Bowers & Wilkins ® , Denon ™ , Marantz ™ , HEOS ™ , Classé ™ , Polk Audio ™ , Boston Acoustics ™ and Definitive Technology ™ . The brands are linked by a commitment to the highest production standards and a focus on unparalleled audio quality and audio performance. Sound United delivers significant competitive benefits through its platform advantages including global distribution across online, retail and custom installation channels; a cloud-connected home ecosystem; and a state-of-the-art research and development function focused on creating the highest-quality consumer products with world-class industrial design. The Company acquired 100% of the equity interests of Sound United for $1.0575 billion in cash, subject to adjustments based on Sound United’s net working capital, transaction expenses, cash and debt as of the closing of the Merger (Closing), payable by the Company in cash. The transaction was primarily funded with the proceeds from the Credit Facility. See Note 15, “Debt”, for additional information about the Credit Facility. There was no contingent consideration resulting from the transaction. The results of operations of Sound United subsequent to the acquisition date and the acquired assets and assumed liabilities, including the provisional allocation of goodwill and intangible assets, are included in the non-healthcare segment, including revenue of $216.6 million and a net loss of $3.3 million for the period of January 1, 2023 to April 1, 2023. Acquisition costs The Company recognized no transaction costs related to the Sound United Acquisition for the three months ended April 1, 2023. Purchase price allocations The purchase price allocation for the Sound United Acquisition is provisional, pending the finalization of the valuation and analysis of certain tax assets and liabilities, and goodwill: specifically for tax uncertainties in jurisdictions such as Japan and the United Kingdom. Based on additional supportable information and changes in assumptions during the period, the Company recorded certain measurement period adjustments during the three months ended April 1, 2023. The valuations of the assets acquired and liabilities assumed have not yet been finalized as of April 1, 2023. The purchase price allocation is provisional and subject to change, including measurement period adjustments, the valuation of certain tax assets, liabilities and goodwill. The purchase price allocation will be finalized as the information necessary to complete the required analysis is obtained, which the Company will complete within one year from the acquisition date. Goodwill was calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from intangible assets acquired that do not qualify for separate recognition, including the assembled workforce. Goodwill is not expected to be deductible for tax purposes. Measurement period adjustments for the period ended April 1, 2023, included changes to the purchase price allocation and total consideration, resulting in a net decrease of approximately $7.3 million to goodwill. The measurement period adjustments resulted primarily from valuation inputs pertaining to certain acquired assets based on facts and circumstances that existed as of the acquisition date and did not result from events subsequent to the acquisition date. The fair values assigned to assets acquired and liabilities assumed as of April 1, 2023 are based on management’s best estimates and assumptions as of the reporting date and are considered provisional pending finalization of the valuation of certain tax assets, liabilities and goodwill. The table below summarizes the provisional allocation of fair value of assets acquired and liabilities assumed, inclusive of measurement period adjustments as of April 1, 2023: (in millions) Sound United Cash consideration (1) $ 1,057.5 Purchase price $ 1,057.5 Assets acquired: Cash and cash equivalents $ 82.6 Accounts receivables 108.5 Inventories 238.6 Prepaid expenses and other current assets 30.0 Property, plant and equipment 113.2 Intangible asset 649.0 Goodwill 325.8 Long-term other assets 7.4 Total assets acquired $ 1,555.1 Liabilities assumed: Accounts payable $ (118.8) Accrued liabilities and other current liabilities (148.9) Deferred tax liabilities (152.9) Other long-term liabilities (77.0) Total liabilities assumed $ (497.6) ______________ (1) The purchase price allocation for the Sound United Acquisition is provisional, pending finalization of the valuation of certain tax assets, liabilities, and goodwill. Identifiable Intangible Assets The following table sets forth the components of identifiable intangible assets acquired and the weighted average amortization period as of the acquisition date: Weighted average April 11, Trademarks/tradenames 10 $ 6.0 Customer relationships 17 196.0 Developed technology 8 156.0 Contractual license agreements 15 29.0 Subtotal 14 years $ 387.0 Indefinite trademarks/tradenames N/A 262.0 Total $ 649.0 In determining the fair value of the identifiable intangible assets, the Company utilized various forms of the income approach, depending on the asset being valued. The estimation of fair value requires significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Other inputs included historical data, current and anticipated market conditions, and growth rates. Contractual license agreements have a weighted-average amortization period of five years until the next renewal term. The intangible assets were valued using the following valuation approaches: Customer relationships The fair value of customer relationships was determined using the multi-period excess earnings method. The multi-period excess earnings method involves forecasting the net earnings expected to be generated by the asset, reducing them by appropriate returns on contributory assets, and then discounting the resulting net cash flows to a present value using an appropriate discount rate. Trademarks/tradenames The fair values of the trademark/tradenames were determined using the relief-from-royalty method under the income approach. This involves forecasting avoided royalties, reducing them by taxes, and discounting the resulting net cash flows to a present value using an appropriate discount rate. Judgment was applied for a number of assumptions in valuing the identified intangible assets, including revenue and cash flow forecasts, survival rates, technology life, royalty rate, obsolescence and discount rate. Developed technology The fair values of the developed technology was determined using the relief-from-royalty method under the income approach. This involves forecasting avoided royalties, reducing them by taxes, and discounting the resulting net cash flows to a present value using an appropriate discount rate. Judgment was applied for a number of assumptions in valuing the identified intangible assets including revenue and cash flow forecasts, survival rates, technology life, royalty rate, obsolescence and discount rate. Contractual licensing agreements The fair value of the contractual license agreements was determined using a variation of the multi-period excess earnings method. This method involves forecasting the net earnings expected to be generated by the asset and then discounting the resulting net cash flows to a present value using an appropriate discount rate. Unaudited pro forma financial information The supplemental pro forma financial information has been prepared using the acquisition method of accounting and is based on the historical financial information of Masimo and Sound United, assuming the transaction occurred on January 1, 2021. The supplemental pro forma financial information does not necessarily represent what the combined companies’ revenue or results of operations would have been had the acquisition of Sound United been completed on January 1, 2021, nor is it intended to be a projection of future operating results of the combined company. It also does not reflect any operating efficiencies or potential cost savings that might be achieved from synergies of combining Masimo and Sound United. The unaudited supplemental pro forma financial information has been calculated after applying Masimo’s accounting policies and adjusting the results of the combined company to reflect incremental amortization and depreciation expense resulting from the fair value adjustments for acquired intangible assets, inventory, property, plant and equipment as well as the net decrease to interest expense resulting from the elimination of the historical interest expense on Sound United’s debt that was paid off at closing partially offset by incremental interest expense resulting from the external debt borrowed by Masimo to fund the acquisition, and the corresponding income tax impact of these adjustments. Also, during the three months ended April 1, 2023, Masimo and Sound United incurred $1.7 million of integration costs. These expenses are not reflected in pro forma net (loss) income for the three months ended April 1, 2023, in the table below and the acquisition related integration expenses incurred by Masimo are included in selling, general and administrative, in the Company’s condensed consolidated statements of comprehensive income for the three months ended April 1, 2023. There are no other material non-recurring pro forma adjustments directly attributable to the Sound United Acquisition included in the reported pro forma revenue and pro forma net income. Three Months Ended April 1, April 2, (in millions) Actual Pro forma Net revenue $ 565.0 $ 554.9 Net income $ 21.0 $ 49.2 |
Equity
Equity | 3 Months Ended |
Apr. 01, 2023 | |
Equity [Abstract] | |
Equity | 19. Equity Series A Junior Participating Preferred Stock and Stockholder Rights Plan In September 2022, the Company authorized and declared a dividend of one preferred stock purchase right (Right) for each outstanding share of its common stock to stockholders of record at the close of business on September 20, 2022 (the Record Date) pursuant to a Rights Agreement, dated as of September 9, 2022 (Rights Agreement), with Broadridge Corporate Issuer Solutions, Inc. as Rights Agent. In addition, one Right was issued with each share of common stock that became outstanding after the Record Date. Each Right entitled the registered holder to purchase from the Company one thousandth of one share of the Company’s Series A junior participating preferred stock, par value $0.001 per share, at a purchase price equal to $1,000.00 per Right, subject to adjustment. Generally, the Rights were to become exercisable in the event any person or group of affiliated or associated persons acquires beneficial ownership of 10% (20% in the case of a passive institutional investor), subject to certain exceptions. On March 22, 2023, the Company and the Rights Agent, entered into an amendment (“Rights Agreement Amendment”) to the Rights Agreement. The Rights Agreement Amendment accelerated the expiration of the Rights to 5:00 P.M., New York time, on March 22, 2023, and the Rights Agreement terminated at such time. At the time of the termination of the Rights Agreement, all Rights distributed to holders of the Company’s common stock pursuant to the Rights Agreement expired. Stock Repurchase Programs In October 2021, the Board approved a stock repurchase program, authorizing the Company to purchase up to 3.0 million shares of its common stock over a period of up to three years (2021 Repurchase Program). The 2021 Repurchase Program became effective in October 2021 upon the expiration of the 2018 Repurchase Program. The 2021 Repurchase Program was completed in May 2022. In June 2022, the Board approved a new stock repurchase program, authorizing the Company to purchase up to 5.0 million shares of its common stock on or before December 31, 2027 (2022 Repurchase Program). The 2022 Repurchase Program became effective in July 2022. The Company expects to fund the 2022 Repurchase Program through its available cash, cash expected to be generated from future operations, the Credit Facility and other potential sources of capital. The 2022 Repurchase Program can be carried out at the discretion of a committee comprised of the Company’s CEO and CFO through open market pu rchases, one or more Rule 10b5-1 trading plans, block trades and privately negotiated transactions. As of April 1, 2023, 5.0 million shares remained available for repurchase pursuant the 2022 Repurchase Program. No shares were repurchased pursuant to the 2022 Repurchase Program during each of the three months ended April 1, 2023 and April 2, 2022. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Apr. 01, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 20. Stock-Based Compensation Total stock-based compensation expense for the three months ended April 1, 2023 and April 2, 2022 was $7.3 million and $10.9 million, respectively. As of April 1, 2023, an aggregate of 10.0 million shares of common stock were reserved for future issuance under the Company’s equity plans, of which 3.6 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, RSUs, stock appreciation rights, 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. Upon effectiveness, an aggregate of 5.0 million shares were available for issuance under the 2017 Equity Plan. In May 2020, the Company’s stockholders approved an increase of 2.5 million shares to the 2017 Equity Plan. The aggregate number of shares that may be awarded under the 2017 Equity Plan is 7.5 million shares. The 2017 Equity Plan provides that at least 95% of the equity awards issued under the 2017 Equity Plan must 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: Three Months Ended (in millions, except for weighted-average exercise prices) Shares Weighted-Average Options outstanding, beginning of period 2.8 $ 83.85 Granted 0.1 177.29 Canceled — 173.02 Exercised — 40.63 Options outstanding, end of period 2.9 $ 88.05 Options exercisable, end of period 2.4 $ 72.20 Total stock option expense for the three months ended April 1, 2023 and April 2, 2022 was $2.4 million and $3.2 million, respectively. As of April 1, 2023, the Company had $22.7 million of unrecognized compensation cost related to non-vested stock options that are expected to vest over a weighted-average period of approximately 2.8 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 April 1, 2023 was 4.3 years. RSUs The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows: Three Months Ended (in millions, except for weighted-average grant date fair value amounts) Units Weighted-Average Grant RSUs outstanding, beginning of period 3.2 $ 105.65 Granted 0.2 174.88 Expired (0.1) 183.51 Vested (0.1) 178.03 RSUs outstanding, end of period 3.2 $ 108.31 Total RSU expense for the three months ended April 1, 2023 and April 2, 2022 was $4.2 million and $3.0 million, respectively. As of April 1, 2023, the Company had $82.6 million of unrecognized compensation cost related to non-vested RSU awards expected to be recognized and vest over a weighted-average period of approximately 4.1 years. PSUs The number of PSUs outstanding under all of the Company’s equity plans are as follows: Three Months Ended (in millions, except for weighted-average grant date fair value amounts) Units Weighted-Average Grant PSUs outstanding, beginning of period 0.3 $ 180.04 Granted (1) 0.1 204.67 Canceled — — Expired — — Vested (0.1) 179.42 PSUs outstanding, end of period 0.3 $ 187.93 ______________ (1) On February 27, 2023, the Audit Committee approved the weighted payout percentage for the 2020 PSU awards (three-year performance period), which were based upon the actual fiscal 2022 performance against pre-established performance objectives. Included in the granted amount are those additional PSUs earned based on actual performance achieved. These PSUs were originally awarded at target. During the three months ended April 1, 2023, the Company awarded 103,803 PSUs that will vest three years from the award date, based on the achievement of certain pre-established multi-year performance criteria approved by the Board. Estimates of stock-based compensation expense for an award with performance conditions are based on the probable outcome of the performance conditions and the cumulative effect of any changes in the probability outcomes is recorded in the period in which the changes occur. If earned, the PSUs granted will vest upon achievement of the performance criteria, which include a relative total shareholder return (TSR) component, in the year following the evaluation and confirmation of the performance achievement criteria. The Company’s TSR is based on the Company’s common stock percentile ranking relative to the constituents of the Nasdaq Composite Index for the performance period beginning on January 1, 2023 and ending on December 31, 2025. The number of shares that may be earned can range from 0% to 200% of the target amount. The fair value of market-based RSU is determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair value of performance-based PSU is determined using the closing price of the Company’s common stock on the grant date. Based on management’s estimate of the number of units expected to vest, total PSU expense for the three months ended April 1, 2023 and April 2, 2022 was $0.7 million and $4.7 million, respectively. As of April 1, 2023, the Company had $66.2 million of unrecognized compensation cost related to non-vested PSU awards expected to be recognized and vest over a weighted-average period of approximately 2.0 years. Valuation of Stock-Based Award Activity The fair value of each RSU and PSU is determined based on the closing price of the Company’s common stock on the grant date. 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 April 1, April 2, Risk-free interest rate 4.2% 1.0% to 1.9% Expected term (in years) 5.9 5.7 Estimated volatility 36.7% 31.2% to 38.9% Expected dividends 0% 0% Weighted-average fair value of options granted $75.08 $51.87 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 April 1, 2023 was $282.3 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 April 1, 2023 was $273.7 million. |
Employee Benefits
Employee Benefits | 3 Months Ended |
Apr. 01, 2023 | |
Postemployment Benefits [Abstract] | |
Employee Benefits | 21. Employee Benefits Defined Contribution Plans In the U.S. the Company sponsors one 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. On April 11, 2022, in connection with the Sound United Acquisition, the MRSP was amended to allow for participation by eligible Sound United employees. The MRSP matches 100% of a participant’s salary deferral, up to 3% of each participant’s compensation for the pay period, subject to a maximum amount. The Company may also contribute to the MRSP on a discretionary basis. The Company contributed $2.3 million and $1.1 million to the MRSP for the three months ended April 1, 2023 and April 2, 2022, respectively, all in the form of matching contributions. In addition, some of the Company’s international subsidiaries also have defined contribution plans to which both the employees and the employers are eligible to make contributions. The Company contributed $0.8 million to these plans for the three months ended April 1, 2023. The Company made no contributions to any of these plans for the three months ended April 2, 2022. Defined Benefit Plans The Company sponsors several international noncontributory defined benefit plans. In connection with the Sound United Acquisition, the Company assumed sponsorship of several international defined benefit plans and post-retirement benefit plans. All defined benefit plans and post-retirement benefit plans assumed with the acquisition of Sound United were closed to new participants prior to the acquisition. The service cost component for the defined benefit plans are recorded in operating expenses in the consolidated statement of operations. All other cost components are recorded in other income (expense), net in the condensed consolidated statement of operations. The Company’s net periodic defined benefit costs for each of the three months ended April 1, 2023, and April 2, 2022 were immaterial. |
Non-operating Loss
Non-operating Loss | 3 Months Ended |
Apr. 01, 2023 | |
Nonoperating Income (Expense) [Abstract] | |
Non-operating Loss | 22. Non-operating Loss Non-operating loss consists of the following: Three Months Ended (in millions) April 1, April 2, Interest income $ 0.8 $ 0.3 Interest expense (11.9) (0.1) Realized and unrealized foreign currency losses (0.7) (0.8) Total non-operating loss $ (11.8) $ (0.6) |
Income Taxes
Income Taxes | 3 Months Ended |
Apr. 01, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 23. Income Taxes The Company has provided for income taxes in fiscal year 2023 interim periods based on the estimated effective income tax rate for the complete fiscal year, as adjusted for discrete tax events, including excess tax benefits or deficiencies related to stock-based compensation, in the period such events occur. The estimated annual effective tax rate is computed based on the expected annual pretax income of the consolidated entities located within each taxing jurisdiction based on legislation enacted as of the balance sheet date. For the three months ended April 1, 2023 and April 2, 2022, the Company recorded discrete tax benefits of approximately $2.4 million and $1.7 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 April 1, 2023, the liability for income taxes associated with uncertain tax positions was approximately $27.8 million. If fully recognized, approximately $25.5 million (net of federal benefit on state taxes) would impact the Company’s effective tax rate. 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 2018. All material state, local and foreign income tax matters have been concluded through fiscal year 2015. The Company does not believe that the results of any tax authority examination would have a significant impact on its consolidated financial statements. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Apr. 01, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 24. Commitments and Contingencies Employment and Severance Agreements In July 2017, the Company entered into the First Amendment to that certain Amended and Restated Employment Agreement entered into between the Company and Mr. Kiani on November 4, 2015 (as amended, the Amended Employment Agreement). 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” (as defined in the Amended Employment Agreement) and the full amount of the “Cash Payment” (as defined in the Amended Employment Agreement). 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 first and second 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. On January 14, 2022, the Company entered into the Second Amendment to the Amended Employment Agreement (Second Amendment) with Mr. Kiani. The Second Amendment provides that the RSUs granted to Mr. Kiani pursuant to the Amended Employment Agreement will vest in full upon the termination of Mr. Kiani’s employment with the Company pursuant to Mr. Kiani’s death or disability. As of April 1, 2023, the expense related to the Award Shares and Cash Payment that would be recognized in the Company’s consolidated financial statements upon the occurrence of a Qualifying Termination under the Amended Employment Agreement, as amended by the Second Amendment, was approximately $664.3 million. In connection with the Board’s unanimous selection of H Michael Cohen as Lead Independent Director, Mr. Kiani has voluntarily irrevocably and permanently waived his right to treat the appointment of any lead independent director as “Good Reason” under his employment agreement with the Company, to terminate employment, and to receive contractual separation payments on this basis. As of April 1, 2023, the Company had severance plan participation agreements with five 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. Each executive officer is also required to give the Company six months’ advance notice of his resignation under certain circumstances. Cercacor Cross-Licensing Agreement Provisions The Company’s Cross-Licensing Agreement with Cercacor contains annual minimum aggregate royalty obligations for use of the rainbow ® licensed technology. The current annual minimum royalty obligation is $5.0 million. Upon a change in control (as defined in the Cross-Licensing Agreement) of the Company or Cercacor: (i) all rights to the “Masimo” trademark will be assigned to Cercacor if the surviving or acquiring entity ceases to use “Masimo” as a company name and trademark; (ii) the option to license technology developed by Cercacor for use in blood glucose monitoring will be deemed automatically exercised and a $2.5 million license fee for this technology will become immediately payable to Cercacor; and (iii) the minimum aggregate annual royalties payable to Cercacor for carbon monoxide, methemoglobin, fractional arterial oxygen saturation, hemoglobin and/or glucose measurements will increase to $15.0 million per year until the exclusivity period of the agreement ends, plus up to $2.0 million for each additional vital sign measurement with no maximum ceiling for non-vital sign measurements. Purchase Commitments Pursuant to contractual obligations with vendors, the Company had $394.9 million of purchase commitments as of April 1, 2023 that 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, other critical inventory and manufacturing supplies, 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 April 1, 2023, the Company had approximately $3.3 million in outstanding 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 April 1, 2023, 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 a portion of its excess cash with major financial institutions. As of April 1, 2023, the Company had $174.1 million of bank balances, of which $7.9 million was covered by either the U.S. Federal Deposit Insurance Corporation limit or foreign countries’ deposit insurance organizations. The Company’s ability to sell its healthcare products to U.S. hospitals depends in part on its relationships with GPOs. Many existing and potential healthcare 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 months ended April 1, 2023 and April 2, 2022, revenue from the sale of the Company’s healthcare products to customers that are members of GPOs approximated 51.0% and 55.1% of healthcare revenue, respectively. For the three months ended April 1, 2023, the Company had sales through one just-in-time healthcare distributor that represented 8.9% of revenue. For the three months ended April 2, 2022, the Company had sales through two just-in-time healthcare distributors that represented 13.5% and 8.2% of consolidated revenue, respectively. During the three months ended April 1, 2023 and April 2, 2022, there were no revenue concentrations for the Company’s non-healthcare business. As of April 1, 2023 and December 31, 2022, one healthcare customer represented 10.6% and 9.1%, respectively, of the Company’s consolidated accounts receivable balance. The receivable balance related to such healthcare customer is fully secured by a letter of credit. As of April 1, 2023 and December 31, 2022, there were no customer concentrations risks associated with the Company’s non-healthcare business. Litigation On January 9, 2020, the Company filed a complaint against Apple Inc. (Apple) in the United States District Court for the Central District of California for infringement of a number of patents, for trade secret misappropriation, and for ownership and correction of inventorship of a number of Apple patents listing one of its former employees as an inventor. The Company is seeking damages, injunctive relief, and declaratory judgment regarding ownership of the Apple patents. Apple filed petitions for Inter Partes review (IPR) of the asserted patents in the U.S. Patent and Trademark Office (PTO). The PTO instituted IPR of the asserted patents. On October 13, 2020, the District Court stayed the patent infringement claims pending completion of the IPR proceedings. In the IPR proceedings, one or more of the challenged claims of three of the asserted patents were found valid. The challenged claims of nine of the asserted patents were found invalid. The Company and Apple filed notices of appeal with the U.S. Court of Appeals for the Federal Circuit seeking review of the IPR decisions on all asserted patents. The Company filed an opening brief in one consolidated appeal for five asserted patents and the parties now await scheduling of oral arguments. The Company filed an opening brief in another consolidated appeal for four asserted patents on December 12, 2022, and Apple filed a reply brief in that other consolidated appeal on February 21, 2023. From April 4, 2023 through May 1, 2023, the District Court held a jury trial on the trade secret, ownership, and inventorship claims. The District Court granted Apple’s motion for judgment as a matter of law on certain trade secrets and denied the remainder of Apple’s motion. On May 1, 2023, the District Court declared a mistrial because the jury was unable to reach a unanimous verdict. The District Court has not yet scheduled a new trial. On June 30, 2021, the Company filed a complaint with the U.S. International Trade Commission (ITC) against Apple for infringement of a number of other patents. The Company filed an amended complaint on July 12, 2021. On August 13, 2021, the ITC issued a Notice of Institution of Investigation on the asserted patents. From June 6, 2022 to June 10, 2022, the ITC conducted an evidentiary hearing. The current target date for completion of the ITC investigation is May 10, 2023. In July and August 2022, Apple filed petitions for IPR of the asserted patents in the PTO. On January 10, 2023, a United States Administrative Law Judge in Washington, D.C. ruled that Apple violated Section 337 of the Tariff Act of 1930, as amended, by importing and selling within the United States certain Apple Watches with light-based pulse oximetry functionality and components, which infringe one of the Company’s pulse oximeter patents. On January 24, 2023, the United States Administrative Law Judge further recommended that the ITC issue an exclusion order and a cease and desist order on certain Apple Watches. The ITC will now consider whether to implement a ban on imports of certain Apple Watches. On January 30, 2023, the PTO denied institution of IPR proceedings for the Company’s pulse oximeter patent that the United States Administrative Law Judge ruled was infringed. With respect to the other patents asserted at the ITC, the PTO denied institution of IPR proceedings for two patents and instituted IPR proceedings for two patents in January and February 2023. The instituted IPR proceedings on the two patents are pending. On October 20, 2022, Apple filed two complaints against the Company in the U.S. District Court for the District of Delaware alleging that the Masimo W1 ™ watch infringes six utility and four design patents. Apple is seeking damages and injunctive relief. On December 12, 2022, the Company counterclaimed for monopolization, attempted monopolization, false advertising (and related causes of action) and infringement of ten patents. The Company is seeking damages and injunctive relief. On May 5, 2023, the Court ordered that the two cases be coordinated through the pre-trial stage. The Court will hold a case management conference in January 2024 to address the scope of claims and counterclaims for trial and set a trial date. The Company intends to vigorously pursue all of its claims against Apple and believes the Company has good and substantial defenses to Apple’s claims, but there is no guarantee that the Company will be successful in these efforts. On October 21, 2022, a complaint was filed in the Delaware Court of Chancery against the Company and members of the Company’s Board (Director Defendants) by Politan Capital Management LP and Politan Capital NY LLC (Activist Plaintiffs). The complaint sought to (i) declare certain amendments to the Company’s bylaws that became effective on September 9, 2022 (Bylaw Amendments) unenforceable, (ii) find that the Director Defendants breached their fiduciary duties by approving and implementing the Bylaw Amendments and the shareholder rights plan adopted by the Company on September 9, 2022, and refusing to invalidate certain change of control provisions in the Company’s employment agreement with Joe Kiani, the Company’s Chief Executive Officer (CEO), (iii) invalidate certain change of control provisions in Mr. Kiani’s employment agreement, (iv) permanently enjoin the Company and its Board from taking any actions to prevent the Activist Plaintiffs from exercising their rights in accordance with the Company’s prior bylaws to nominate directors, and (v) award the Activist Plaintiffs their fees, costs and expenses in connection with the action covered by the complaint. On February 5, 2023, the Board approved and adopted amended and restated bylaws (the Amended and Restated Bylaws) which reverted to the Second Amended and Restated Bylaws of the Corporation, dated as of October 24, 2019 (included as Exhibit 3.1 to the Current Report on Form 8-K, filed by the Corporation with the U.S. Securities and Exchange Commission on October 30, 2019), except that the Amended and Restated Bylaws continued to provide that the period for stockholders to give notice of their intention to nominate directors to stand for election and to submit stockholder proposals for consideration at the 2023 annual meeting of stockholders would begin on March 24, 2023 and remain open for one month (later extended to May 1, 2023). In addition, effective February 8, 2023, Mr. Kiani agreed that the valid election to the Board at the 2023 Annual Meeting of any two individuals nominated by the Company stockholders in lieu of two of the Company’s current Board members will not be deemed to constitute a “Change in Control” for purposes of Section 9(iii) of his employment agreement. On February 8, 2023, the Court informed the parties that the Amended and Restated Bylaws mooted the Bylaw Amendments dispute and continued trial on the change in control provisions to September 12, 2023. On May 1, 2023, Politan filed a motion for an interim fee award of attorneys’ fees and expenses. On March 3, 2023, Politan filed a motion for leave to file a second amended and supplemented verified complaint (the Second Amended Complaint), which the Court granted on March 15, 2023. The Second Amended Complaint added the California State Teachers’ Retirement System (CalSTRS) as a co-plaintiff and added several former members of the Company’s Board as additional co-defendants. The Second Amended Complaint seeks to invalidate Mr. Kiani’s employment agreement and challenges Mr. Kiani’s February 8, 2023 waiver. The Second Amended Complaint seeks declaratory and monetary relief and attorneys’ fees and costs. The Company believes that it and the Director Defendants have good and substantial defenses to the claims in the Second Amended Complaint, but there is no guarantee that the Company and the Director Defendants will be successful in these efforts. The Company is unable to determine whether any loss ultimately will 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. 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 consolidated financial position, results of operations or cash flows. |
Segment and Enterprise Reportin
Segment and Enterprise Reporting | 3 Months Ended |
Apr. 01, 2023 | |
Segment Reporting [Abstract] | |
Segment and Enterprise Reporting | 25. Segment and Enterprise Reporting The Company’s reportable segments are determined based upon the Company’s new organizational structure and the way in which the Company’s Chief Operating Decision Maker (CODM), the CEO, makes operating decisions and assesses financial performance. The CODM considered several factors including, but not limited to, customer base, technology, and homogeneity of products. The two segments are: • Healthcare - develops, manufactures, and markets a variety of noninvasive monitoring technologies and hospital automation solutions and therapeutics. This segment includes the Company’s core legacy hospital business and new Masimo-technology-enabled consumer products that are distributed through many channels including e-commerce sites, leading national retailers and specialty chains globally. • Non-healthcare - designs, develops, manufactures, markets and sells a broad portfolio of premium, high-performance audio products and services. This is a new reportable segment comprised primarily of Sound United’s operations. Income from operations for each segme nt includes all geographic revenues, related cost of net revenues and operating expenses directly attributable to the segment. The Company uses gross profit, as presented in the Company’s finan cial reports, as the primary measure of segment profitability. The Company uses the same accounting policies to generate segment results as the Company does for consolidated results. Segment information presented herein reflects the impact of these changes for all periods presented. There was no inter-segment revenue for any of the periods presented. Selected information by reportable segment is presented below for each of the three months ended April 1, 2023 and April 2, 2022: Three Months Ended (in millions) April 1, April 2, Revenues by segment: Healthcare $ 346.7 $ 304.2 Non-healthcare 218.3 — Total revenue by segment $ 565.0 $ 304.2 Gross profit: Healthcare $ 214.8 $ 204.7 Non-healthcare 77.8 — Other (1) (7.8) — Gross profit $ 284.8 $ 204.7 ____________________________ (1) Management excludes certain corporate expenses from segment gross profit. In addition, certain amounts that management considers to be non-recurring or non-operational are excluded from segment gross profit because management evaluates the operating results of the segments excluding such items. The Company’s depreciation and amortization by segment are as follows: Three Months Ended (in millions) April 1, April 2, Depreciation and amortization by segment: Healthcare $ 9.0 $ 9.1 Non-healthcare 17.1 — Total depreciation and amortization $ 26.1 $ 9.1 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Apr. 01, 2023 | |
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, 2022 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, 2022 (fiscal year 2022), filed with the SEC on March 1, 2023. The results for the three months ended April 1, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending December 30, 2023 (fiscal year 2023) or for any other interim period or for any future year. |
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 weeks while a 53 week fiscal year includes three 13 week fiscal quarters and one 14 week fiscal quarter. The Company’s last 53 week fiscal year was fiscal year 2020. Fiscal year 2023 is a 52 week fiscal year ending December 30, 2023. 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 standalone selling prices, variable consideration, total consideration allocated to each performance obligation within a contract, inventory valuation, valuation of the Company’s equity awards, valuation of identifiable assets and liabilities connected with business combinations, derivative instruments, deferred taxes and any associated valuation allowances, deferred revenue, accounting for pensions, uncertain income tax positions, litigation costs, and related accruals. Actual results could differ from such estimates. |
Business Combinations | Business Combinations The Company accounts for business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) Topic 805, Business Combinations , which requires that once control is obtained, assets acquired, liabilities assumed and noncontrolling interests in the acquired entity, if applicable, are recorded at their respective fair values at the date of acquisition, with the exception of acquired contract assets and contract liabilities (i.e., deferred revenue) from contracts with customers. These are recognized and measured in accordance with ASC Topic 606, Revenue from Contracts with Customers. |
Fair Value Measurements | Fair Value Measurements The Company accounts for certain financial instruments at their fair values as either assets or liabilities on the balance sheet. The Company determines the fair value of its financial instruments using the framework prescribed by ASC Topic 820, Fair Value Measurements and Disclosures , and considers the estimated amount the Company would receive or pay to transfer these instruments at the reporting date with respect to current currency exchange rates, interest rates, the creditworthiness of the counterparty for unrealized gain positions and the Company’s creditworthiness for unrealized loss positions. In certain instances, the Company may utilize financial models to measure the fair value of its financial instruments. In doing so, the Company uses inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. Recurring Fair Value Measurement On a recurring basis, the Company measures certain financial assets and financial liabilities at fair value based upon quoted market prices. Where quoted market prices or other observable inputs are not available, the Company applies valuation techniques to estimate fair value. 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. The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at April 1, 2023: Total Carrying Fair Value Measurement Hierarchy (in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 116.8 $ 116.8 $ — $ — Money market funds 57.3 57.3 — — Pension assets 22.2 14.8 7.4 — Derivative instruments - cash flow hedges 14.2 — 14.2 — Total assets $ 210.5 $ 188.9 $ 21.6 $ — Liabilities None $ — $ — $ — $ — Total liabilities $ — $ — $ — $ — The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at December 31, 2022: Total Carrying Fair Value Measurement Hierarchy (in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 148.5 $ 148.5 $ — $ — Money market funds 54.4 54.4 — — Pension assets 22.2 14.8 7.4 — Derivative instruments - cash flow hedges 19.7 — 19.7 — Total assets $ 244.8 $ 217.7 $ 27.1 $ — Liabilities None $ — $ — $ — $ — Total liabilities $ — $ — $ — $ — The Company invests in checking, savings and money market fund accounts, which are classified within Level 1 of the fair value hierarchy as they are valued using quoted market prices. These investments are classified as cash and cash equivalents within the Company’s accompanying condensed consolidated balance sheets, in accordance with GAAP and its accounting policies. The Company’s pension assets consist of Level 1 and Level 2 investments. The fair value of Level 2 assets is based on observable inputs such as prices or quotes for similar assets, adjusted for any differences in terms or conditions that may affect the value of the instrument being valued. The valuation techniques used for Level 2 assets may include the use of models or other valuation techniques, but these methods are all based on observable market inputs. Non-Recurring Fair Value Measurements For certain other financial assets and liabilities, including restricted cash, accounts receivable, accounts payable and other current assets and liabilities, the carrying amounts approximate their fair value primarily due to the relatively short maturity of these balances. The Company also measures certain non-financial assets at fair value on a non-recurring basis, primarily goodwill, intangible assets and operating lease right-of-use assets, in connection with periodic evaluations for potential impairment. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity from the 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. The Company carries cash and cash equivalents at cost, which approximates fair value, and they are Level 1 under the fair value hierarchy. |
Accounts Receivable and Allowance for Credit Losses | Accounts Receivable and Allowance for Credit Losses Accounts receivable consist of trade receivables recorded at the time of invoicing of product sales, 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 an evaluation of the customer’s financial condition. Collateral is generally not required. The Company records an allowance for credit losses that it does not expect to collect based on relevant information, including historical experience, current conditions, and reasonable and supportable forecasts. Accounts are charged off against the allowance when the Company believes they are uncollectible. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. Based on the risk characteristics, the Company has identified U.S. and international customers as separate portfolios for both segments, and measures expected credit losses on such receivables using an aging methodology . |
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 valuation adjustments 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. The Company generally determines inventory valuation adjustments based on an evaluation of the expected future use of its inventory on an item by item basis and applies historical obsolescence rates to estimate the loss on inventory expected to have a recovery value below cost. The Company also records other specific inventory valuation adjustments when it becomes aware of unique events or circumstances that result in an expected recovery value below cost. For inventory items that have been written down, the reduced value becomes the new cost basis. |
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 Buildings and building improvements 7 to 39 years Computer equipment and software 2 to 12 years Demonstration units 2 to 3 years Furniture and office equipment 2 to 15 years Leasehold improvements Lesser of useful life or term of lease Machinery, equipment and tooling 3 to 20 years Operating lease assets Lesser of useful life or term of lease Transportation, vehicles and other 1 to 20 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. |
Lessee Right-of-Use (ROU) Assets and Lease Liabilities | Lessee Right-of-Use (ROU) Assets and Lease Liabilities The Company determines if an arrangement contains a lease at inception. ROU assets represent the Company’s right to use an asset underlying an operating lease for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from an operating lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company generally estimates the applicable discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. Many of the Company’s lessee agreements include options to extend the lease, which the Company does not include in its lease terms unless they are reasonably certain to be exercised. The Company utilizes a portfolio approach to account for the ROU assets and liabilities associated with certain equipment leases. The Company has also made an accounting policy election not to separate lease and non-lease components for its real estate leases and to exclude short-term leases with a term of twelve months or less from its ROU assets and lease liabilities. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. |
Intangible Assets | Intangible Assets Intangible assets consist primarily of patents, trademarks, software development costs, customer relationships and acquired technology. Costs related to patents and trademarks, which include legal and application fees, are ca pitalized and amortized over the estimated useful lives using the straight-line method. Patent and tradema rk amortization commences once final approval of the patent or trademark has been obtained. Patent costs are amortized over the lesser of 10 years or the patent’s remaining legal life, which assumes renewals, and trademark costs are amortized over 17 years, and their associated amortization cost is included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations. For intangibles purchased in an asset acquisition or business combination, which mainly include patents, trademarks, customer relationships and acquired technologies, the useful life is determined largely by valuation estimates of remaining economic life. The Company’s policy is to renew its patents and trademarks. Costs to renew patents and trademarks are capitalized and amortized over the remaining useful life of the intangible asset. The Company periodically 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. Intangibles purchased as part of an asset acquisition or business combination historically have included patents, trademarks, customer relationships, developed technologies and contractual licenses. In certain circumstances the Company also has acquired non-compete agreements tied to certain employment relationships. The useful life for all of these is largely determined by valuation estimates of remaining economic life. In connection with the Sound United Acquisition, the Company acquired certain trademarks/tradenames, which are intangible assets with indefinite useful lives. These brands are expected to maintain brand value for an indefinite period of time. |
Impairment of Goodwill, Intangible Assets and Other Long-Lived 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, 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 has two reporting units, healthcare and non-healthcare. 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 the qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, or if the Company elects to bypass the qualitative analysis, then the Company performs a quantitative analysis that compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired; otherwise, a goodwill impairment loss is recognized for the lesser of: (a) the amount that the carrying amount of such reporting unit exceeds its fair value; or (b) the amount of the goodwill allocated to such reporting unit. The annual impairment test is performed during the fourth fiscal quarter. Similar to goodwill, indefinite-lived intangible assets are not amortized but instead are subject to annual impairment testing, unless circumstances dictate more frequent testing, if impairment indicators exist. Impairment for indefinite-lived assets exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. Determining whether impairment indicators exist and estimating the fair value of the Company’s indefinite-lived intangible assets if necessary for impairment testing require significant judgment. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors. The Company reviews finite lived intangible assets and long-lived assets 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 flows 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. |
Employee Defined Benefit Plans | Employee Defined Benefit Plans The Company maintains noncontributory defined benefit plans that cover certain employees in certain international locations. The Company recognizes the funded status, or the difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the condensed consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive (loss) income. If the projected benefit obligation exceeds the fair value of plan assets, the difference or underfunded status represents the pension liability. The Company records a net periodic pension cost in the condensed consolidated statement of operations. The liabilities and annual income or expense are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of asset return. The Company’s accounting policy includes an annual re-measurement of pension assets and obligations. In addition, the Company r e-measures pension assets and obligations for significant events, as of the nearest month-end date on the calendar. The fair values of plan assets are determined based on prevailing market prices. See Note 21, “Employee Benefits”, for further details. |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method, under which the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for net operating loss and tax credit carryforwards. Tax positions that meet a more-likely-than-not recognition threshold are recognized in the first reporting period that it becomes more-likely-than-not such tax position will be sustained upon examination. A tax position that meets this more-likely-than-not recognition threshold is recorded at the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Previously recognized income tax positions that fail to meet the recognition threshold in a subsequent period are derecognized in that period. Differences between actual results and the Company’s assumptions, or changes in the Company’s assumptions in future periods, are recorded in the period they become known. The Company records potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. As a multinational corporation, the Company is subject to complex tax laws and regulations in various jurisdictions. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, evolution of regulations and court rulings. Therefore, the actual liability for U.S. or foreign taxes may be materially different from the Company’s estimates, which could result in the need to record additional liabilities or potentially to reverse previously recorded tax liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is recorded against any deferred tax assets when, in the judgment of management, it is more likely than not that all or part of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including recent financial performance, scheduled reversals of temporary differences, projected future taxable income, availability of taxable income in carryback periods and tax planning strategies. Income taxes are highly susceptible to changes from period to period, requiring management to make assumptions about the Company’s future income over the lives of its deferred tax assets and the impact of changes in valuation allowances. Any difference in the assumptions, judgments and estimates mentioned above could result in changes to the Company’s results of operations. |
Revenue Recognition, Deferred Revenue and Other Contract Liabilities | Revenue Recognition, Deferred Revenue and Other Contract Liabilities The Company generally recognizes revenue following a single, principles-based five-step model to be applied to all contracts with customers and generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers that are remitted to government authorities, when control over the promised goods or services are transferred to the customer. Healthcare segment While the majority of the Company’s healthcare segment revenue contracts and transactions contain standard business terms and conditions, there are some transactions that contain non-standard business terms and conditions. As a result, contract interpretation, judgment and analysis are required to determine the appropriate accounting, including: (i) the amount of the total consideration, as well as variable consideration, (ii) whether the arrangement contains an embedded lease, and if so, whether such embedded lease is a sales-type lease or an operating lease, (iii) the identification of the distinct performance obligations contained within the arrangement, (iv) how the arrangement consideration should be allocated to each performance obligation when multiple performance obligations exist, including the determination of standalone selling price, and (v) when to recognize revenue on the performance obligations. Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition. Revenue from fixed lease payments related to equipment supplied under sales-type lease arrangements is recognized once control over the equipment is transferred to the customer, while revenue from fixed lease payments related to equipment supplied under operating-type lease arrangements is generally recognized on a straight-line basis over the term of the lease and variable lease payments are recognized as they occur. The Company derives the majority of its healthcare segment revenue from four primary sources: (i) direct sales under deferred equipment 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 customers; and (iv) sales of integrated circuit boards to OEM customers who incorporate the Company’s embedded software technology into their multiparameter monitoring devices. Subject to customer credit considerations, the majority of such sales are made on open accounts using industry standard payment terms based on the geography within which the specific customer is located. The Company enters into agreements to sell its monitoring solutions and services, sometimes as a part of arrangements with multiple performance obligations that include various combinations of product sales, equipment leases and services. In the case of contracts with multiple performance obligations, the authoritative guidance provides that the total consideration be allocated to each performance obligation on the basis of relative standalone selling prices. When a standalone selling price is not readily observable, the Company estimates the standalone selling price 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 other market conditions. Sales under deferred equipment agreements are generally structured such that the Company agrees to provide certain monitoring-related equipment, software, installation, training and/or warranty support at no up-front charge in exchange for the customer’s commitment to purchase sensors over the term of the agreement, which generally ranges from three years to six years. The Company allocates contract consideration under deferred equipment agreements containing fixed annual sensor purchase commitments to the underlying lease and non-lease components at contract inception. In determining whether any underlying lease components are related to a sales-type lease or an operating lease, the Company evaluates the customer’s rights and ability to control the use of the underlying equipment throughout the contract term, including any equipment substitution rights retained by the Company, as well as the Company’s expectations surrounding potential contract/lease extensions or renewals and the customer’s likelihood to exercise any purchase options. Beginning in 2022, for contracts that contain variable lease payments that are not dependent on an index or rate, the Company classifies as operating leases any lease components that would have otherwise been classified as sales-type leases that would result in a selling loss upon lease commencement. Revenue allocable to non-lease performance obligations is generally recognized as such non-lease performance obligations are satisfied. Revenue allocable to lease components under sales-type lease arrangements is generally recognized when control over the equipment is transferred to the customer. Revenue allocable to lease components under operating lease arrangements is generally recognized over the term of the operating lease. The Company generally does not expect to derive any significant value in excess of such asset’s unamortized book value from equipment underlying its operating lease arrangements after the end of the agreement. Revenue from the sale of products to end-user hospitals, emergency medical response organizations, other direct customers, distributors and OEM customers, is recognized by the Company when control of such products transfer to the customer based upon the terms of the contract or underlying purchase order. Revenue related to OEM rainbow ® parameter software licenses is recognized by the Company upon the OEM’s shipment of its product to its customer, as reported to the Company by the OEM. The Company provides certain customers with various sales incentives that may take the form of discounts or rebates. The Company records estimates related to these programs as a reduction to revenue at the time of sale. 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. The Company estimates the revenue constraints related to these forms of variable consideration based on various factors, including expected purchasing volumes, prior sales and returns history, and specific contractual terms and limitations. Non-healthcare segment Non-healthcare segment revenue is related to hardware and embedded software that is integrated into final products that are manufactured and sold by the Company. Products and related software are accounted for as a single performance obligation and all intended functionality is available to the customer upon purchase. Non-healthcare segment revenue is recognized upon transfer of control of promised products or service to customers, which is either upon shipment or upon delivery to the customers, depending on delivery terms. The Company offers sales incentives and has customer programs consisting primarily of discounts and market development fund programs, and records them as a contra revenue. Estimates for sales incentives are developed using the most likely amount and are included in the transaction price to the extent that a significant reversal of revenue would not result once the uncertainty is resolved. In developing its estimates, the Company also considers the susceptibility of the incentive to outside influences, the length of time until the uncertainty is resolved and the Company’s experience with similar contracts. Reductions in revenue related to discounts are allocated to products on a relative basis based on their respective standard selling price if there are undelivered products in a contract. Judgement is required to determine the timing and amount of recognition of marketing funds which the Company estimates based on past practice of providing similar funds. Payment terms and conditions vary among the Company’s distribution channels although terms generally include a requirement of payment within 30 to 60 days of product shipment. Sales made directly to customers from the Company’s website are paid at the time of product shipment. Prior to determining payment terms for each customer, an evaluation of such customer’s credit risk is performed. Contractual allowances are an offset to accounts receivable. |
Shipping and Handling Costs and Fees | Shipping and Handling Costs and Fees All shipping and handling costs are expensed as incurred and are recorded as a component of cost of goods sold in the accompanying condensed consolidated statements of operations. Charges for shipping and handling billed to customers are included as a component of revenue. |
Taxes Collected From Customers And Remitted To Governmental Authorities | Taxes Collected From Customers and Remitted to Governmental Authorities The Company’s policy is to present revenue net of taxes collected from customers and remitted to governmental authorities. |
Deferred Costs and Other Contract Assets | Deferred Costs and Other Contract Assets The costs of monitoring-related equipment provided to customers under operating lease arrangements within the Company’s deferred equipment agreements are generally deferred and amortized to cost of goods sold over the life of the underlying contracts. Some of the Company’s deferred equipment agreements also contain provisions for certain allowances to be made directly to the end-user hospital customer at the inception of the arrangement. These allowances are generally allocated to the lease and non-lease components and recognized as a reduction to revenue as the underlying performance obligations are satisfied. The Company generally invoices its customers under deferred equipment agreements as sensors are provided to the customer. However, the Company may recognize revenue for certain non-lease performance obligations under deferred equipment agreements with fixed annual commitments at the time such performance obligations are satisfied and prior to the customer being invoiced. When this occurs, the Company records an unbilled contract receivable related to such revenue until the customer has been invoiced pursuant to the terms of the underlying deferred equipment agreement. The incremental costs of obtaining a contract with a customer are capitalized and deferred if the Company expects such costs to be recoverable over the life of the contract and the contract term is greater than one year. Such deferred costs generally relate to certain incentive sales commissions earned by the Company’s internal sales team in connection with the execution of deferred equipment agreements and are amortized to expense over the expected term of the underlying contract. T he Company recognizes non-healthcare royalty revenue associated with certain prepaid license arrangements. The Company recognizes non-healthcare revenue from the prepaid license arrangements based upon sales-based royalties when a subsequent sale occurs. |
Warranty | Warranty The Company generally provides a warranty against defects in material and workmanship for a period ranging from six months 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 goods sold. Customers may also purchase extended warranty coverage or service level upgrades separately or as part of a deferred equipment agreement. Revenue related to extended warranty coverage and service level upgrades is generally recognized over the life of the contract, which reasonably approximates the period over which such services will be provided. The related extended warranty and service level upgrade costs are expensed as incurred. Changes in the product warranty accrual were as follows: Three Months Ended (in millions) April 1, April 2, Product warranty accrual, beginning of period $ 10.6 $ 2.5 Accrual for warranties issued 3.8 2.2 Changes in pre-existing warranties (including changes in estimates) (3.5) (2.2) Settlements made (0.7) (0.1) Product warranty accrual, end of period $ 10.2 $ 2.4 |
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. |
Foreign Currency Translation | Foreign Currency Translation The Company’s international headquarters is in Switzerland, and its functional currency is the U.S. Dollar. The Company has many other foreign subsidiaries, and the largest transactions in foreign currency translations occur in the Japanese Yen, the British Pou nd, the Chinese Yuan a nd the European Euro. |
Derivatives Instruments and Hedging Activities | Derivatives Instruments and Hedging Activities The Company addresses market risk from changes in interest rates risks through risk management programs, which include the use of derivative instruments. The Company’s exposure to a counterparty’s credit risk is generally limited to the amounts of the net obligation to the counterparty. The Company established policies to enter into contracts only with major investment-grade financial institutions to mitigate such counterparty credit risk. The Company also established a policy to further monitor the counterparty risks throughout the life of the instruments. None of the derivative instruments currently held by the Company were entered into for speculative trading purposes. All derivative financial instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets and are classified as short-term or long-term based on the tenor of the instrument. The Company has elected not to separate a derivative instrument into current and long-term portions. A derivative instrument whose fair value is a net liability is classified as current in total. A derivative instrument whose fair value is a net asset and whose current portion is an asset is classified as non-current in total. For a derivative instrument that meets the criteria to qualify for hedge accounting, the Company marks the fair value of the derivative instrument to market periodically through other comprehensive (loss) income. When the hedged items are recorded to income (expense), the associated deferred gains (losses) of the derivatives in accumulated other comprehensive (loss) income will be reclassified into earnings. Any fluctuation in the fair value of a derivative instrument that does not meet the criteria for hedge accounting, is recorded to earnings (expense) in the period it occurs. |
Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) income includes foreign currency translation adjustments, changes to pension benefits, unrealized gains (losses) on cash flow hedges and any related tax benefits (expenses) that have been excluded from net income and reflected in stockholders’ equity. |
Net Income Per Share | Net Income Per Share A computation of basic and diluted net income per share is as follows: Three Months Ended (in millions, except per share amounts) April 1, April 2, Net income $ 21.3 $ 46.6 Basic net income per share: Weighted-average shares outstanding - basic 52.6 55.4 Net income per basic share $ 0.40 $ 0.84 Diluted net income per share: Weighted-average shares outstanding - basic 52.6 55.4 Diluted share equivalents: stock options, RSUs and PSUs 1.8 1.9 Weighted-average shares outstanding - diluted 54.4 57.3 Net income per diluted share $ 0.39 $ 0.81 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 is 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 stock units (PSUs). For the three months ended April 1, 2023 and April 2, 2022, weighted options to purchase 1.0 million and 0.6 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. Certain RSUs are 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 each of April 1, 2023 and April 2, 2022, 2.7 million weighted-average shares related to such RSUs have been excluded from the calculation of potential shares for the three month periods then ended. |
Recently Adopted and Recently Announced Accounting Pronouncements | Recently Adopted and Recently Announced Accounting Pronouncements There have been no material changes to the accounting policies discussed in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023. There are no recently announced, but not yet effective accounting pronouncements that are expected to have a material impact to the Company as of April 1, 2023. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Accounting Policies [Abstract] | |
Fair Value, Assets Measured on Recurring Basis | The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at April 1, 2023: Total Carrying Fair Value Measurement Hierarchy (in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 116.8 $ 116.8 $ — $ — Money market funds 57.3 57.3 — — Pension assets 22.2 14.8 7.4 — Derivative instruments - cash flow hedges 14.2 — 14.2 — Total assets $ 210.5 $ 188.9 $ 21.6 $ — Liabilities None $ — $ — $ — $ — Total liabilities $ — $ — $ — $ — The following tables represent the Company’s financial assets, measured at fair value on a recurring basis at December 31, 2022: Total Carrying Fair Value Measurement Hierarchy (in millions) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 148.5 $ 148.5 $ — $ — Money market funds 54.4 54.4 — — Pension assets 22.2 14.8 7.4 — Derivative instruments - cash flow hedges 19.7 — 19.7 — Total assets $ 244.8 $ 217.7 $ 27.1 $ — Liabilities None $ — $ — $ — $ — Total liabilities $ — $ — $ — $ — |
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 Buildings and building improvements 7 to 39 years Computer equipment and software 2 to 12 years Demonstration units 2 to 3 years Furniture and office equipment 2 to 15 years Leasehold improvements Lesser of useful life or term of lease Machinery, equipment and tooling 3 to 20 years Operating lease assets Lesser of useful life or term of lease Transportation, vehicles and other 1 to 20 years Property and equipment, net, consists of the following: (in millions) April 1, December 31, Building and building improvements $ 150.9 $ 151.0 Machinery, equipment and tooling 150.2 149.4 Land 66.2 65.1 Operating lease assets 51.9 50.2 Computer equipment and software 43.6 42.1 Leasehold improvements 33.7 32.3 Transportation, vehicles and other 33.2 32.7 Furniture and office equipment 19.8 19.4 Demonstration units 9.7 11.2 Construction-in-progress (CIP) 58.2 50.6 Total property and equipment 617.4 604.0 Accumulated depreciation (215.3) (201.5) Property and equipment, net $ 402.1 $ 402.5 |
Changes in Product Warranty Accrual | Changes in the product warranty accrual were as follows: Three Months Ended (in millions) April 1, April 2, Product warranty accrual, beginning of period $ 10.6 $ 2.5 Accrual for warranties issued 3.8 2.2 Changes in pre-existing warranties (including changes in estimates) (3.5) (2.2) Settlements made (0.7) (0.1) Product warranty accrual, end of period $ 10.2 $ 2.4 |
Reconciliation of Basic and Diluted Net Income Per Share | A computation of basic and diluted net income per share is as follows: Three Months Ended (in millions, except per share amounts) April 1, April 2, Net income $ 21.3 $ 46.6 Basic net income per share: Weighted-average shares outstanding - basic 52.6 55.4 Net income per basic share $ 0.40 $ 0.84 Diluted net income per share: Weighted-average shares outstanding - basic 52.6 55.4 Diluted share equivalents: stock options, RSUs and PSUs 1.8 1.9 Weighted-average shares outstanding - diluted 54.4 57.3 Net income per diluted share $ 0.39 $ 0.81 |
Supplemental Cash Flow Information | Supplemental cash flow information includes the following: Three Months Ended (in millions) April 1, April 2, Cash paid during the year for: Interest expense $ 11.7 $ 0.1 Income taxes 11.0 5.8 Operating lease liabilities 5.3 2.1 Non-cash operating activities: ROU assets obtained in exchange for lease liabilities $ 0.6 $ 8.3 Non-cash investing activities: Unpaid purchases of property and equipment $ 0.7 $ 5.7 Unpaid strategic investments 1.2 2.3 Non-cash financing activities: Unsettled common stock proceeds from option exercises $ 0.1 $ 0.3 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 174.1 $ 720.0 Restricted cash 7.0 3.0 Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows $ 181.1 $ 723.0 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Inventory Disclosure [Abstract] | |
Components of Inventory | Inventories consist of the following: (in millions) April 1, December 31, Raw materials $ 240.5 $ 209.9 Work-in-process 30.8 30.4 Finished goods 232.2 260.7 Total inventories $ 503.5 $ 501.0 |
Other Current Assets (Tables)
Other Current Assets (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Non-Current Assets | Other current assets consist of the following: (in millions) April 1, December 31, Prepaid expenses $ 78.7 $ 77.5 Lease receivable, current 30.4 28.5 Indirect taxes receivable 23.3 26.8 Prepaid income taxes 21.7 12.4 Prepaid rebates and royalties, current 4.8 3.7 Contract assets, current 4.7 3.9 Restricted cash (1) 2.4 2.4 Other current assets 6.0 3.6 Total other current assets $ 172.0 $ 158.8 ______________ (1) Restricted cash includes funds received from the Bill and Melinda Gates Foundation. As the Company incurs costs associated with research and development related to this project, on a quarterly basis, the Company reclasses amounts from the grant to offset costs incurred. Other non-current assets consist of the following: (in millions) April 1, December 31, Lessee ROU assets, net $ 66.6 $ 69.6 Strategic investments 13.7 13.8 Derivative assets - non-current 13.6 19.3 Prepaid deposits and other 9.9 11.0 Other non-current assets 0.4 0.3 Total non-current assets $ 104.2 $ 114.0 |
Lease Receivable (Tables)
Lease Receivable (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Leases [Abstract] | |
Sale-Type Lease Receivable | Lease receivable from sales-type leases consists of the following: (in millions) April 1, December 31, Lease receivable $ 112.6 $ 101.8 Allowance for credit loss (0.3) (0.2) Lease receivable, net 112.3 101.6 Less: current portion of lease receivable (30.4) (28.5) Lease receivable, non-current $ 81.9 $ 73.1 |
Sales-type Lease, Lease Receivable, Maturity | As of April 1, 2023, estimated future maturities of customer sales-type lease receivables and operating lease payments for each of the following fiscal years are as follows: Future Lease Receivables/Payments Fiscal year Sales-Type Leases Operating Leases 2023 (balance of year) $ 23.1 $ 5.1 2024 28.1 5.8 2025 22.8 5.1 2026 16.6 4.6 2027 10.6 3.6 Thereafter 11.1 4.5 Total $ 112.3 $ 28.7 Less: imputed interest (1) — Present value of total lease payments $ 112.3 ______________ (1) The calculation of the rates implicit in the leases resulted in negative discount rates. Therefore, the Company as a lessor used a 0% discount rate to measure the net investment in the lease. |
Deferred Costs and Other Cont_2
Deferred Costs and Other Contract Assets (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Deferred Costs and Other Contract Assets | Deferred costs and other contract assets consist of the following: (in millions) April 1, December 31, Deferred commissions $ 17.6 $ 17.1 Prepaid contract allowances 14.1 13.7 Unbilled contract receivables 9.5 9.4 Deferred equipment agreements, net 1.7 1.7 Deferred costs and other contract assets $ 42.9 $ 41.9 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of 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 Buildings and building improvements 7 to 39 years Computer equipment and software 2 to 12 years Demonstration units 2 to 3 years Furniture and office equipment 2 to 15 years Leasehold improvements Lesser of useful life or term of lease Machinery, equipment and tooling 3 to 20 years Operating lease assets Lesser of useful life or term of lease Transportation, vehicles and other 1 to 20 years Property and equipment, net, consists of the following: (in millions) April 1, December 31, Building and building improvements $ 150.9 $ 151.0 Machinery, equipment and tooling 150.2 149.4 Land 66.2 65.1 Operating lease assets 51.9 50.2 Computer equipment and software 43.6 42.1 Leasehold improvements 33.7 32.3 Transportation, vehicles and other 33.2 32.7 Furniture and office equipment 19.8 19.4 Demonstration units 9.7 11.2 Construction-in-progress (CIP) 58.2 50.6 Total property and equipment 617.4 604.0 Accumulated depreciation (215.3) (201.5) Property and equipment, net $ 402.1 $ 402.5 |
Intangible Assets, net (Tables)
Intangible Assets, net (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | Intangible assets, net, consist of the following: April 1, December 31, (in millions) Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying Intangible assets subject to amortization: Customer relationships $ 213.3 $ (22.3) $ 191.0 $ 220.9 $ (19.3) $ 201.6 Acquired technologies 177.0 (30.2) 146.8 185.3 (25.2) 160.1 Patents 36.1 (13.9) 22.2 35.2 (13.9) 21.3 Licenses 37.9 (5.1) 32.8 39.0 (4.4) 34.6 Trademarks 39.4 (7.4) 32.0 39.3 (5.8) 33.5 Licenses-related party 7.5 (6.4) 1.1 7.5 (6.3) 1.2 Non-compete agreements 6.0 (1.4) 4.6 6.3 (1.1) 5.2 Capitalized software development costs 9.6 (3.0) 6.6 5.5 (2.9) 2.6 Other 1.5 (1.1) 0.4 1.6 (1.1) 0.5 Total intangible assets subject to amortization, net $ 528.3 $ (90.8) $ 437.5 $ 540.6 $ (80.0) $ 460.6 Intangible assets not subject to amortization: Trademarks 252.3 262.0 Intangible assets, net $ 689.8 $ 722.6 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for each of the next fiscal years is as follows: Fiscal year Amount 2023 (balance of year) $ 35.8 2024 46.5 2025 45.5 2026 43.9 2027 43.2 Thereafter 222.6 Total $ 437.5 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Goodwill [Abstract] | |
Schedule of Goodwill | Changes in goodwill were as follows: Three Months Ended (in millions) Healthcare Non-healthcare Total Goodwill, beginning of period $ 97.6 $ 347.8 $ 445.4 Adjustments to goodwill from purchase price allocation — (9.8) (9.8) Foreign currency translation adjustment 0.3 (14.0) (13.7) Goodwill, end of period $ 97.9 $ 324.0 $ 421.9 |
Lessee ROU Assets and Lease L_2
Lessee ROU Assets and Lease Liabilities (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Leases [Abstract] | |
Lessee Operating Lease Balance Sheet Classification | The balance sheet classifications for amounts related to the Company’s operating leases for which it is the lessee are as follows: (in millions) Balance sheet classification April 1, December 31, Lessee ROU assets Other non-current assets $ 66.6 $ 69.6 Lessee current lease liabilities Other current liabilities 22.8 18.7 Lessee non-current lease liabilities Other non-current liabilities 55.4 53.4 Total operating lease liabilities $ 78.2 $ 72.1 |
Lessee, Operating Lease, Liability, Maturity | As of April 1, 2023, estimated future operating lease payments for each of the following fiscal years were as follows: Fiscal year Amount 2023 (balance of year) $ 17.7 2024 19.0 2025 14.9 2026 10.6 2027 5.2 Thereafter (1) 19.8 Total 87.2 Imputed interest (9.0) Present value $ 78.2 ______________ (1) Includes optional renewal period for certain leases. |
Other Non-Current Assets (Table
Other Non-Current Assets (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Other Assets, Longterm [Abstract] | |
Schedule of Other Non-Current Assets | Other current assets consist of the following: (in millions) April 1, December 31, Prepaid expenses $ 78.7 $ 77.5 Lease receivable, current 30.4 28.5 Indirect taxes receivable 23.3 26.8 Prepaid income taxes 21.7 12.4 Prepaid rebates and royalties, current 4.8 3.7 Contract assets, current 4.7 3.9 Restricted cash (1) 2.4 2.4 Other current assets 6.0 3.6 Total other current assets $ 172.0 $ 158.8 ______________ (1) Restricted cash includes funds received from the Bill and Melinda Gates Foundation. As the Company incurs costs associated with research and development related to this project, on a quarterly basis, the Company reclasses amounts from the grant to offset costs incurred. Other non-current assets consist of the following: (in millions) April 1, December 31, Lessee ROU assets, net $ 66.6 $ 69.6 Strategic investments 13.7 13.8 Derivative assets - non-current 13.6 19.3 Prepaid deposits and other 9.9 11.0 Other non-current assets 0.4 0.3 Total non-current assets $ 104.2 $ 114.0 |
Deferred Revenue and Other Co_2
Deferred Revenue and Other Contract Liabilities, Current (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Contract with Customer, Asset and Liability | Deferred revenue and other contract liabilities, current, consist of the following: (in millions) April 1, December 31, Deferred revenue $ 61.3 $ 61.0 Accrued rebates and allowances 37.9 38.5 Accrued customer reimbursements 8.0 6.1 Total deferred revenue and other contract liabilities 107.2 105.6 Less: Non-current portion of deferred revenue (25.5) (25.0) Deferred revenue and other contract liabilities, current $ 81.7 $ 80.6 Changes in deferred revenue were as follows: (in millions) Three Months Ended Deferred revenue, beginning of the period $ 61.0 Revenue deferred during the period 9.7 Recognition of revenue deferred in prior periods (9.4) Deferred revenue, end of the period $ 61.3 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Accrued Liabilities [Abstract] | |
Schedule Other Current Liabilities | Other current liabilities consist of the following: (in millions) April 1, December 31, Current portion of long-term debt $ 31.6 $ 15.1 Accrued expenses 29.6 39.9 Income tax payable 27.1 32.1 Accrued indirect taxes payable 23.4 28.2 Lessee lease liabilities, current 22.8 18.7 Accrued warranty 10.2 10.6 Accrued legal fees 9.5 11.4 Accrued property taxes 8.4 12.1 Related party payables 5.7 4.0 Accrued donations 4.1 5.1 Other current liabilities 7.1 6.1 Total other current liabilities $ 179.5 $ 183.3 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | (in millions) April 1, December 31, Term loan - current portion $ 7.5 $ 7.5 Japanese loans - current portion 24.1 7.6 Short-term debt 31.6 15.1 Term loan - long-term 277.5 278.9 Revolver - long-term 609.2 651.0 Japanese loans - long-term 10.8 11.7 Long-term debt 897.5 941.6 Total debt $ 929.1 $ 956.7 |
Schedule of Maturities of Long-term Debt | As of April 1, 2023, the aggregate maturities of principal on all debt for each of the next five years and thereafter are as follows: Fiscal year Amount 2023 (balance of the year) $ 29.2 2024 14.9 2025 16.8 2026 16.8 2027 847.3 Thereafter 4.1 Total $ 929.1 |
Other Non-Current Liabilities (
Other Non-Current Liabilities (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Other Liabilities, Long Term [Abstract] | |
Schedule of Components Of Other Liabilities Long Term Table | Other non-current liabilities consist of the following: (in millions) April 1, December 31, Lessee non-current lease liabilities $ 55.4 $ 53.4 Deferred revenue, non-current 25.5 25.0 Unrecognized tax benefits 19.7 18.0 Income tax payable, non-current 12.7 12.7 Defined benefit obligation 9.6 10.1 Indirect tax payable, non-current 8.3 8.2 Other 4.9 9.1 Total other non-current liabilities $ 136.1 $ 136.5 |
Derivative Instruments and He_2
Derivative Instruments and Hedging Activities (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The following table summarizes the fair value of the hedging instruments, presented on a gross basis, as of April 1, 2023 and December 31, 2022. Condensed Consolidated (in millions) Balance sheet classification April 1, December 31, Interest rate contracts, inclusive of accrued interest Other non-current assets $ 14.2 $ 19.7 Total $ 14.2 $ 19.7 |
Reclassification out of Accumulated Other Comprehensive Income | The following table summarizes the gains (losses) reclassified from accumulated other comprehensive (loss) income to the condensed consolidated financial statements for the three months ended April 1, 2023 and April 2, 2022. Condensed Consolidated (in millions) Location of gains (losses) Three Months Ended Three Months Ended Cash flow hedges - interest rate contracts Non-operating (losses) $ (3.0) $ — Total $ (3.0) $ — |
Schedule of Accumulated Other Comprehensive Income (Loss) | The following tables summarize the changes in accumulated other comprehensive (losses) income related to the hedging instruments for the three months ended April 1, 2023 and April 2, 2022. (in millions) April 1, April 2, Beginning balance $ 19.3 $ — Amount recognized in other comprehensive (loss) income (2.7) — Amount reclassified into earnings (3.0) — Ending balance $ 13.6 $ — |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The table below summarizes the provisional allocation of fair value of assets acquired and liabilities assumed, inclusive of measurement period adjustments as of April 1, 2023: (in millions) Sound United Cash consideration (1) $ 1,057.5 Purchase price $ 1,057.5 Assets acquired: Cash and cash equivalents $ 82.6 Accounts receivables 108.5 Inventories 238.6 Prepaid expenses and other current assets 30.0 Property, plant and equipment 113.2 Intangible asset 649.0 Goodwill 325.8 Long-term other assets 7.4 Total assets acquired $ 1,555.1 Liabilities assumed: Accounts payable $ (118.8) Accrued liabilities and other current liabilities (148.9) Deferred tax liabilities (152.9) Other long-term liabilities (77.0) Total liabilities assumed $ (497.6) ______________ (1) The purchase price allocation for the Sound United Acquisition is provisional, pending finalization of the valuation of certain tax assets, liabilities, and goodwill. The following table sets forth the components of identifiable intangible assets acquired and the weighted average amortization period as of the acquisition date: Weighted average April 11, Trademarks/tradenames 10 $ 6.0 Customer relationships 17 196.0 Developed technology 8 156.0 Contractual license agreements 15 29.0 Subtotal 14 years $ 387.0 Indefinite trademarks/tradenames N/A 262.0 Total $ 649.0 |
Business Acquisition, Pro Forma Information | There are no other material non-recurring pro forma adjustments directly attributable to the Sound United Acquisition included in the reported pro forma revenue and pro forma net income. Three Months Ended April 1, April 2, (in millions) Actual Pro forma Net revenue $ 565.0 $ 554.9 Net income $ 21.0 $ 49.2 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of 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: Three Months Ended (in millions, except for weighted-average exercise prices) Shares Weighted-Average Options outstanding, beginning of period 2.8 $ 83.85 Granted 0.1 177.29 Canceled — 173.02 Exercised — 40.63 Options outstanding, end of period 2.9 $ 88.05 Options exercisable, end of period 2.4 $ 72.20 |
Schedule of Share-based Compensation, Restricted Stock Units Award Activity | The number of RSUs issued and outstanding under all of the Company’s equity plans are as follows: Three Months Ended (in millions, except for weighted-average grant date fair value amounts) Units Weighted-Average Grant RSUs outstanding, beginning of period 3.2 $ 105.65 Granted 0.2 174.88 Expired (0.1) 183.51 Vested (0.1) 178.03 RSUs outstanding, end of period 3.2 $ 108.31 |
Schedule of Nonvested Performance-based Units Activity | The number of PSUs outstanding under all of the Company’s equity plans are as follows: Three Months Ended (in millions, except for weighted-average grant date fair value amounts) Units Weighted-Average Grant PSUs outstanding, beginning of period 0.3 $ 180.04 Granted (1) 0.1 204.67 Canceled — — Expired — — Vested (0.1) 179.42 PSUs outstanding, end of period 0.3 $ 187.93 ______________ (1) On February 27, 2023, the Audit Committee approved the weighted payout percentage for the 2020 PSU awards (three-year performance period), which were based upon the actual fiscal 2022 performance against pre-established performance objectives. Included in the granted amount are those additional PSUs earned based on actual performance achieved. These PSUs were originally awarded at target. |
Schedule of 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 April 1, April 2, Risk-free interest rate 4.2% 1.0% to 1.9% Expected term (in years) 5.9 5.7 Estimated volatility 36.7% 31.2% to 38.9% Expected dividends 0% 0% Weighted-average fair value of options granted $75.08 $51.87 |
Non-operating Loss (Tables)
Non-operating Loss (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Nonoperating Income (Expense) [Abstract] | |
Schedule of Other Nonoperating Income (Expense) | Non-operating loss consists of the following: Three Months Ended (in millions) April 1, April 2, Interest income $ 0.8 $ 0.3 Interest expense (11.9) (0.1) Realized and unrealized foreign currency losses (0.7) (0.8) Total non-operating loss $ (11.8) $ (0.6) |
Segment and Enterprise Report_2
Segment and Enterprise Reporting (Tables) | 3 Months Ended |
Apr. 01, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Selected information by reportable segment is presented below for each of the three months ended April 1, 2023 and April 2, 2022: Three Months Ended (in millions) April 1, April 2, Revenues by segment: Healthcare $ 346.7 $ 304.2 Non-healthcare 218.3 — Total revenue by segment $ 565.0 $ 304.2 Gross profit: Healthcare $ 214.8 $ 204.7 Non-healthcare 77.8 — Other (1) (7.8) — Gross profit $ 284.8 $ 204.7 ____________________________ (1) Management excludes certain corporate expenses from segment gross profit. In addition, certain amounts that management considers to be non-recurring or non-operational are excluded from segment gross profit because management evaluates the operating results of the segments excluding such items. The Company’s depreciation and amortization by segment are as follows: Three Months Ended (in millions) April 1, April 2, Depreciation and amortization by segment: Healthcare $ 9.0 $ 9.1 Non-healthcare 17.1 — Total depreciation and amortization $ 26.1 $ 9.1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Schedule of Financial Assets Measured at Fair Value on a Recurring Basis (Detail) - Recurring - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Assets | ||
Cash and cash equivalents | $ 116.8 | $ 148.5 |
Money market funds | 57.3 | 54.4 |
Pension assets | 22.2 | 22.2 |
Derivative instruments - cash flow hedges | 14.2 | 19.7 |
Total assets | 210.5 | 244.8 |
Liabilities | ||
Total liabilities | 0 | 0 |
Level 1 | ||
Assets | ||
Cash and cash equivalents | 116.8 | 148.5 |
Money market funds | 57.3 | 54.4 |
Pension assets | 14.8 | 14.8 |
Derivative instruments - cash flow hedges | 0 | 0 |
Total assets | 188.9 | 217.7 |
Liabilities | ||
Total liabilities | 0 | 0 |
Level 2 | ||
Assets | ||
Cash and cash equivalents | 0 | 0 |
Money market funds | 0 | 0 |
Pension assets | 7.4 | 7.4 |
Derivative instruments - cash flow hedges | 14.2 | 19.7 |
Total assets | 21.6 | 27.1 |
Liabilities | ||
Total liabilities | 0 | 0 |
Level 3 | ||
Assets | ||
Cash and cash equivalents | 0 | 0 |
Money market funds | 0 | 0 |
Pension assets | 0 | 0 |
Derivative instruments - cash flow hedges | 0 | 0 |
Total assets | 0 | 0 |
Liabilities | ||
Total liabilities | $ 0 | $ 0 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Property and Equipment Estimated Useful Lives (Detail) | 3 Months Ended |
Apr. 01, 2023 | |
Maximum | Buildings and building improvements | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 39 years |
Maximum | Computer equipment and software | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 12 years |
Maximum | Demonstration units | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 3 years |
Maximum | Furniture and office equipment | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 15 years |
Maximum | Machinery, equipment and tooling | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 20 years |
Maximum | Transportation, vehicles and other | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 20 years |
Minimum | Buildings and building improvements | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 7 years |
Minimum | Computer equipment and software | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 2 years |
Minimum | Demonstration units | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 2 years |
Minimum | Furniture and office equipment | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 2 years |
Minimum | Machinery, equipment and tooling | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 3 years |
Minimum | Transportation, vehicles and other | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 1 year |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Additional Information (Detail) shares in Millions | 3 Months Ended | |
Apr. 01, 2023 segment shares | Apr. 02, 2022 shares | |
Summary Of Significant Accounting Policies [Line Items] | ||
Number of sources of product revenue | segment | 4 | |
Options to purchase of shares of common stock | 1 | 0.6 |
Restricted Stock Units (RSUs) | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Share-based compensation arrangement, grants in period (in shares) | 0.2 | |
Chief Executive Officer | Restricted Stock Units (RSUs) | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Share-based compensation arrangement, grants in period (in shares) | 2.7 | 2.7 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-02 | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Revenue remaining performance obligation, expected timing of satisfaction | 1 year | |
Minimum | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Payment terms | 30 days | |
Warranty period for defects in material and workmanship | 6 months | |
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-02 | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Revenue remaining performance obligation, expected timing of satisfaction | 3 years | |
Maximum | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Payment terms | 60 days | |
Warranty period for defects in material and workmanship | 48 months | |
Maximum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2029-04-02 | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Revenue remaining performance obligation, expected timing of satisfaction | 6 years | |
Patents | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Intangible asset, useful life | 10 years | |
Trademarks | Maximum | ||
Summary Of Significant Accounting Policies [Line Items] | ||
Intangible asset, useful life | 17 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Changes in Product Warranty Accrual (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward] | ||
Product warranty accrual, beginning of period | $ 10.6 | $ 2.5 |
Accrual for warranties issued | 3.8 | 2.2 |
Changes in pre-existing warranties (including changes in estimates) | (3.5) | (2.2) |
Settlements made | (0.7) | (0.1) |
Product warranty accrual, end of period | $ 10.2 | $ 2.4 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Reconciliation of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Net income per share: | ||
Net income | $ 21.3 | $ 46.6 |
Basic net income per share: | ||
Weighted-average shares outstanding - basic (in shares) | 52.6 | 55.4 |
Net income per basic share (in dollars per share) | $ 0.40 | $ 0.84 |
Diluted net income per share: | ||
Weighted-average shares outstanding - basic (in shares) | 52.6 | 55.4 |
Diluted share equivalent: stock options, RSUs and PSUs (in shares) | 1.8 | 1.9 |
Weighted-average shares outstanding - diluted (in shares) | 54.4 | 57.3 |
Net income per diluted share (in dollars per share) | $ 0.39 | $ 0.81 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Supplemental Cash Flow Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |||
Apr. 01, 2023 | Apr. 02, 2022 | Dec. 31, 2022 | Jan. 01, 2022 | |
Accounting Policies [Abstract] | ||||
Interest expense | $ 11.7 | $ 0.1 | ||
Income taxes | 11 | 5.8 | ||
Operating lease liabilities | 5.3 | 2.1 | ||
ROU assets obtained in exchange for lease liabilities | 0.6 | 8.3 | ||
Unpaid purchases of property and equipment | 0.7 | 5.7 | ||
Unpaid strategic investments | 1.2 | 2.3 | ||
Unsettled common stock proceeds from option exercises | 0.1 | 0.3 | ||
Cash and cash equivalents | 174.1 | 720 | $ 202.9 | |
Restricted cash | 7 | 3 | ||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows | $ 181.1 | $ 723 | $ 209.6 | $ 748.4 |
Related Party Transactions - (D
Related Party Transactions - (Details) ft² in Thousands | 1 Months Ended | 3 Months Ended | |||
Jul. 31, 2021 USD ($) | Apr. 01, 2023 USD ($) ft² | Apr. 02, 2022 USD ($) | Dec. 31, 2022 USD ($) | Jan. 01, 2022 USD ($) | |
Cercacor Laboratories | |||||
Related Party Transaction [Line Items] | |||||
Payments for royalties | $ 5,600,000 | $ 3,500,000 | |||
Payment for administrative fees | $ 100,000 | 100,000 | |||
Related party transaction, date | Dec. 31, 2024 | ||||
Sublease income | $ 300,000 | 300,000 | |||
Related party transaction, due from (to) related party | $ (5,600,000) | $ (3,800,000) | |||
Leased Property | |||||
Related Party Transaction [Line Items] | |||||
Property plant and equipment, occupied square feet | ft² | 34 | ||||
Not for Profit Organization | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, amounts of transaction | $ 0 | 1,000,000 | |||
Like Minded Media Ventures | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, due from (to) related party | 0 | $ 0 | |||
Related party transaction, expenses from transactions with related party | 0 | 0 | |||
Like Minded Labs | |||||
Related Party Transaction [Line Items] | |||||
Finite-lived license agreements, gross | $ 3,000,000 | ||||
Vantrix Corp | Purchase Commitment | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, purchases from related party | $ 500,000 | ||||
Vantrix Corp | Options Held | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, purchases from related party | $ 1,100,000 | ||||
Reimbursement Fee | Chief Executive Officer | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, expenses from transactions with related party | 100,000 | $ 0 | |||
Minimum | |||||
Related Party Transaction [Line Items] | |||||
Payments for royalties | $ 5,000,000 |
Inventories - Components of Inv
Inventories - Components of Inventory (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 240.5 | $ 209.9 |
Work-in-process | 30.8 | 30.4 |
Finished goods | 232.2 | 260.7 |
Total inventories | $ 503.5 | $ 501 |
Other Current Assets (Details)
Other Current Assets (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 78.7 | $ 77.5 |
Lease receivable, current | 30.4 | 28.5 |
Indirect taxes receivable | 23.3 | 26.8 |
Prepaid income taxes | 21.7 | 12.4 |
Prepaid rebates and royalties, current | 4.8 | 3.7 |
Contract assets, current | 4.7 | 3.9 |
Restricted cash | 2.4 | 2.4 |
Other current assets | 6 | 3.6 |
Total other current assets | $ 172 | $ 158.8 |
Lease Receivable (Details)
Lease Receivable (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Leases [Abstract] | ||
Variable lease income | $ 20 | $ 13 |
Lease Receivable - Sales-Type (
Lease Receivable - Sales-Type (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Leases [Abstract] | ||
Lease receivable | $ 112.6 | $ 101.8 |
Allowance for credit loss | (0.3) | (0.2) |
Lease receivable, net | 112.3 | 101.6 |
Less: current portion of lease receivable | (30.4) | (28.5) |
Lease receivable, non-current | $ 81.9 | $ 73.1 |
Lease Receivable - Sales-type L
Lease Receivable - Sales-type Lease, Maturity (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Sales-Type Leases | ||
2023 (balance of year) | $ 23.1 | |
2024 | 28.1 | |
2025 | 22.8 | |
2026 | 16.6 | |
2027 | 10.6 | |
Thereafter | 11.1 | |
Total | 112.3 | |
Less: imputed interest | 0 | |
Lease receivable, net | 112.3 | $ 101.6 |
Operating Leases | ||
2023 (balance of year) | 5.1 | |
2024 | 5.8 | |
2025 | 5.1 | |
2026 | 4.6 | |
2027 | 3.6 | |
Thereafter | 4.5 | |
Total | $ 28.7 | |
Discount rate used to measure the net investment in lease | 0% |
Deferred Costs and Other Cont_3
Deferred Costs and Other Contract Assets (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred commissions | $ 17.6 | $ 17.1 |
Prepaid contract allowances | 14.1 | 13.7 |
Unbilled contract receivables | 9.5 | 9.4 |
Deferred equipment agreements, net | 1.7 | 1.7 |
Deferred costs and other contract assets | $ 42.9 | $ 41.9 |
Property and Equipment, net (De
Property and Equipment, net (Details) $ in Millions, $ in Millions | 3 Months Ended | |||
Feb. 14, 2022 CAD ($) | Apr. 01, 2023 USD ($) | Apr. 02, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | $ 617.4 | $ 604 | ||
Accumulated depreciation | (215.3) | (201.5) | ||
Property and equipment, net | 402.1 | 402.5 | ||
Depreciation | 11.8 | $ 6.5 | ||
Depreciation expense under operating leases | 3 | $ 0.2 | ||
Property, plant and equipment, additions | $ 123 | |||
Escrow deposit | $ 21 | |||
Building and building improvements | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 150.9 | 151 | ||
Machinery, equipment and tooling | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 150.2 | 149.4 | ||
Land | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 66.2 | 65.1 | ||
Operating lease assets | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 51.9 | 50.2 | ||
Computer equipment and software | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 43.6 | 42.1 | ||
Leasehold improvements | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 33.7 | 32.3 | ||
Transportation, vehicles and other | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 33.2 | 32.7 | ||
Furniture and office equipment | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 19.8 | 19.4 | ||
Demonstration units | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | 9.7 | 11.2 | ||
Construction-in-progress (CIP) | ||||
Property, Plant and Equipment [Line Items] | ||||
Total property and equipment | $ 58.2 | $ 50.6 |
Intangible Assets, net - Schedu
Intangible Assets, net - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Intangible assets subject to amortization: | ||
Gross Carrying Amount | $ 528.3 | $ 540.6 |
Accumulated Amortization | (90.8) | (80) |
Net Carrying Amount | 437.5 | 460.6 |
Intangible assets not subject to amortization: | ||
Net Carrying Amount | 252.3 | 262 |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Intangible assets, net | 689.8 | 722.6 |
Trademarks | ||
Intangible assets not subject to amortization: | ||
Net Carrying Amount | 252.3 | 262 |
Customer relationships | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 213.3 | 220.9 |
Accumulated Amortization | (22.3) | (19.3) |
Net Carrying Amount | 191 | 201.6 |
Acquired technologies | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 177 | 185.3 |
Accumulated Amortization | (30.2) | (25.2) |
Net Carrying Amount | 146.8 | 160.1 |
Patents | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 36.1 | 35.2 |
Accumulated Amortization | (13.9) | (13.9) |
Net Carrying Amount | 22.2 | 21.3 |
Licenses | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 37.9 | 39 |
Accumulated Amortization | (5.1) | (4.4) |
Net Carrying Amount | 32.8 | 34.6 |
Licenses | Cercacor Laboratories | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 7.5 | 7.5 |
Accumulated Amortization | (6.4) | (6.3) |
Net Carrying Amount | 1.1 | 1.2 |
Trademarks | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 39.4 | 39.3 |
Accumulated Amortization | (7.4) | (5.8) |
Net Carrying Amount | 32 | 33.5 |
Non-compete agreements | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 6 | 6.3 |
Accumulated Amortization | (1.4) | (1.1) |
Net Carrying Amount | 4.6 | 5.2 |
Capitalized software development costs | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 9.6 | 5.5 |
Accumulated Amortization | (3) | (2.9) |
Net Carrying Amount | 6.6 | 2.6 |
Other | ||
Intangible assets subject to amortization: | ||
Gross Carrying Amount | 1.5 | 1.6 |
Accumulated Amortization | (1.1) | (1.1) |
Net Carrying Amount | $ 0.4 | $ 0.5 |
Intangible Assets, net - Additi
Intangible Assets, net - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of intangible assets | $ 14.3 | $ 2.5 |
Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period (in years) | 12 years | |
Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period (in years) | 14 years | |
Patents And Trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, cost incurred to renew or extend | $ 0.3 | $ 0.4 |
Patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average number of years until the next renewal | 2 years | |
Trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted average number of years until the next renewal | 6 years |
Intangible Assets, net - Future
Intangible Assets, net - Future Amortization Expense (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2023 (balance of year) | $ 35.8 | |
2024 | 46.5 | |
2025 | 45.5 | |
2026 | 43.9 | |
2027 | 43.2 | |
Thereafter | 222.6 | |
Net Carrying Amount | $ 437.5 | $ 460.6 |
Goodwill (Details)
Goodwill (Details) $ in Millions | 3 Months Ended |
Apr. 01, 2023 USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | $ 445.4 |
Adjustments to goodwill from purchase price allocation | (9.8) |
Foreign currency translation adjustment | (13.7) |
Goodwill, end of period | 421.9 |
Healthcare | |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | 97.6 |
Adjustments to goodwill from purchase price allocation | 0 |
Foreign currency translation adjustment | 0.3 |
Goodwill, end of period | 97.9 |
Non-healthcare | |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | 347.8 |
Adjustments to goodwill from purchase price allocation | (9.8) |
Foreign currency translation adjustment | (14) |
Goodwill, end of period | $ 324 |
Lessee ROU Assets and Lease L_3
Lessee ROU Assets and Lease Liabilities (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 01, 2023 | Apr. 02, 2022 | Dec. 31, 2022 | |
Leases [Abstract] | |||
Lessee, operating lease, renewal term | 5 years | ||
Operating lease, weighted average discount rate | 3.80% | ||
Accumulated amortization for lessee ROU assets | $ 41 | $ 36.6 | |
Weighted average remaining lease term | 5 years 9 months 18 days | ||
Operating lease costs | $ 5.1 | $ 2.4 |
Lessee ROU Assets and Lease L_4
Lessee ROU Assets and Lease Liabilities Lessee Operating Lease Balance Sheet Classification (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Leases [Abstract] | ||
Lessee ROU assets | $ 66.6 | $ 69.6 |
Lessee lease liabilities, current | 22.8 | 18.7 |
Lessee non-current lease liabilities | 55.4 | 53.4 |
Total operating lease liabilities | $ 78.2 | $ 72.1 |
Lessee ROU Assets and Lease L_5
Lessee ROU Assets and Lease Liabilities Future Maturities Operating Lease Payments (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Leases [Abstract] | ||
2023 (balance of year) | $ 17.7 | |
2024 | 19 | |
2025 | 14.9 | |
2026 | 10.6 | |
2027 | 5.2 | |
Thereafter | 19.8 | |
Total | 87.2 | |
Imputed interest | (9) | |
Present value | $ 78.2 | $ 72.1 |
Other Non-Current Assets (Detai
Other Non-Current Assets (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Other Assets, Longterm [Abstract] | ||
Lessee ROU assets, net | $ 66.6 | $ 69.6 |
Strategic investments | 13.7 | 13.8 |
Derivative assets - non-current | 13.6 | 19.3 |
Prepaid deposits and other | 9.9 | 11 |
Other non-current assets | 0.4 | 0.3 |
Total non-current assets | $ 104.2 | $ 114 |
Deferred Revenue and Other Co_3
Deferred Revenue and Other Contract Liabilities, Current (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Revenue Recognition and Deferred Revenue [Abstract] | ||
Deferred revenue | $ 61.3 | $ 61 |
Accrued rebates and allowances | 37.9 | 38.5 |
Accrued customer reimbursements | 8 | 6.1 |
Total deferred revenue and other contract liabilities | 107.2 | 105.6 |
Less: Non-current portion of deferred revenue | (25.5) | (25) |
Deferred revenue and other contract liabilities, current | $ 81.7 | $ 80.6 |
Deferred Revenue and Other Co_4
Deferred Revenue and Other Contract Liabilities, Current - Narrative (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 | Oct. 31, 2020 |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |||
Unrecognized contract revenue | $ 1,363.9 | ||
Deferred revenue | 61.3 | $ 61 | |
Bowers and Wilkins | |||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |||
Royalty prepayment | $ 20 | ||
Deferred revenue | 17 | $ 35 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-02 | |||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |||
Unrecognized contract revenue | $ 357.7 | ||
Revenue remaining performance obligation, expected timing of satisfaction | 1 year | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-02 | Twelve Months and Thereafter | |||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |||
Revenue remaining performance obligation, expected timing of satisfaction | 12 months |
Deferred Revenue and Other Co_5
Deferred Revenue and Other Contract Liabilities, Current - Changes in Deferred Revenue (Details) $ in Millions | 3 Months Ended |
Apr. 01, 2023 USD ($) | |
Movement in Deferred Revenue [Roll Forward] | |
Deferred revenue, beginning of the period | $ 61 |
Revenue deferred during the period | 9.7 |
Recognition of revenue deferred in prior periods | (9.4) |
Deferred revenue, end of the period | $ 61.3 |
Other Current Liabilities (Deta
Other Current Liabilities (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Accrued Liabilities [Abstract] | ||
Current portion of long-term debt | $ 31.6 | $ 15.1 |
Accrued expenses | 29.6 | 39.9 |
Income tax payable | 27.1 | 32.1 |
Accrued indirect taxes payable | 23.4 | 28.2 |
Lessee lease liabilities, current | 22.8 | 18.7 |
Accrued warranty | 10.2 | 10.6 |
Accrued legal fees | 9.5 | 11.4 |
Accrued property taxes | 8.4 | 12.1 |
Related party payables | 5.7 | 4 |
Accrued donations | 4.1 | 5.1 |
Other current liabilities | 7.1 | 6.1 |
Total other current liabilities | $ 179.5 | $ 183.3 |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Short-term debt | $ 31.6 | $ 15.1 |
Long-term debt | 897.5 | 941.6 |
Total debt | 929.1 | 956.7 |
Term Loan | ||
Debt Instrument [Line Items] | ||
Short-term debt | 7.5 | 7.5 |
Long-term debt | 277.5 | 278.9 |
Revolver | ||
Debt Instrument [Line Items] | ||
Long-term debt | 609.2 | 651 |
Japanese Loans | ||
Debt Instrument [Line Items] | ||
Short-term debt | 24.1 | 7.6 |
Long-term debt | $ 10.8 | $ 11.7 |
Debt - Narrative (Details)
Debt - Narrative (Details) ¥ in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | ||||||||||||
Feb. 28, 2023 USD ($) | Apr. 11, 2022 USD ($) | Mar. 31, 2020 USD ($) | Apr. 01, 2023 USD ($) | Apr. 02, 2022 USD ($) | Feb. 28, 2023 JPY (¥) | May 16, 2022 USD ($) | May 31, 2021 USD ($) | May 31, 2021 JPY (¥) | Apr. 30, 2021 USD ($) | Apr. 30, 2021 JPY (¥) | Jun. 30, 2020 USD ($) | Jun. 30, 2020 JPY (¥) | Mar. 31, 2020 JPY (¥) | |
New Credit Facility Agreement | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Accordion feature, increase limit | $ 400 | |||||||||||||
New Credit Facility Agreement | Adjusted Secured Overnight Financing Rate (SOFR) | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 1% | |||||||||||||
New Credit Facility Agreement | Fed Funds Effective Rate Overnight Index Swap Rate | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 0.50% | |||||||||||||
New Credit Facility Agreement | Adjusted Secured Overnight Financing Rate (SOFR), One-Month Interest Period | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 0.10% | |||||||||||||
New Credit Facility Agreement | Adjusted Secured Overnight Financing Rate (SOFR), Three-Month Interest Period | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 0.15% | |||||||||||||
New Credit Facility Agreement | Adjusted Secured Overnight Financing Rate (SOFR), Six-Month Interest Period | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 0.25% | |||||||||||||
New Credit Facility Agreement | Minimum | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Commitment fee percentage | 0.15% | |||||||||||||
New Credit Facility Agreement | Minimum | Alternate Base Rate | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 0% | |||||||||||||
New Credit Facility Agreement | Minimum | Adjusted Secured Overnight Financing Rate (SOFR) | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 1% | |||||||||||||
New Credit Facility Agreement | Maximum | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Commitment fee percentage | 0.275% | |||||||||||||
New Credit Facility Agreement | Maximum | Alternate Base Rate | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 0.75% | |||||||||||||
New Credit Facility Agreement | Maximum | Adjusted Secured Overnight Financing Rate (SOFR) | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Variable rate | 1.75% | |||||||||||||
Japanese Government Loans | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Debt instrument face amount | $ 11.1 | ¥ 1,480 | ||||||||||||
Average interest rate | 1.33% | 1.33% | ||||||||||||
Japanese Equipment Loans | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Debt instrument face amount | $ 0.6 | ¥ 80 | $ 1.1 | ¥ 150 | ||||||||||
Average interest rate | 1.20% | 1.20% | 0.58% | 0.58% | ||||||||||
Revolving Credit Facility | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Interest expense | $ 10.9 | $ 0.1 | ||||||||||||
Revolving Credit Facility | New Credit Facility Agreement | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Maximum borrowing capacity | $ 500 | $ 705 | ||||||||||||
Accordion feature, increase limit | $ 205 | |||||||||||||
Revolving Credit Facility | Line of Credit | Japanese Revolving Loan | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Maximum borrowing capacity | $ 22.6 | $ 6 | ¥ 3,000 | ¥ 800 | ||||||||||
Debt issuance costs | $ 0.2 | $ 0.1 | ¥ 22 | ¥ 7.2 | ||||||||||
Variable rate | 0.75% | 0.50% | ||||||||||||
Revolving Credit Facility | Line of Credit | Initial Lenders | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Debt issuance costs | 8.4 | |||||||||||||
Unsecured Debt | New Credit Facility Agreement | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Maximum borrowing capacity | 300 | |||||||||||||
Letter of Credit | New Credit Facility Agreement | ||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||
Maximum borrowing capacity | $ 50 |
Debt - Maturity Debt Schedule (
Debt - Maturity Debt Schedule (Details) $ in Millions | Apr. 01, 2023 USD ($) |
Debt Disclosure [Abstract] | |
2023 (balance of the year) | $ 29.2 |
2024 | 14.9 |
2025 | 16.8 |
2026 | 16.8 |
2027 | 847.3 |
Thereafter | 4.1 |
Total | $ 929.1 |
Other Non-Current Liabilities_2
Other Non-Current Liabilities (Detail) - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Other Liabilities, Long Term [Abstract] | ||
Lessee non-current lease liabilities | $ 55.4 | $ 53.4 |
Deferred revenue, non-current | 25.5 | 25 |
Unrecognized tax benefits | 19.7 | 18 |
Income tax payable, non-current | 12.7 | 12.7 |
Defined benefit obligation | 9.6 | 10.1 |
Indirect tax payable, non-current | 8.3 | 8.2 |
Other | 4.9 | 9.1 |
Total other non-current liabilities | $ 136.1 | $ 136.5 |
Derivative Instruments and He_3
Derivative Instruments and Hedging Activities - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | Dec. 30, 2023 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Net of tax gain (loss) on derivatives | $ (4.3) | $ 0 | |
Forecast [Member] | Interest Expense | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Net of tax gain (loss) on derivatives | $ 11.4 | ||
Designated as Hedging Instrument | Interest rate contracts, inclusive of accrued interest | |||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||
Average fixed interest rate related to derivative contracts | 2.87% | ||
Maturities of derivative contracts | 4 years |
Derivative Instruments and He_4
Derivative Instruments and Hedging Activities - Schedule of Fair Value of Hedging Instruments (Details) - Designated as Hedging Instrument - USD ($) $ in Millions | Apr. 01, 2023 | Dec. 31, 2022 |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Fair value of hedging instruments | $ 14.2 | $ 19.7 |
Interest rate contracts, inclusive of accrued interest | Other non-current assets | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Fair value of hedging instruments | $ 14.2 | $ 19.7 |
Derivative Instruments and He_5
Derivative Instruments and Hedging Activities - Schedule of Gain (Losses) Reclassified from AOCI (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income | $ (3) | $ 0 |
Designated as Hedging Instrument | Interest rate contracts, inclusive of accrued interest | Non-operating (losses) | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Gains (losses) reclassified from accumulated other comprehensive income | $ 0 |
Derivative Instruments and He_6
Derivative Instruments and Hedging Activities - Schedule of Accumulated Other Comprehensive Income Related to Hedging Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | $ 1,338.9 | $ 1,550.3 |
Ending balance | 1,330.3 | 1,582.2 |
Accumulated Gain (Loss), Cash Flow Hedge, Including Noncontrolling Interest | ||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | ||
Beginning balance | 19.3 | 0 |
Amount recognized in other comprehensive (loss) income | (2.7) | 0 |
Amount reclassified into earnings | (3) | 0 |
Ending balance | $ 13.6 | $ 0 |
Business Combinations - Narrati
Business Combinations - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Apr. 11, 2022 | Apr. 01, 2023 | Oct. 01, 2022 | Apr. 01, 2023 | |
Business Acquisition [Line Items] | ||||
Purchase price allocation completion, term (in years) | 1 year | 1 year | ||
Adjustments to goodwill from purchase price allocation | $ (9.8) | |||
Non-healthcare | ||||
Business Acquisition [Line Items] | ||||
Adjustments to goodwill from purchase price allocation | (9.8) | |||
Sound United | ||||
Business Acquisition [Line Items] | ||||
Percentage of voting interests acquired | 100% | |||
Cash consideration | $ 1,057.5 | |||
Adjustments to goodwill from purchase price allocation | $ 7.3 | |||
Transaction costs | $ 1.7 | $ 1.7 | ||
Sound United | Operating Segments | Non-healthcare | ||||
Business Acquisition [Line Items] | ||||
Revenue | 216.6 | |||
Net loss | $ 3.3 |
Business Combinations - Fair Va
Business Combinations - Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions | Apr. 11, 2022 | Apr. 01, 2023 | Dec. 31, 2022 |
Assets acquired: | |||
Goodwill | $ 421.9 | $ 445.4 | |
Sound United | |||
Business Acquisition [Line Items] | |||
Cash consideration | $ 1,057.5 | ||
Purchase price | 1,057.5 | ||
Assets acquired: | |||
Cash and cash equivalents | 82.6 | ||
Accounts receivables | 108.5 | ||
Inventories | 238.6 | ||
Prepaid expenses and other current assets | 30 | ||
Property, plant and equipment | 113.2 | ||
Intangible asset | 649 | ||
Goodwill | 325.8 | ||
Long-term other assets | 7.4 | ||
Total assets acquired | 1,555.1 | ||
Liabilities assumed: | |||
Accounts payable | (118.8) | ||
Accrued liabilities and other current liabilities | (148.9) | ||
Deferred tax liabilities | (152.9) | ||
Other long-term liabilities | (77) | ||
Total liabilities assumed | $ (497.6) |
Business Combinations - Schedul
Business Combinations - Schedule of Acquired Intangible Assets (Details) - Sound United $ in Millions | Apr. 11, 2022 USD ($) |
Business Acquisition [Line Items] | |
Weighted average amortization period (in years) | 14 years |
Finite lived intangible assets | $ 387 |
Indefinite intangible assets | 262 |
Intangible asset | $ 649 |
Trademarks/tradenames | |
Business Acquisition [Line Items] | |
Weighted average amortization period (in years) | 10 years |
Finite lived intangible assets | $ 6 |
Customer relationships | |
Business Acquisition [Line Items] | |
Weighted average amortization period (in years) | 17 years |
Finite lived intangible assets | $ 196 |
Developed technology | |
Business Acquisition [Line Items] | |
Weighted average amortization period (in years) | 8 years |
Finite lived intangible assets | $ 156 |
Contractual license agreements | |
Business Acquisition [Line Items] | |
Weighted average amortization period (in years) | 15 years |
Finite lived intangible assets | $ 29 |
Business Combinations - Pro For
Business Combinations - Pro Forma Information (Details) - Sound United - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||
Net revenue | $ 565 | $ 554.9 |
Net income | $ 21 | $ 49.2 |
Equity - Additional Information
Equity - Additional Information (Detail) - $ / shares | 1 Months Ended | 3 Months Ended | ||||
Oct. 31, 2021 | Apr. 01, 2023 | Apr. 02, 2022 | Dec. 31, 2022 | Sep. 20, 2022 | Jun. 30, 2022 | |
Class of Stock [Line Items] | ||||||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | ||||
Repurchase of common stock (in shares) | 0 | 0 | ||||
Rights to Purchase Series A Junior Participating Preferred Stock [Member] | ||||||
Class of Stock [Line Items] | ||||||
Preferred stock purchase right declared for each share of common stock | 1 | |||||
Preferred stock, par value (in dollars per share) | $ 0.001 | |||||
Purchase price per each right (in dollars per share) | $ 1,000 | |||||
Rights to Purchase Series A Junior Participating Preferred Stock [Member] | Minimum | ||||||
Class of Stock [Line Items] | ||||||
Threshold percentage to exercise purchase right | 10% | |||||
Rights to Purchase Series A Junior Participating Preferred Stock [Member] | Maximum | ||||||
Class of Stock [Line Items] | ||||||
Threshold percentage to exercise purchase right | 20% | |||||
2021 Repurchase Program | Common Stock | ||||||
Class of Stock [Line Items] | ||||||
Number of common shares authorized to be repurchased under new stock repurchase program | 3,000,000 | |||||
Stock repurchase program, period | 3 years | |||||
2022 Repurchase Program | Common Stock | ||||||
Class of Stock [Line Items] | ||||||
Number of common shares authorized to be repurchased under new stock repurchase program | 5,000,000 | |||||
Stock repurchase program, remaining number of shares available for repurchase (in shares) | 5,000,000 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||
May 31, 2020 | Apr. 01, 2023 | Apr. 02, 2022 | Jun. 01, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock compensation expense | $ 7.3 | $ 10.9 | ||
Common stock, capital shares reserved for future issuance (in shares) | 10,000,000 | |||
Options available for grant, end of period (in shares) | 3,600,000 | |||
Share-based compensation arrangement, award vesting rights | three | |||
Aggregate intrinsic value of options outstanding | $ 282.3 | |||
Aggregate intrinsic value of options exercisable | 273.7 | |||
Employee Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock compensation expense | 2.4 | 3.2 | ||
Share-based payment arrangement, cost not yet recognized, amount | $ 22.7 | |||
Share-based payment arrangement, period for recognition (in years) | 2 years 9 months 18 days | |||
Share-based compensation arrangement, weighted average remaining contractual term (in years) | 4 years 3 months 18 days | |||
Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock compensation expense | $ 4.2 | 3 | ||
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 82.6 | |||
Share-based compensation arrangement outstanding, weighted average remaining contractual terms (in years) | 4 years 1 month 6 days | |||
Granted (in units) | 200,000 | |||
Performance Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock compensation expense | $ 0.7 | $ 4.7 | ||
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 66.2 | |||
Share-based compensation arrangement outstanding, weighted average remaining contractual terms (in years) | 2 years | |||
Granted (in units) | 100,000 | |||
Performance Shares | Minimum | 2021 PSU Grant | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted (in units) | 103,803 | |||
Share-based compensation arrangement by share-based payment award, range of percentage payout | 0% | |||
Performance Shares | Maximum | 2021 PSU Grant | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation arrangement by share-based payment award, range of percentage payout | 200% | |||
2017 Equity Incentive Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation, number of additional shares authorized (in shares) | 2,500,000 | |||
2017 Equity Incentive Plan | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options available for grant, end of period (in shares) | 5,000,000 | |||
2017 Equity Incentive Plan | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options available for grant, end of period (in shares) | 7,500,000 | |||
2007 Stock Incentive Plan | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options available for grant, end of period (in shares) | 5,000,000 |
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 Millions | 3 Months Ended |
Apr. 01, 2023 $ / shares shares | |
Shares | |
Options outstanding, beginning of period (in shares) | shares | 2.8 |
Granted (in shares) | shares | 0.1 |
Canceled (in shares) | shares | 0 |
Exercised (in shares) | shares | 0 |
Options outstanding, end of period (in shares) | shares | 2.9 |
Options exercisable, end of period (in shares) | shares | 2.4 |
Weighted-Average Exercise Price | |
Options outstanding, beginning of period (in usd per share) | $ / shares | $ 83.85 |
Granted (in usd per share) | $ / shares | 177.29 |
Canceled (in usd per share) | $ / shares | 173.02 |
Exercised (in usd per share) | $ / shares | 40.63 |
Options outstanding, end of period (in usd per share) | $ / shares | 88.05 |
Options exercisable, end of period (in dollars per share) | $ / shares | $ 72.20 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Units Activity (Detail) - $ / shares shares in Millions | 3 Months Ended | |
Apr. 01, 2023 | Dec. 31, 2022 | |
Restricted Stock Units (RSUs) | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward] | ||
Outstanding, beginning of period (in units) | 3.2 | |
Granted (in units) | 0.2 | |
Expired (in units) | (0.1) | |
Vested (in units) | (0.1) | |
Outstanding, end of period (in units) | 3.2 | |
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Weighted average grant date fair value, beginning of period (in dollars per unit) | $ 108.31 | $ 105.65 |
Weighted average grant date fair value, granted (in dollars per unit) | 174.88 | |
Weighted average grant date fair value, expired (in dollars per unit) | 183.51 | |
Weighted average grant date fair value, vested (in dollars per unit) | 178.03 | |
Weighted average grant date fair value, granted, end of period (in dollars per unit) | $ 108.31 | |
Performance Shares | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward] | ||
Outstanding, beginning of period (in units) | 0.3 | |
Granted (in units) | 0.1 | |
Canceled (in units) | 0 | |
Expired (in units) | 0 | |
Vested (in units) | (0.1) | |
Outstanding, end of period (in units) | 0.3 | |
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Weighted average grant date fair value, beginning of period (in dollars per unit) | $ 187.93 | $ 180.04 |
Weighted average grant date fair value, granted (in dollars per unit) | 204.67 | |
Weighted average grant date fair value, canceled (in dollars per unit) | 0 | |
Weighted average grant date fair value, expired (in dollars per unit) | 0 | |
Weighted average grant date fair value, vested (in dollars per unit) | 179.42 | |
Weighted average grant date fair value, granted, end of period (in dollars per unit) | $ 187.93 |
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 | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Range of assumptions used and resulting weighted-average fair value of options granted at the date of grant | ||
Risk-free interest rate | 4.20% | |
Risk-free interest rate, minimum | 1% | |
Risk-free interest rate, maximum | 1.90% | |
Expected term (in years) | 5 years 10 months 24 days | 5 years 8 months 12 days |
Estimated volatility | 36.70% | |
Estimated volatility, minimum | 31.20% | |
Estimated volatility, maximum | 38.90% | |
Expected dividends | 0% | 0% |
Weighted-average fair value of options granted (in dollars per share) | $ 75.08 | $ 51.87 |
Employee Benefits - Narrative (
Employee Benefits - Narrative (Details) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 USD ($) plan | Apr. 02, 2022 USD ($) | |
Defined Contribution Plan Disclosure [Line Items] | ||
Defined contribution plan, number of plans | plan | 1 | |
Masimo Retirement Savings Plan | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Percent of employees' gross pay | 100% | |
Percent of match | 3% | |
Company's contribution to employee retirement savings plan | $ 2.3 | $ 1.1 |
Masimo Retirement Savings Plan | Foreign Plan | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Company's contribution to employee retirement savings plan | $ 0.8 | $ 0 |
Non-operating Loss (Detail)
Non-operating Loss (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Nonoperating Income (Expense) [Abstract] | ||
Interest income | $ 0.8 | $ 0.3 |
Interest expense | (11.9) | (0.1) |
Realized and unrealized foreign currency losses | (0.7) | (0.8) |
Total non-operating loss | $ (11.8) | $ (0.6) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 | Apr. 02, 2022 | |
Income Tax Disclosure [Abstract] | ||
Other tax expense (benefit) | $ 2.4 | $ 1.7 |
Gross unrecognized tax benefit | 27.8 | |
Unrecognized tax benefit that would affect effective tax rate | $ 25.5 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) $ in Millions | 1 Months Ended | 3 Months Ended | |||||
Aug. 05, 2022 appeal patent | Apr. 21, 2021 patent | Jul. 31, 2017 | Apr. 01, 2023 USD ($) executiveOfficer customer distributor | Apr. 02, 2022 distributor | Dec. 31, 2022 customer | Oct. 20, 2022 complaint | |
Contingencies And Commitments [Line Items] | |||||||
Severance plan participation agreements | executiveOfficer | 5 | ||||||
Required notice of resignation | 6 months | ||||||
Royalty obligation | $ 5 | ||||||
License fee | 2.5 | ||||||
Change in control | 15 | ||||||
Royalty guarantees, commitments, additional, change in control | 2 | ||||||
Remaining commitment | 394.9 | ||||||
Other commitment | 3.3 | ||||||
Bank balances | 174.1 | ||||||
Bank balance covered by Federal Deposit Insurance Corporation limit | $ 7.9 | ||||||
Percentage of revenue one customer | 8.90% | 13.50% | |||||
Percentage of revenue two customer | 8.20% | ||||||
Concentration risk, AR balance one customer | customer | 1 | 1 | |||||
Masimo Vs. Apple Inc | Pending Litigation | |||||||
Contingencies And Commitments [Line Items] | |||||||
Asserted patents found valid | patent | 3 | ||||||
Asserted patents found invalid | patent | 9 | ||||||
Apple, Inc. Patent Infringement | Pending Litigation | |||||||
Contingencies And Commitments [Line Items] | |||||||
Number of appeals | appeal | 1 | ||||||
Number of asserted patents | patent | 5 | ||||||
Number of complaints | complaint | 2 | ||||||
Sales | |||||||
Contingencies And Commitments [Line Items] | |||||||
Distributors | distributor | 1 | 2 | |||||
Accounts Receivable | |||||||
Contingencies And Commitments [Line Items] | |||||||
Percentage of accounts receivable balance | 10.60% | 9.10% | |||||
Sales Revenue, Product Line | |||||||
Contingencies And Commitments [Line Items] | |||||||
Percentage of revenue - customer concentration | 51% | 55.10% | |||||
Chief Executive Officer | |||||||
Contingencies And Commitments [Line Items] | |||||||
Severance payment period | 3 years | ||||||
Qualifying termination | $ 664.3 | ||||||
Chief Executive Officer | Cash Distribution | |||||||
Contingencies And Commitments [Line Items] | |||||||
Severance terms | 50% | ||||||
Chief Executive Officer | Restricted Stock Units (RSUs) | |||||||
Contingencies And Commitments [Line Items] | |||||||
Severance terms | 50% |
Segment and Enterprise Report_3
Segment and Enterprise Reporting - Segment Information (Detail) $ in Millions | 3 Months Ended | |
Apr. 01, 2023 USD ($) segment | Apr. 02, 2022 USD ($) | |
Segment Reporting [Abstract] | ||
Number of operating segments | segment | 2 | |
Number of reportable segments | segment | 2 | |
Segment Reporting Information [Line Items] | ||
Total revenue by segment | $ 565 | $ 304.2 |
Gross profit: | 284.8 | 204.7 |
Depreciation and amortization | 26.1 | 9.1 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total revenue by segment | 565 | 304.2 |
Segment Reconciling Items | ||
Segment Reporting Information [Line Items] | ||
Gross profit: | (7.8) | 0 |
Non-healthcare | ||
Segment Reporting Information [Line Items] | ||
Depreciation and amortization | 17.1 | 0 |
Non-healthcare | Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total revenue by segment | 218.3 | 0 |
Gross profit: | 77.8 | 0 |
Healthcare | ||
Segment Reporting Information [Line Items] | ||
Depreciation and amortization | 9 | 9.1 |
Healthcare | Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total revenue by segment | 346.7 | 304.2 |
Gross profit: | $ 214.8 | $ 204.7 |