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Share Name | Share Symbol | Market | Type |
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Masimo Corporation | NASDAQ:MASI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-15.98 | -11.75% | 120.02 | 118.01 | 121.88 | 130.10 | 114.32 | 130.00 | 2,332,557 | 00:03:23 |
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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MASIMO CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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ABOUT MASIMO
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MASIMO CORPORATION
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Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Masimo Corporation, a Delaware corporation (the “Company”), or any adjournment or postponement thereof. The Annual Meeting will be held on Thursday, May 30, 2019, at 2:00 p.m. Pacific Time at the principal executive offices of the Company at 52 Discovery, Irvine, California 92618. Information concerning the matters to be considered and voted upon at the 2019 Annual Meeting is set out in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.
In 2018, we experienced strong momentum in our business. Our global organization executed on our strategy to deliver above-market growth and drive operational efficiencies throughout the business. Our product revenues increased 12% to $830 million and we shipped a record number of noninvasive technology boards and monitors, which exclude handheld and finger oximeters. In addition, we delivered significant operating margin improvements and earnings per share (“EPS”) growth that exceeded expectations.
Our strong performance in 2018 demonstrates the significant progress that we are making to drive operational efficiencies throughout the business and take further steps towards achieving our long term goal of 30% operating profit margins. Most importantly, we are making this progress on the profitability front while at the same time increasing our research and development investment as we continue to deliver innovative technologies to the marketplace.
Regardless of the number of shares you hold or whether you plan to attend the Annual Meeting in person, you are encouraged to make sure that your shares are represented at our Annual Meeting. Accordingly, please authorize a proxy to vote your shares as soon as possible in accordance with the instructions you received. This will not prevent you from voting your shares in person if you hold your shares in record name or have a valid proxy and subsequently choose to attend the Annual Meeting.
We look forward to your continued support.
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Joe Kiani
Chairman and Chief Executive Officer
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“Improve Patient Outcomes and Reduce the Cost of Care.”
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TIME AND DATE
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Thursday, May 30, 2019
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2:00 p.m. local time
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PLACE
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Masimo Corporation Headquarters
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52 Discovery
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Irvine, California 92618
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ITEMS OF BUSINESS
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To elect two Class III directors as named in our Proxy Statement;
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To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for our fiscal year ending December 28, 2019;
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To provide an advisory vote to approve the compensation of our named executive officers;
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To vote on a stockholder proposal described in the proxy statement if properly presented at the meeting; and
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To conduct any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.
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(These items of business are more fully described in the Proxy Statement accompanying this Notice.)
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RECORD DATE
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April 1, 2019
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Only stockholders of record at the close of business on that date may vote at the Annual Meeting or any adjournment or postponement thereof.
On or about April 15, 2019, we expect to mail our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement and our annual report. The Notice provides instructions on how to vote via the internet or by telephone and includes instructions on how to receive a paper copy of our proxy materials by mail. The accompanying proxy statement and our annual report can be accessed directly at
www.envisionreports.com/MASI
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TABLE OF CONTENTS - CONTINUED
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¡
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Summary Compensation Table
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Grants of Plan-Based Awards During Fiscal Year 2018
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Outstanding Equity Awards on December 29, 2018
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Option Exercises and Stock Vested During Fiscal Year 2018
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Employment Arrangements with Named Executive Officers
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Pay Ratio Disclosure
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OWNERSHIP OF OUR STOCK
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Security Ownership of Certain Beneficial Owners and Management
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Securities Authorized for Issuance
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Section 16(a) Beneficial Ownership Reporting Compliance
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Stock Ownership Policy
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Non-Employee Director Stock Ownership Policy
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ADDITIONAL INFORMATION
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PROPOSAL 1: Election of Directors
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PROPOSAL 2: Ratification of Selection of Independent Registered Public Accounting Firm
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PROPOSAL 3: Advisory Vote to Approve the Compensation of Our Named Executive Officers
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PROPOSAL 4: Stockholder Proposal for Proxy Access
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Transactions with Related Persons, Promoters and Certain Control Persons
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Questions and Answers You May Have About These Proxy Materials and Voting
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Householding
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¡
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Annual Report on Form 10-K
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Important Notice Regarding Availability of Proxy Materials for Stockholders Meeting to be Held on May 30, 2019
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Other Matters
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APPENDIX A
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A-1
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APPENDIX B
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B-1
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SPECIAL NOTE ON FORWARD LOOKING INFORMATION
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2019 PROXY STATEMENT SUMMARY
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WHEN
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WHERE
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RECORD DATE
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Thursday,
May 30, 2019 |
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52 Discovery, Irvine
California 92618
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Monday,
April 1, 2019 |
2:00 p.m. local time
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SUMMARY OF PROPOSAL FOR VOTING
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PROPOSAL
1
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Election of two Class III director nominees
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þ
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Our Board recommends a vote
FOR
each nominee.
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See page
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for further information.
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Committees
(1)
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Nominee
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Age
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Director Since
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Independent
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Other Public Boards
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AC
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CC
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NCGC
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Adam Mikkelson
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40
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2015
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Yes
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None
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ü
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ü
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ü
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Craig Reynolds
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70
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2014
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Yes
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Vapotherm, Inc.
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ü
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ü
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(1)
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AC
- Audit Committee;
CC
- Compensation Committee;
NCGC
- Nominating, Compliance and Corporate Governance Committee
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Ø
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2019
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We appointed Julie A. Shimer, Ph.D. to the Board and the Audit Committee.
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Ø
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2018
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We appointed H Michael Cohen to the Board and the Audit Committee.
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Ø
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2016
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Following the retirement of one of our Board members, we appointed Adam Mikkelson to the Board and the Audit Committee, the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee.
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Ø
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2015
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Following the retirement of one of our Board members, we appointed Thomas Harkin to the Board and appointed him to the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee.
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PROPOSAL
2
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Ratification of the selection of our independent registered public accounting firm
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Our Board recommends a vote
FOR
this proposal.
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See page
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for further information.
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PROPOSAL
3
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Advisory vote to approve the compensation of our named executive officers
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Our Board recommends a vote
FOR
the compensation of our named executive officers.
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See page
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for further information.
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•
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We provide market-competitive compensation programs that enable Masimo to attract and retain highly talented individuals.
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Pay is directly linked to the achievement of performance goals designed to foster the creation of sustainable long-term stockholder value.
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Our pay-for-performance principles dictate that our executive officers should only receive target payouts when Masimo achieves its financial goals. For this reason, our Compensation Committee sets financial targets for incentive pay that align with or exceed the external guidance communicated to stockholders.
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•
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25% in the form of stock options that vest annually over a five year period; and
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75% in the form of PSUs that vest after three years based on our actual performance as measured against multiple pre-established performance objectives. For fiscal 2018, the Compensation Committee selected fiscal 2020 Adjusted Product Revenue
2
and fiscal 2020 Non-GAAP Operating Profit Margin
2
as the performance measures for the target PSU award percentages, each weighted equally. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).
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Total “at risk” compensation =
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92.3%
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Total “at risk” compensation =
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79.0%
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2
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Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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þ
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What We Do
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What We Don’t Do
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Maintain an Independent Compensation Committee
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No Guaranteed Bonuses
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Compensation Committee Retains an Independent Compensation Advisor
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No Special Executive Retirement Plans
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Annual Executive Compensation Review
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No Hedging; Pledging Requires Pre-Approval
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Compensation At-Risk - Pay For Performance
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No Tax Payments on Perquisites
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Annual Compensation-Related Risk Assessment
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No Tax Gross-Up Payments on Post-Employment Compensation Arrangements
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Multi-Year Vesting Requirements
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No Special Welfare or Health Benefits
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Compensation Recovery (“Clawback”) Policy
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No Stock Option Re-pricing
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Stock Ownership Policy
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Annual Stockholder Advisory Vote on Named Executive Officer Compensation
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Stockholder Engagement that includes our Compensation Committee Chairperson
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ü
Approximately 84% of the votes
cast on our Say-On-Pay proposal for fiscal year 2017 compensation
voted in favor of our executive compensation program and policies.
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PROPOSAL
4
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Stockholder Proposal - for Proxy Access
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Our Board recommends a vote
AGAINST
this proposal.
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See page
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for further information.
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2018 BUSINESS AND FINANCIAL HIGHLIGHTS
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2018 BUSINESS AND FINANCIAL HIGHLIGHTS
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Total revenues, including royalties and other revenue of $858 million, which significantly exceeded our original fiscal 2018 financial guidance of $836 million.
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Product revenue increased 12.4% to $830 million, or 11.9% on a constant currency basis
1
, which significantly exceeded our original fiscal 2018 financial guidance of $808 million.
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Shipments of noninvasive technology boards and monitors increased 14.1% to 231,700.
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GAAP operating profit margin was 24.2%;
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Non-GAAP operating profit
1
margin improved 100 basis points to 24.5%;
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Non-GAAP product operating margin
1
, excluding the impact of royalty and NRE, improved 340 bps to 22.0%.
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GAAP EPS was $3.45;
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Non-GAAP total EPS
1
increased 31.7% to $3.03;
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Non-GAAP product EPS
1
, excluding the impact of royalty and NRE, increased 53.2% to $2.65.
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Adjusted free cash flow was $222 million or 26.0% of total revenue, which was driven by strong earnings performance and significant working capital improvements;
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Days sales outstanding (“DSO”) improved 10 days to reach 45 days at the end of fiscal 2018;
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Inventory days on hand (“DOH”) improved 10 days to reach 113 days at the end of fiscal 2018.
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Product Revenue
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Constant Currency Product Revenue Growth
1
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Non-GAAP
EPS
1
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Non-GAAP
EPS Growth 1 |
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in Millions
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% growth on a constant
currency basis |
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$ per diluted share
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% growth
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$830
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11.9%
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$3.03
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31.7%
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Goal: $808M
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Goal: $2.80
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1
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Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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2018 BUSINESS AND FINANCIAL HIGHLIGHTS
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*
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Constant currency growth
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**
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O
f total revenue
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Stock Price
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December 29, 2018
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$105.56
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Stock Price
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at IPO
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(August 2007)
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$17.00
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1
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Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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EXECUTIVE OFFICERS
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Name
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Age
(1)
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Position(s)
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Joe Kiani
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54
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Chief Executive Officer & Chairman of the Board
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Micah Young
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40
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Executive Vice President, Finance & Chief Financial Officer
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Anand Sampath
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52
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Chief Operating Officer
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Jon Coleman
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55
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President, Worldwide Sales, Professional Services & Medical Affairs
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Yongsam Lee
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54
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Executive Vice President, Chief Information Officer
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Tao Levy
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45
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Executive Vice President, Business Development
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Tom McClenahan
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46
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Executive Vice President, General Counsel & Corporate Secretary
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Bilal Muhsin
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38
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Executive Vice President, Engineering, Marketing & Regulatory Affairs
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(1)
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As of
April 20, 2019
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Joe Kiani
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Chief Executive Officer & Chairman of the Board
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Employee Since: 1989
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Joe Kiani is the founder of Masimo and has served as Chief Executive Officer (CEO) & Chairman of the Board since our inception in 1989. He is an inventor on more than 100 patents related to signal processing, sensors and patient monitoring, including patents for the invention of Measure-through motion and low-perfusion pulse oximetry. Since September 2016, Mr. Kiani has served on the Board of Directors of Stereotaxis, Inc. (OTCQX: STXS), a manufacturer of robotic cardiology instrument navigation systems. From 1998 to March 2013, Mr. Kiani served on the Board of Directors of Saba Software, Inc., a publicly-traded software company focused on human capital development and management solutions. Mr. Kiani holds a B.S.E.E. and an M.S.E.E. from San Diego State University. In addition to Mr. Kiani’s role at Masimo, he is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare, Chairman of the Patient Safety Movement Foundation, Chairman and CEO of the Patient Safety Movement Coalition and Chairman and CEO of Cercacor Laboratories, Inc. He also sits on a number of other Boards of Directors, including Atheer Labs, CHOC Children’s Orange/CHOC Children’s at Mission Hospital, Bioniz Therapeutics, Inc. and the Medical Device Manufacturers Association. As Masimo’s founder, Chief Executive Officer and Chairman of the Board since our formation in 1989, Mr. Kiani has the deepest understanding of Masimo, our history, our culture and our technology. He has broad experience in a wide range of functional areas, including strategic planning, strategic investments, engineering and development, and legal and governmental affairs. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Kiani is critical to our continued development and growth.
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Micah Young
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Executive Vice President, Finance & Chief Financial Officer
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Employee Since: 2017
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Micah Young has served as our Executive Vice President, Finance & Chief Financial Officer (“CFO”) since October 2017. From July 2012 to September 2017, Mr. Young served as Vice President, Finance, at NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. Prior to that time, he served as NuVasive, Inc.’s Senior Director, Finance, Global Operations, from December 2009 to July 2012. From 2002 to 2009, Mr. Young held various accounting and finance positions with Zimmer Holdings, Inc., a company focused on the design, development, manufacture and marketing of orthopedic reconstructive, spinal and trauma devices, dental implants and related surgical products. Prior to his time at Zimmer Holdings, Inc., Mr. Young was an accountant at Deloitte & Touche LLP from 2000 to 2002. He holds a Bachelor of Science, Accounting and Criminal Justice from Indiana Wesleyan University and is a certified public accountant (inactive).
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Anand Sampath
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Chief Operating Officer
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Employee Since: 2006
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Anand Sampath
has served as our Chief Operating Officer since August 2014. Prior to that, he served as Executive Vice President, Engineering since March 2007. He is an inventor on more than ten patents relating to patient monitoring, wireless networks and communications. From April 2006 to March 2007, Mr. Sampath was our Director of Systems Engineering. From October 1995 to March 2006, he held various positions, including Program Manager, Engineering Manager and Distinguished Member of Technical Staff, at Motorola, Inc. Mr. Sampath holds a B.S. in Engineering from Bangalore University.
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Jon Coleman
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President, Worldwide Sales, Professional Services & Medical Affairs
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Employee Since: 2008
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Jon Coleman has served as our President, Worldwide Sales, Professional Services & Medical Affairs since February 2011, and was our President, International from August 2008 to February 2011. From October 2007 to August 2008, Mr. Coleman was President and Chief Executive Officer of You Take Control, Inc., a healthcare information technology start-up company. He served as General Manager, Americas of Targus Group International, a supplier of mobile computing cases and accessories, from March 2006 to February 2007. From March 1994 to February 2006, he held progressive leadership positions with Pfizer, Inc., most recently as Vice President and General Manager, Canada & Caribbean Region. Mr. Coleman holds a M.B.A. from Harvard Business School, and a B.A. in International Relations from Brigham Young University.
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Yongsam Lee
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Executive Vice President, Chief Information Officer
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Employee Since: 1996
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Yongsam Lee has served as our Executive Vice President, Chief Information Officer since August 2014. From March 1996 to October 2001 and from April 2002 to August 2014, Mr. Lee held various positions with us, including Vice President, IT, Chief Information Officer, Executive Vice President, Operations, Executive Vice President, Regulatory Affairs & Chief Information Officer. From October 2001 to April 2002, he served as Director of IT at SMC Networks, Inc., a provider of networking solutions. Mr. Lee holds a B.S. in Applied Physics from the University of California, Irvine.
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Tao Levy
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Executive Vice President, Business Development
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Employee Since: 2018
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Tao Levy has served as our Executive Vice President, Business Development since January 2018. From March 2013 to December 2017, Mr. Levy served as Managing Director, Medical Devices Equity Research, at Wedbush Securities. Prior to that time, he served as Senior Analyst, Medical Devices Equity Research at Loewen Ondaatje McCutcheon, from August 2012 to March 2013. From September 2010 to February 2012, Mr. Levy was Managing Director, Medical Devices Equity Research at Collins Stewart. Prior to his time at Collins Stewart, Mr. Levy was Director, Medical Devices Equity Research at Deutsche Bank where he served from 2002 to 2010. He holds a Bachelor of Arts in Biology from the University of Pennsylvania.
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Tom McClenahan
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Executive Vice President, General Counsel & Corporate Secretary
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Employee Since: 2011
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Tom McClenahan has served as our Executive Vice President & General Counsel since April 2013 and as our Corporate Secretary since August 2014. From April 2011 to April 2013, Mr. McClenahan was our Vice President and Assistant General Counsel. From November 2002 to April 2011, he was an associate and then principal with the law firm of Fish & Richardson. From September 1999 to November 2002, he was an associate with the law firm of Knobbe, Martens, Olson & Bear. Mr. McClenahan holds a B.S. in Mechanical Engineering from Iowa State University and a J.D. from the University of Minnesota Law School.
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Bilal Muhsin
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Executive Vice President, Engineering, Marketing & Regulatory Affairs
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Employee Since: 2000
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Bilal Muhsin has served as our Executive Vice President, Engineering, Marketing and Regulatory Affairs since March 2018. In May 2015, Mr. Muhsin became Executive Vice President, Engineering after having served as Vice President, Engineering, Instruments and Systems since April 2012. Prior to this, Mr. Muhsin held other Director and Manager level positions within the Company since June 2000. Mr. Muhsin’s technical, product and overall leadership skills have helped Masimo bring revolutionary new products to the marketplace, including Masimo’s Patient Safety Net, Radical-7
®
, Root
™
and various significant software products. Mr. Muhsin holds a B.S. in Computer Science from San Diego State University.
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BOARD OF DIRECTORS
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Name
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Age
(1)
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Director Class
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Term Expires
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Position(s)
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Steven J. Barker, M.D., Ph.D.
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74
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Class I
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2020
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Director
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H Michael Cohen
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54
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Class II
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2021
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Director
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Sanford Fitch
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78
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Class I
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2020
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Director
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Thomas Harkin
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79
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Class II
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2021
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Director
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Joe Kiani
(2)
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54
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Class II
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2021
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Chief Executive Officer & Chairman of the Board
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Adam Mikkelson
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40
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Class III
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2019
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Director
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Craig Reynolds
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70
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Class III
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2019
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Director
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Julie A. Shimer, Ph.D.
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65
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Class I
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2020
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Director
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(1)
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As of
April 20, 2019
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(2)
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Please see “Executive Officers” on page
16
of this Proxy Statement for Mr. Kiani’s biography.
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SKILLS AND QUALIFICATION OF OUR BOARD OF DIRECTORS
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Skills and Qualification
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Barker
|
Cohen
|
Fitch
|
Harkin
|
Kiani
|
Mikkelson
|
Reynolds
|
Shimer
|
Active/Retired CEO or COO
|
|
|
|
|
n
|
|
n
|
n
|
Financial expertise
|
|
n
|
n
|
|
|
n
|
|
|
Government
|
|
|
|
n
|
|
|
|
|
Healthcare management/banking
|
|
n
|
|
|
|
n
|
|
|
Healthcare industry
|
n
|
|
n
|
n
|
n
|
n
|
n
|
n
|
Medical device manufacturing
|
|
|
n
|
|
n
|
|
n
|
n
|
Ph.D. or M.D.
|
n
|
|
|
|
|
|
|
n
|
CORPORATE GOVERNANCE AND BOARD MATTERS
|
CORPORATE GOVERNANCE PRACTICES
|
•
|
except in unusual circumstances, the positions of Chairman of our Board and CEO will each be held by the same person;
|
•
|
ordinarily, directors should not serve on more than five boards of publicly-traded companies, including our Board, and all of our directors currently satisfy this requirement;
|
•
|
outside directors must own a minimum number of shares of our common stock (see “Non-Employee Director Compensation—Non-Employee Director Stock Ownership Policy” on page
81
of this Proxy Statement for additional information); and
|
•
|
a non-employee director will not be nominated for re-election at the next annual meeting of stockholders for which his or her class of directors is up for election following his or her 15th anniversary of service on our Board, unless our Board waives this term limit with respect to such non-employee director as a result of its determination that such nomination is in the best interests of Masimo and its stockholders.
|
CONSIDERATION OF DIRECTOR NOMINEES
|
•
|
the highest ethical standards and integrity and a strong personal reputation;
|
•
|
a background that demonstrates experience and achievement in business, finance, technology, healthcare or other activities relevant to our business and activities;
|
•
|
a willingness to act on and be accountable for Board and, as applicable, committee decisions;
|
•
|
an ability to provide reasoned, informed and thoughtful counsel to management on a range of issues affecting us and our stockholders;
|
•
|
an ability to work effectively and collegially with other individuals;
|
•
|
loyalty and commitment to driving our success and increasing long-term value for our stockholders;
|
•
|
sufficient time to devote to our Board and, as applicable, committee membership and matters; and
|
•
|
meeting the independence requirements imposed by the SEC and Nasdaq.
|
•
|
the name and address of the stockholder and any beneficial owner on whose behalf the nomination is being made;
|
•
|
the class, series and number of shares of Masimo, and any convertible securities of Masimo, that are beneficially owned by the stockholder and any beneficial owner on whose behalf the nomination is being made;
|
•
|
any proxy, contract, arrangement, understanding or relationship pursuant to which the stockholder and any beneficial owner on whose behalf the nomination is being made has the right to vote any of Masimo’s voting securities;
|
•
|
any “short” interest in Masimo’s securities held by the stockholder and any beneficial owner on whose behalf the nomination is being made;
|
•
|
the proposed director candidate’s full legal name, age, business address and residential address;
|
•
|
complete biographical information for the proposed director candidate, including the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years;
|
•
|
a description of the proposed candidate’s qualifications as a director;
|
•
|
the class and number of shares of Masimo that are beneficially owned by the proposed director candidate as of the date of the written recommendation; and
|
•
|
any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Exchange Act.
|
BOARD LEADERSHIP STRUCTURE
|
BOARD’S ROLE IN RISK OVERSIGHT
|
|
The Board of Directors
|
|
||||||||||
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit Committee
|
|
Nominating, Compliance and Corporate Governance Committee
|
|
Compensation Committee
|
||||||||
5
|
|
5
|
|
5
|
||||||||
Oversees management of financial risks including:
|
|
Oversees management of non-financial risks including:
|
|
Oversees management of risks relating to our compensation plans and arrangements including:
|
||||||||
|
|
|||||||||||
|
|
|||||||||||
=
Financial statement integrity and reporting;
=
Internal controls;
=
Major financial and other business risk exposures
|
|
=
Legal, environmental, health, safety;
=
Board governance, independence of the Board and conflicts of interest
|
|
=
Employee compensation policies and practices;
=
Non-employee director compensation policies and practices
|
||||||||
|
|
|||||||||||
|
|
|||||||||||
|
|
|||||||||||
|
|
|||||||||||
|
|
INVESTOR FEEDBACK AND ENGAGEMENT
|
MEETINGS AND EXECUTIVE SESSIONS
|
POLICY REGARDING BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
|
INDEPENDENCE OF THE BOARD OF DIRECTORS
|
CODE OF BUSINESS CONDUCT AND ETHICS
|
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
|
•
|
the name and address of all the Masimo stockholders on whose behalf the communication is sent; and
|
•
|
the number of Masimo shares that are beneficially owned by the stockholders as of the date of the communication.
|
INFORMATION REGARDING BOARD COMMITTEES
|
|
|
Committee Membership
|
|
|
|
|||||||
Name
|
|
Independent
|
|
Audit
|
|
Compensation
|
|
Nominating, Compliance and
Corporate Governance
|
|
Scientific Advisory
|
||
Employee Director:
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Kiani
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
||
Non-Employee Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Barker, Ph.D., M.D.
(1)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
¬
|
||
H Michael Cohen
(2)
|
|
5
|
|
ü
|
|
|
|
|
|
—
|
||
Sanford Fitch
|
|
5
|
|
¬
|
|
|
—
|
|
—
|
|
—
|
|
Thomas Harkin
|
|
5
|
|
—
|
|
ü
|
|
¬
|
|
—
|
||
Adam Mikkelson
|
|
5
|
|
ü
|
|
ü
|
|
ü
|
|
—
|
||
Craig Reynolds
|
|
5
|
|
—
|
(3)
|
|
¬
|
|
ü
|
|
—
|
|
Julie A. Shimer, Ph.D.
(4)
|
|
5
|
|
—
|
|
—
|
|
—
|
|
—
|
||
Total meetings in fiscal 2018
|
|
|
|
5
|
|
4
|
|
3
|
|
|
¬
|
Committee Chairperson.
À
Financial Expert.
ü
Member.
5
Independent.
|
(1)
|
Dr. Barker has provided consulting services to Masimo since July 2013. He currently serves as our Chief Science Officer and Chairman of our Scientific Advisory Board and previously served as our interim Chief Medical Officer from July 2013 to March 2015.
|
(2)
|
Mr. Cohen has been a member of our Board since July 31, 2018. He was appointed to the Audit Committee on July 31, 2018.
|
(3)
|
Mr. Reynolds served on the Audit Committee until July 31, 2018.
|
(4)
|
Dr. Shimer has been a member of our Board since January 2, 2019. She was appointed to the Audit Committee on March 15, 2019.
|
Members and Number of Meetings
|
|
Primary Committee Functions
|
|
|
|
Committee Members:
(1)
|
|
l
Appointing, retaining and determining the compensation of our independent registered public accounting firm;
l
Overseeing and approving any proposed audit and permissible non-audit services provided by our independent registered public accounting firm;
l
Reviewing at least annually the qualifications, performance and independence of our independent registered public accounting firm;
l
Overseeing the relationship with our independent registered public accounting firm, including the rotation of the audit partners, as well as reviewing and resolving any disagreements between our management and ensuring discussions with our management and our independent registered public accounting firm relating to financial controls over financial reporting;
l
Discussing with our management and our independent registered public accounting firm the design, implementation and effectiveness of our internal controls;
l
Reviewing and discussing with our management and our independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;
l
Overseeing and approving the annual Committee Report to be included in our annual public filings;
l
Reviewing the quarterly earnings announcements and any other public announcements regarding our results of operations with our management;
l
Reviewing and discussing reports from our independent registered public accounting firm relating to our critical accounting policies and practices;
l
Establishing and overseeing the processes and procedures for the receipt, retention and treatment of any complaints regarding accounting, internal controls or audit matters, as well as the confidential and anonymous submissions by employees concerning questionable accounting, auditing and internal control matters;
l
Investigating any matter brought to its attention, with full access to our books, records, facilities and employees, and with sole authority to select, retain and terminate any consultants, legal counsel or advisors to advise the Audit Committee; and
l
Reviewing and evaluating, at least annually, the performance of the Audit Committee and its members, including compliance of the Audit Committee with its charter.
|
Mr. Fitch, Chair
|
|
|
Mr. Mikkelson
|
|
|
Mr. Reynolds
(2)
|
|
|
Mr. Cohen
(2)
|
|
|
Dr. Shimer
(3)
|
|
|
|
|
|
|
|
|
Number of Meetings:
(4)
|
|
|
5
|
|
|
|
|
|
|
|
|
Attendance Rate:
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________
|
|
|
(1)
Our Board has determined that Mr. Fitch, the Chairperson of our Audit Committee, is an audit committee financial expert, as defined under applicable SEC rules, and that Mr. Fitch meets the background and financial sophistication requirements under Nasdaq Listing Rule 5605(c)(2)(A). In making this determination, the Board made a qualitative assessment of Mr. Fitch’s level of knowledge and experience based on a number of factors, including his formal education and experience. Both our independent registered public accounting firm and internal financial personnel regularly meet privately with our Audit Committee and have unrestricted access to this committee.
|
||
(2)
Mr. Reynolds served on the Audit Committee until J
uly 31, 2018. Mr. Cohen was appointed to the Audit Committee on July 31, 2018.
|
||
(3)
Dr. Shimer was appointed to the Audit Committee effective March 15, 2019.
|
||
(4)
Typically, the Audit Committee meets at least quarterly and with greater frequency if necessary.
|
NON-EMPLOYEE DIRECTOR COMPENSATION
|
Compensation Item(s):
|
|
Amount
|
|||
Retainer
(1)
- Board Service
|
|
$
|
50,000
|
|
|
Retainer
(1)
- Each Committee
|
|
7,500
|
|
||
Chairperson Additional Retainer
(1)
- Audit Committee
|
|
30,000
|
|
||
Chairperson Additional Retainer
(1)
- Compensation Committee
|
|
10,000
|
|
||
Chairperson Additional Retainer
(1)
- Nominating, Compliance and Corporate Governance Committee
|
|
7,500
|
|
||
Cash Fee Per Committee Meeting in Excess of First Eight Meetings
(2)
|
|
1,000
|
|
||
Restricted Share Units
(3)(4)
|
|
$
|
140,000
|
|
(1)
|
All cash retainers are payable on a quarterly basis in arrears.
|
(2)
|
Each non-employee director receives a $1,000 per meeting cash fee for each committee meeting attended in excess of the first eight meetings of each committee during the fiscal year.
|
(3)
|
Each year on the date of our annual meeting of stockholders, each non-employee director will be granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $140,000, rounded down to the nearest whole share, which vest on the earlier of the first anniversary of the grant date or the date of the next annual meeting of stockholders.
|
(4)
|
The Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.
|
Fiscal 2018 Director Compensation Table:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Name
(1)
|
|
Fees Earned
or Paid in Cash
|
|
Stock
Awards
(2)(3)
|
|
Option
Awards
(4)
|
|
All Other
Compensation
|
|
Total
|
||||||||||
Steven J. Barker, Ph.D., M.D.
|
|
$
|
51,729
|
|
|
$
|
139,937
|
|
|
$
|
—
|
|
|
$
|
120,000
|
|
(5)
|
$
|
311,666
|
|
H Michael Cohen
(6)
|
|
24,011
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,011
|
|
|||||
Sanford Fitch
|
|
87,816
|
|
|
139,937
|
|
|
—
|
|
|
—
|
|
|
227,753
|
|
|||||
Thomas Harkin
|
|
72,500
|
|
|
139,937
|
|
|
—
|
|
|
—
|
|
|
212,437
|
|
|||||
Adam Mikkelson
|
|
72,500
|
|
|
139,937
|
|
|
—
|
|
|
—
|
|
|
212,437
|
|
|||||
Craig Reynolds
|
|
79,389
|
|
|
139,937
|
|
|
—
|
|
|
—
|
|
|
219,326
|
|
(1)
|
Our Chairman and CEO, Mr. Kiani, is not included in this table as he is an employee of Masimo and therefore receives no compensation for his service as a director. Mr. Kiani’s compensation is included in the “Summary Compensation Table” on page
61
of this Proxy Statement. Dr. Shimer is not included in this table as she was appointed to our Board effective January 2, 2019.
|
(3)
|
As of
December 29, 2018
, each of the listed non-employee directors held RSU awards with respect to
1,583
shares of our common stock, with the exception of H Michael Cohen, who held none.
|
(4)
|
These amounts generally represent the aggregate grant date fair value of the RSU awards granted to each listed non-employee director in fiscal
2018
, computed in accordance with Financial Accounting Standard Board Accounting Standard Codification Topic 718 (“ASC Topic 718”). These amounts do not represent the actual amounts paid to or realized by the directors during fiscal
2018
. The value as of the grant date for the RSU awards is calculated based on the number of RSUs at the grant date market price and is recognized once the requisite service period for the RSUs is satisfied. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Note 14 to our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of
|
(4)
|
As of
December 29, 2018
, each of the listed non-employee directors held the following number of options: Steven J. Barker, Ph.D., M.D.—
110,000
; H Michael Cohen—
0
; Sanford Fitch—
80,000
; Thomas Harkin—
0
; Adam Mikkelson—
0
and Craig Reynolds—
100,000
.
|
(5)
|
Consists of fees earned by Dr. Barker for non-employee consulting services provided to the Company.
|
(6)
|
H Michael Cohen was appointed to our Board effective July 31, 2018.
|
Compensation Item(s):
|
|
2018
|
|
2019
|
|
Change
|
|||||||
Retainer
(1)
- Board Service
|
|
$
|
50,000
|
|
|
$
|
70,000
|
|
|
$
|
20,000
|
|
|
Retainer
(1)
- Audit Committee
|
|
7,500
|
|
|
12,500
|
|
|
5,000
|
|
||||
Retainer
(1)
- Compensation Committee
|
|
7,500
|
|
|
10,000
|
|
|
2,500
|
|
||||
Retainer
(1)
- Nominating, Compliance and Corporate Governance Committee
|
|
7,500
|
|
|
5,000
|
|
|
(2,500
|
)
|
||||
Chairperson Additional Retainer
(1)
- Audit Committee
|
|
30,000
|
|
|
12,500
|
|
|
(17,500
|
)
|
||||
Chairperson Additional Retainer
(1)
- Compensation Committee
|
|
10,000
|
|
|
10,000
|
|
|
—
|
|
||||
Chairperson Additional Retainer
(1)
- Nominating, Compliance and Corporate Governance Committee
|
|
7,500
|
|
|
10,000
|
|
|
2,500
|
|
||||
Cash Fee Per Committee Meeting in Excess of First Eight Meetings
(2)
|
|
1,000
|
|
|
—
|
|
|
(1,000
|
)
|
||||
Restricted Share Units
(3)(4)
|
|
$
|
140,000
|
|
|
$
|
180,000
|
|
|
$
|
40,000
|
|
(1)
|
All cash retainers are payable on a quarterly basis in arrears.
|
(2)
|
Non-employee directors will no longer receive a per meeting cash fee for each committee meeting attended in excess of the first eight meetings of each committee during the fiscal year.
|
(3)
|
Each year on the date of our annual meeting of stockholders, each non-employee director will be granted an RSU award with respect to shares of our common stock having a grant date fair value of
$180,000
, rounded down to the nearest whole share, which vests on the first anniversary of the grant date.
|
(4)
|
The Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.
|
AUDIT RELATED MATTERS
|
AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
|
|
Fiscal Year Ended
|
||||||
|
|
December 29, 2018
|
|
December 30, 2017
|
||||
Audit Fees
(1)
|
|
$
|
2,111,428
|
|
|
$
|
2,035,933
|
|
Audit-Related Fees
(2)
|
|
69,839
|
|
|
122,453
|
|
||
Tax Fees
(3)
|
|
36,305
|
|
|
36,952
|
|
||
All Other Fees
|
|
—
|
|
|
—
|
|
||
Total Fees
|
|
$
|
2,217,572
|
|
|
$
|
2,195,338
|
|
(1)
|
Audit fees consist of fees billed for services rendered for the audit of our consolidated annual financial statements, including performance of the attestation procedures required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements.
|
(2)
|
Audit-related fees consist of fees for assurance and related services that are traditionally performed by our independent registered public accounting firm and include fees reasonably related to the performance of the audit or review of our interim consolidated financial statements and not reported under the caption “Audit Fees.” For the fiscal years ended
December 29, 2018
and
December 30, 2017
, these services included fees primarily for the audit of our retirement savings plan.
|
(3)
|
Tax fees consist of fees for preparation of our federal and state income tax returns, general consultation and international tax research.
|
AUDIT COMMITTEE REPORT
|
•
|
reviewed and discussed our audited financial statements with management and Grant Thornton LLP, the independent registered public accounting firm;
|
•
|
discussed with Grant Thornton LLP the matters required to be discussed by Auditing Standard No. 1301
Communications with Audit Committees,
as adopted by the Public Company Accounting Oversight Board; and
|
•
|
received from Grant Thornton LLP the written disclosures and the letter regarding their communications with the Audit Committee concerning independence as required by the Public Company Accounting Oversight Board and discussed the auditors’ independence with them.
|
|
Audit Committee
|
|
H Michael Cohen
|
|
Mr. Sanford Fitch
|
|
Mr. Adam Mikkelson
|
|
EXECUTIVE COMPENSATION
|
EXECUTIVE COMPENSATION
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Name
|
|
Position(s)
|
Joe Kiani
|
|
Chief Executive Officer & Chairman of the Board
|
Micah Young
|
|
Executive Vice President, Finance & Chief Financial Officer
|
Anand Sampath
|
|
Chief Operating Officer
|
Tao Levy
|
|
Executive Vice President, Business Development
|
Bilal Muhsin
|
|
Executive Vice President, Engineering, Marketing & Regulatory Affairs
|
|
EXECUTIVE COMPENSATION
|
EXECUTIVE SUMMARY
|
|
l
Total revenues, including royalties and other revenue of $858 million, which significantly exceeded our original fiscal 2018 financial guidance of $836 million.
|
|||
|
l
Product revenue increased 12.4% to $830 million, or 11.9% on a constant currency basis
1
, which significantly exceeded our original fiscal 2018 financial guidance of $808 million.
|
|||
|
l
Shipments of noninvasive technology boards and monitors increased 14.1% to 231,700.
|
|||
|
l
GAAP operating profit margin was 24.2%;
l
Non-GAAP operating profit margin
1
improved 100 basis points to 24.5%;
l
Non-GAAP product operating margin
1
, excluding the impact of royalty and NRE, improved 340 bps to 22.0%.
|
|||
|
l
GAAP EPS was $3.45;
l
Non-GAAP total EPS
1
increased 31.7% to $3.03;
l
Non-GAAP product EPS
1
, excluding the impact of royalty and NRE, increased 53.2% to $2.65.
|
|||
|
l
Adjusted free cash flow was $222 million or 26.0% of total revenue, which was driven by strong earnings performance and significant working capital improvements;
l
Days sales outstanding (“DSO”) improved 10 days to reach 45 days at the end of fiscal 2018;
l
Inventory days on hand (“DOH”) improved 10 days to reach 113 days at the end of fiscal 2018.
|
|
Product Revenue
|
|
|
|
Constant Currency Product Revenue Growth
(1)
|
|
|
|
Non-GAAP
EPS
(1)
|
|
|
|
Non-GAAP
EPS Growth (1) |
|
|
in Millions
|
|
|
|
% growth on a constant
currency basis |
|
|
|
$ per diluted share
|
|
|
|
% growth
|
|
|
$830
|
|
|
|
11.9%
|
|
|
|
$3.03
|
|
|
|
31.7%
|
|
|
Goal: $808M
|
|
|
|
|
|
|
|
Goal: $2.80
|
|
|
|
|
|
1
|
Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
*
|
Constant currency growth
|
**
|
O
f total revenue
|
|
|
|
|
|
Stock Price
|
||
|
December 29, 2018
|
||
|
$105.56
|
||
|
|
||
|
|
||
|
Stock Price
|
||
|
at IPO
|
||
|
(August 2007)
|
||
|
$17.00
|
||
|
|
||
|
|
||
|
|
||
|
|
1
|
Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
|
|
1 Year
|
|
3 Year
|
|
5 Year
|
Masimo TSR (%)
|
|
26.6%
|
|
37.3%
|
|
29.4%
|
NASDAQ Composite TSR (%)
|
|
3.9%
|
|
9.8%
|
|
9.7%
|
NASDAQ Medical Equipment TSR (%)
|
|
13.6%
|
|
14.7%
|
|
15.1%
|
Measures of
Operating Performance
|
|
Masimo
Performance
|
|
Percentile Ranking
Versus Fiscal 2018 Compensation
Peer Group Companies
|
Return on Equity
|
|
20%
|
|
83rd
|
Return on Capital
|
|
20%
|
|
88th
|
Return on Assets
|
|
16.8%
|
|
93rd
|
Total Revenue Growth
|
|
8.6%
|
|
34th
|
Operating Margin
|
|
24.2%
|
|
87th
|
|
EXECUTIVE COMPENSATION
|
•
|
Annual Cash Bonus -
The annual cash bonus plan is designed to provide performance-based compensation that will be earned only upon achieving various pre-established levels of Company financial performance. For fiscal 2018, the Compensation Committee selected 2018 Adjusted Product Revenue
2
and 2018 Non-GAAP EPS
2
as the performance measures for the funding percentages, each weighted equally, as the Compensation Committee believes these performance measures directly support both our short-term strategy and our long-term objective of creating sustainable stockholder value.
|
•
|
Long-Term Incentive (“LTI”) Compensation - Equity Awards
- The Compensation Committee believed that a one-year performance period was appropriate for the 2017 PSU awards in light of the transition to our new 2017 Equity Incentive Plan. However, to further align the compensation of our executive officers with long-term performance, the Compensation Committee decided to extend the performance period for the 2018 PSU awards from one year to three years. Accordingly, the Compensation Committee granted LTI awards to our executive officers for fiscal 2018 consisting of the following mix of equity awards:
|
◦
|
25% in the form of stock options that vest annually over a five year period; and
|
◦
|
75% in the form of PSU awards that are earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives. For the fiscal 2018 PSU awards, the Compensation Committee selected fiscal 2020 Adjusted Product Revenue
2
and fiscal 2020 Non-GAAP Operating Profit Margin
2
as the performance measures for the targeted PSU award percentages, each weighted equally.
|
Performance Stock Unit Awards
|
|||||
|
2017
|
2018
|
2019
|
2020
|
2021
|
2017 Grant
|
1-Year Performance Period
|
Vest
(1)
|
Vest
(1)
|
Vest
(1)
|
Vest
(1)
|
2018 Grant
|
|
3-Year Performance Period
|
Vest
(2)(3)
|
(3)
|
The 2018 Grant will vest in fiscal 2021 based on actual performance during 2020. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
Corporate Governance or Compensation Practice
|
Issues Previously Raised in Stockholder Outreach or Corporate Governance Reviews
|
Our Response
|
Effective Date of Response
|
Executive compensation
|
Equity compensation is not directly tied to long-term Company performance
|
Granted performance based equity tied to three-year Company performance
|
Fiscal 2018
|
Executive compensation
|
Equity compensation includes a large discretionary component
|
Granted performance based equity tied to defined target matrix
|
Fiscal 2017
|
Stockholders’ rights agreement
|
Presence of “poison pill” arrangement
|
Eliminated the “poison pill”
|
Fiscal 2016
|
Non-employee directors’ stock ownership policy
|
Absence of stock ownership policy for members of Board of Directors
|
Adopted stock ownership policy for non-employee members of our Board, which requires each non-employee director to own and hold shares of our common stock with a value equal to at least $250,000
|
Fiscal 2016
|
Term limits for service on Board of Directors
|
Absence of term limits for non-employee members of Board of Directors
|
Adopted term limit of 15 years for non-employee members of our Board
|
Fiscal 2015
|
Executive stock ownership policy
|
Absence of formal stock ownership policy for executive officers
|
Adopted stock ownership policy for executive officers, which requires our CEO to own and hold shares of our common stock with a value equal to at least six times his annual base salary and our other executive officers to own and hold shares of our common stock with a value equal to their annual base salary
|
Fiscal 2013
|
Compensation recovery (“clawback”) policy
|
Absence of formal compensation recovery (“clawback”) policy
|
Adopted formal compensation recovery (“clawback”) policy for executive officers
|
Fiscal 2012
|
|
EXECUTIVE COMPENSATION
|
Tax “gross-up” payments
|
Absence of formal policy restricting the provision of tax “gross-up” or similar payments in connection with a change in control of the Company
|
Adopted formal policy providing that the Compensation Committee will no longer approve any arrangements with executive officers that include a tax “gross-up” or similar provision that results in the Company paying excise taxes on change in control payments
|
Fiscal 2011
|
|
|
In addition, our CEO’s employment agreement, entered into in November 2015, eliminated similar tax “gross-up” provisions. After the elimination of this provision, there are no longer any “gross-up” provisions at the Company
|
Fiscal 2015
|
•
|
Base Salaries
- Increased the annual base salaries of our NEOs, other than Mr. Young, by
3.0%
, which was consistent with the increases provided to our other employees as a whole.
|
•
|
Annual Cash Bonuses
- Based on our Adjusted Product Revenues
2
and Non-GAAP EPS
2
for fiscal 2018, under our fiscal 2018 Executive Bonus Incentive Plan, the Company paid annual cash bonuses to our NEOs (other than our CEO) for fiscal 2018 ranging from
$240,780
to
$335,031
, and an annual cash bonus in the amount of
$1,595,383
to our CEO. An additional cash bonus of $55,000 was awarded to Mr. Muhsin in connection with the successful and timely completion of a strategic management business objective.
|
•
|
Long-Term Incentive (“LTI”) Compensation - Equity Awards -
In March 2018, granted options to purchase shares of our common stock to each of our NEOs (other than our CEO) with a grant date fair value of
$298,458
and an option to purchase shares of our common stock to our CEO with a grant date fair value in the amount of
$2,984,635
, in all cases with an exercise price equal to the fair market value of our common stock on the date of grant. In March 2018, also granted PSU awards with a target grant date fair value of $
899,933
to each of our NEOs (other than our CEO) and a PSU award with a target grant date fair value of $
8,999,934
to our CEO.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
Total “at risk” compensation =
|
92.3%
|
|
Total “at risk” compensation =
|
79.0%
|
|
|
EXECUTIVE COMPENSATION
|
ü
|
Maintain an Independent Compensation Committee
. The Compensation Committee consists solely of independent directors who establish our compensation practices.
|
ü
|
Compensation Committee Retains an Independent Compensation Advisor
. The Compensation Committee has engaged its own compensation consultant to provide information, analysis and other advice on executive compensation independent of management.
|
ü
|
Annual Executive Compensation Review
.
At least once a year, the Compensation Committee conducts a review of our compensation strategy.
|
ü
|
Compensation At-Risk - Pay For Performance
. Our executive compensation program is designed so that a significant portion of our executive officers’ compensation is “at-risk” based on corporate performance, to align the interests of our executive officers and stockholders.
|
ü
|
Annual Compensation-Related Risk Assessment
.
The Compensation Committee
considers our compensation-related risk profile to ensure that our compensation plans and arrangements do not create inappropriate or excessive risk and are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee has determined that there are no risks arising from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on the Company.
|
ü
|
Multi-Year Vesting Requirements
. To align the interests of our executive officers and stockholders, the time-based stock-option awards granted to our executive officers vest over a five-year period. In 2018, we granted our executive officers PSU awards that will be earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives relating to fiscal 2020 Adjusted Product Revenue
2
and fiscal 2020 Non-GAAP Operating Profit Margin
2
.
|
ü
|
Compensation Recovery (“Clawback”) Policy
.
We have adopted a compensation recovery (“clawback”) policy, which enables our Board to recover incentive compensation (including gains from equity awards) from our current and former executive officers that is based on erroneous data, received during the three-year period preceding the date on which we become required to prepare an accounting restatement; and is in excess of what would have been paid if calculated under the restatement.
|
ü
|
Stock Ownership Policies
.
We have adopted stock ownership policies for our executive officers and the non-employee members of our Board under which they must accumulate and maintain, consistent with the terms of our stock ownership policy, shares of our common stock. For additional information, see “Ownership Of Our Stock - Stock Ownership Policies” starting on page
80
of this Proxy Statement.
|
ü
|
Annual Stockholder Advisory Vote on Named Executive Officer Compensation
.
We conduct an annual stockholder advisory vote on the compensation of our NEOs. The Compensation Committee considers the results of this advisory vote during the course of its deliberations on our executive compensation program.
|
ü
|
Stockholder Engagement that Includes our Compensation Committee Chair.
We engage with our stockholders on executive compensation matters and include our Compensation Committee Chairperson in these engagement activities.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
û
|
No Guaranteed Bonuses
.
We do not provide guaranteed bonuses to our executive officers.
|
û
|
No Special Executive Retirement Plans
.
We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our executive officers other than the plans and arrangements that are available to all employees. Our executive officers are eligible to participate in our defined contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), on the same basis as our other employees.
|
û
|
No Hedging; Pledging Requires Pre-Approval
.
We prohibit our employees, including our executive officers, and the non-employee members of our Board from hedging our equity securities. In addition, all pledging of our equity securities by our executive officers and members of our Board must be pre-approved by the Compensation Committee and, as a condition to pre-approving any pledge of our equity securities, the executive officer or member of our Board seeking to pledge securities must clearly demonstrate his or her financial capacity to repay any loan for which securities will be pledged as collateral without resort to the securities to be pledged.
|
û
|
No Tax Payments on Perquisites
.
We do not provide any tax reimbursement payments (including “gross-ups”) to our executive officers on any perquisites or other personal benefits.
|
û
|
No Gross-Up Payments on Post-Employment Compensation Arrangements
.
We do not provide any tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company.
|
û
|
No Special Welfare or Health Benefits
.
We do not provide our executive officers with any welfare or health benefit programs, other than participation in our broad-based employee programs.
|
û
|
No Stock Option Re-pricing
. We do not permit options to purchase shares of our common stock to be re-priced to a lower exercise price without the approval of our stockholders. We have never repriced our stock options.
|
COMPENSATION PHILOSOPHY AND OBJECTIVES
|
|
EXECUTIVE COMPENSATION
|
•
|
attracts and retains the best executive talent;
|
•
|
appropriately aligns our business objectives and stockholder interests;
|
•
|
maintains a reasonable balance across types and purposes of compensation, particularly with respect to fixed compensation objectives, short-term and long-term performance-based objectives and retention objectives;
|
•
|
motivates our executive officers to achieve our annual and long-term strategic goals and rewards performance based on the attainment of such goals;
|
•
|
appropriately considers risk and reward in the context of our business environment and long-range business plans;
|
•
|
recognizes individual value and contributions to our success;
|
•
|
considers but does not exclusively rely upon competitive market data; and
|
•
|
supports our succession planning objectives.
|
Type
|
|
Component
|
|
Objective
|
|
Fixed Compensation
|
|
Base Salary
|
|
l
|
attracts and retains talent
|
|
|
|
|
l
|
motivates strong business performance without encouraging excessive risk-taking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
|
|
Cash Incentives
|
|
l
|
attracts and retains talent
|
Compensation
|
|
|
|
l
|
drives the achievement of key business results on an annual or multi-year basis
|
|
|
|
l
|
recognizes individuals based on their contributions
|
|
|
|
|
l
|
performance-based and not guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
l
|
attracts and retains talent
|
|
|
|
|
l
|
drives the achievement of key long-term business results on an annual or multi-year basis
|
|
|
|
l
|
directly ties the interests of executive officers to the interests of our stockholders
|
|
|
|
|
l
|
recognizes individuals based on their continued contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE COMPENSATION
|
GOVERNANCE OF EXECUTIVE COMPENSATION PROGRAM
|
•
|
our performance against the financial, operational and strategic objectives established by the Compensation Committee and our Board;
|
•
|
each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;
|
•
|
the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;
|
•
|
the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and work as part of a team, all of which reflect our core values;
|
•
|
compensation parity among our executive officers;
|
•
|
our financial performance relative to our compensation and performance peers;
|
•
|
feedback from our investor outreach programs; and
|
•
|
with respect to his direct reports, the recommendations of our CEO.
|
|
EXECUTIVE COMPENSATION
|
•
|
consulting with the Compensation Committee chair and other members between Compensation Committee meetings;
|
•
|
providing competitive market data based on the compensation peer group for our executive officer positions and evaluating how the compensation we pay our executive officers compares both to our performance and to how the companies in our compensation peer group compensate their executives;
|
•
|
reviewing and analyzing the base salary levels, annual cash bonus opportunities, and LTI compensation opportunities of our executive officers;
|
•
|
assessing executive compensation trends within our industry, and providing updates on corporate governance and regulatory issues and developments;
|
•
|
reviewing the Compensation Discussion & Analysis in this Proxy Statement; and
|
•
|
assessing compensation risk to determine whether our compensation policies and practices are reasonably likely to have a material adverse impact on the Company.
|
|
EXECUTIVE COMPENSATION
|
ABIOMED
|
Hill-Rom Holdings
|
OSI Systems
|
Align Technology, Inc.
|
Hologic
|
Penumbra
|
Cooper Companies
|
ICU Medical, Inc.
|
ResMed
|
DENTSPLY SIRONA
|
Integra LifeSciences Holdings
|
Teleflex
|
Dexcom
|
LivaNova
|
Varian Medical Systems
|
Globus Medical, Inc.
|
Merit Medical Systems, Inc.
|
West Pharmaceutical Services, Inc.
|
Haemonetics Corporation
|
Nuvasive, Inc.
|
|
INDIVIDUAL COMPENSATION ELEMENTS
|
|
EXECUTIVE COMPENSATION
|
Name
|
|
Base Salary as of
December 31, 2017
|
|
Base Salary as of
December 30, 2018
|
|
Percentage
Change
|
|||||
Joe Kiani
|
|
$
|
1,060,900
|
|
|
$
|
1,092,728
|
|
|
3.0
|
%
|
Micah Young
|
|
365,000
|
|
|
401,500
|
|
|
10.0
|
|
||
Anand Sampath
|
|
445,578
|
|
|
458,946
|
|
|
3.0
|
|
||
Tao Levy
|
|
—
|
|
|
329,835
|
|
|
—
|
|
||
Bilal Muhsin
|
|
—
|
|
|
447,784
|
|
|
—
|
|
|
EXECUTIVE COMPENSATION
|
Metric
|
Weighting
|
Target Goal
|
Actual Performance
|
Achievement %
(1)
|
Payout %
(1)
|
Weighted Result
|
||||
Threshold
|
Maximum
|
Actual Performance
|
Minimum
|
Maximum
|
Actual Performance
|
|||||
Adjusted
Product Revenue
|
50%
|
$808.0
|
$827.4
|
90%
|
110%
|
102%
|
0%
|
200%
|
124%
|
146%
|
Non-GAAP EPS
|
50%
|
$2.80
|
$2.99
|
90%
|
110%
|
107%
|
0%
|
200%
|
168%
|
(1)
|
Pursuant to the
2018 Executive Bonus Incentive Plan
, payouts for a
chievement levels between the threshold and maximum were based on a linear interpolation between points along the funding
curve
.
|
Name
|
|
Base Salary as of
December 30, 2018
|
|
2018 Target
Cash Bonus
(% of Base Salary)
|
|
2018 Target
Cash Bonus
Amount
|
|
2018 Actual
Cash Bonus
Amount
|
|
2018 Award
(% of Target)
|
||||||
Joe Kiani
|
|
$
|
1,092,728
|
|
|
100%
|
|
$
|
1,092,728
|
|
|
$
|
1,595,383
|
|
|
146%
|
Micah Young
|
|
401,500
|
|
|
50
|
|
200,750
|
|
|
293,095
|
|
|
146
|
|||
Anand Sampath
|
|
458,946
|
|
|
50
|
|
229,473
|
|
|
335,031
|
|
|
146
|
|||
Tao Levy
|
|
329,835
|
|
|
50
|
|
164,918
|
|
|
240,780
|
|
|
146
|
|||
Bilal Muhsin
(1)
|
|
447,784
|
|
|
50
|
|
223,892
|
|
|
326,882
|
|
|
146
|
(1)
|
During fiscal year 2018, Mr. Muhsin was awarded an additional $55,000 cash bonus unrelated to the 2018 Executive Bonus Incentive Plan. This additional cash bonus was paid in connection with the successful and timely completion of a strategic management business objective and is not included within the amounts presented above. See “Bonus” on the Summary Compensation Table on page
61
.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
|
|
|
|
Stock Options
|
|
PSUs
|
|||||||||||||
Name
|
|
Total 2018 LTI Target Award Value
|
|
Options to Purchase Shares
of Common Stock
(number of shares)
|
|
Options to Purchase Shares
of Common Stock
(total fair value at grant date)
(1)(2)
|
|
PSUs at Target
(number of shares granted) (3) |
|
PSUs at Target
(grant date fair value)
(4)
|
|||||||||
Joe Kiani
|
|
$
|
11,984,569
|
|
|
104,362
|
|
|
$
|
2,984,635
|
|
|
$
|
103,507
|
|
|
$
|
8,999,934
|
|
Micah Young
|
|
1,198,391
|
|
|
10,436
|
|
|
298,458
|
|
|
10,350
|
|
|
899,933
|
|
||||
Anand Sampath
|
|
1,198,391
|
|
|
10,436
|
|
|
298,458
|
|
|
10,350
|
|
|
899,933
|
|
||||
Tao Levy
|
|
1,913,363
|
|
|
35,436
|
|
(5)
|
1,013,430
|
|
|
10,350
|
|
|
899,933
|
|
||||
Bilal Muhsin
|
|
1,198,391
|
|
|
10,436
|
|
|
298,458
|
|
|
10,350
|
|
|
899,933
|
|
(1)
|
Amounts set forth in this column reflect the grant date fair value of the option awards, computed in accordance with ASC Topic 718. All of these amounts reflect certain assumptions with respect to the option awards and do not necessarily correspond to the actual value that will be recognized by our NEOs. The actual value, if any, that may be realized from an option award is contingent upon the satisfaction of the conditions to vesting of that award, and upon the excess of the stock price over the exercise price, if any, on the date the option award is exercised. See Note 16 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018 that was filed with the SEC on February 26, 2019 for a discussion of the assumptions made in determining the grant date fair value of the stock options.
|
(2)
|
The 2018 stock option awards were granted on
March 16, 2018
.
|
(3)
|
Reflects the target number of shares subject to PSUs, assuming all performance goals and other requirements are met. As described below, the PSUs earned will range from 50% - 200% of target based on the achievement of performance goals, which vests in the form of shares of our common stock following the conclusion of the three-year performance period.
|
(4)
|
The 2018 PSU awards were granted on
March 16, 2018
. The number of shares was determined by dividing the economic value by the closing stock price per share of $86.95 on the date of grant. Any calculation that results in a fractional share was rounded down to the nearest whole share.
|
(5)
|
Mr. Levy joined Masimo Corporation on January 3, 2018. Upon joining Masimo, Mr. Levy was awarded an option to purchase 25,000 shares of common stock, vesting 20% per year over five years with an exercise price equal to the fair market value of common stock at the date the option was granted.
|
LTI Award Type
|
|
Purpose
|
|
Performance Goal(s)
|
|
Vesting Terms
|
Stock options (25% of total target value)
|
|
Retain and reward executives for driving long-term stockholder value
|
|
Increase in stockholder value
(market valuation) |
|
Vest annually over a five year period (20% per year)
|
PSUs (75% of total target value)
|
|
Retain and reward executives for the achievement of multi-year performance goals
|
|
2020 Adjusted
Product Revenue
2
and
2020 Non-GAAP Product Operating Margin
2
|
|
Vest in 2021 with opportunity that ranges from 50% - 200%
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
|
EXECUTIVE COMPENSATION
|
OTHER COMPENSATION POLICIES AND PRACTICES
|
•
|
based on erroneous data;
|
•
|
received during the three-year period preceding the date on which we become required to prepare an accounting restatement; and
|
•
|
in excess of what would have been paid if calculated under the restatement.
|
|
EXECUTIVE COMPENSATION
|
TAX AND ACCOUNTING CONSIDERATIONS
|
|
EXECUTIVE COMPENSATION
|
|
EXECUTIVE COMPENSATION
|
COMPENSATION COMMITTEE REPORT
|
|
Compensation Committee
|
|
Mr. Craig Reynolds
|
|
Mr. Thomas Harkin
|
|
Mr. Adam Mikkelson
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
|
|
EXECUTIVE COMPENSATION
|
|
|
EXECUTIVE COMPENSATION
|
SUMMARY COMPENSATION TABLE
|
Name and Principal Position(s)
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
(1)
|
|
Option
Awards (1) |
|
Non-Equity
Incentive Plan Compensation (2) |
|
All Other
Compensation |
|
Total
|
||||||||||||||
Joe Kiani
|
|
2018
|
|
$
|
1,139,855
|
|
|
$
|
—
|
|
|
$
|
8,999,934
|
|
|
$
|
2,984,635
|
|
|
$
|
1,595,383
|
|
|
$
|
327,349
|
|
(3)
|
$
|
15,047,156
|
|
Chief Executive Officer and Chairman (PEO)
|
|
2017
|
|
1,045,450
|
|
|
—
|
|
|
9,087,000
|
|
|
2,845,199
|
|
|
1,060,900
|
|
|
152,306
|
|
|
14,190,855
|
|
|||||||
|
|
2016
|
|
1,015,000
|
|
|
—
|
|
|
—
|
|
|
3,930,900
|
|
|
3,654,079
|
|
|
397,791
|
|
|
8,997,770
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Micah Young
|
|
2018
|
|
383,250
|
|
|
—
|
|
|
899,933
|
|
|
298,458
|
|
|
293,095
|
|
|
4,390
|
|
(4)
|
1,879,126
|
|
|||||||
Executive Vice President, Finance & Chief Financial Officer (PFO)
|
|
2017
|
|
77,212
|
|
|
—
|
|
|
—
|
|
|
1,397,802
|
|
|
—
|
|
|
300,000
|
|
|
1,775,014
|
|
|||||||
|
|
2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Anand Sampath
|
|
2018
|
|
452,262
|
|
|
—
|
|
|
899,933
|
|
|
298,458
|
|
|
335,031
|
|
|
9,326
|
|
(5)
|
1,995,010
|
|
|||||||
Chief Operating Officer
|
|
2017
|
|
439,089
|
|
|
—
|
|
|
908,700
|
|
|
284,520
|
|
|
222,789
|
|
|
7,950
|
|
|
1,863,048
|
|
|||||||
|
|
2016
|
|
426,340
|
|
|
—
|
|
|
—
|
|
|
393,090
|
|
|
760,947
|
|
|
7,950
|
|
|
1,588,327
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Tao Levy
(6)
|
|
2018
|
|
324,917
|
|
|
50,000
|
|
(7)
|
899,933
|
|
|
1,013,430
|
|
|
240,780
|
|
|
28,250
|
|
(8)
|
2,557,310
|
|
|||||||
Executive Vice President, Business Development
|
|
2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Bilal Muhsin
(9)
|
|
2018
|
|
432,360
|
|
|
55,000
|
|
(10)
|
899,933
|
|
|
298,458
|
|
|
326,882
|
|
|
12,151
|
|
(11)
|
2,024,784
|
|
|||||||
Executive Vice President, Engineering, Marketing & Regulatory Affairs
|
|
2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
EXECUTIVE COMPENSATION
|
(1)
|
Amounts set forth in the “Stock Awards” and “Option Awards” columns for
2016
,
2017
and
2018
reflect the grant date fair value of stock and option awards granted in the year indicated, computed in accordance with ASC Topic 718. These amounts reflect certain assumptions with respect to the stock and option awards and do not necessarily correspond to the actual value that will be recognized by the NEOs. The actual value, if any, that may be realized from a stock award or an option award is contingent upon the satisfaction of the conditions to vesting in that award, and, in the case of option awards, upon the excess of the stock price over the exercise price, if any, on the date the option award is exercised. See Note 16 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended
December 29, 2018
that was filed with the SEC on
February 26, 2019
for a discussion of the grant date fair value of the stock awards and the assumptions made in determining the grant date fair value of the PSUs, RSUs and stock options granted in our fiscal years
2016
,
2017
and
2018
. For PSUs, amounts reflect the target number of shares subject to the PSUs, assuming all performance goals and other requirements are met. As described below, the PSUs earned will range from 50% - 200% of target based on the achievement of performance goals, which vests in the form of shares of our common stock following the conclusion of the three-year performance period. The maximum potential value of the PSUs (assuming 200% of target, the maximum potential value of the award) granted to each of our NEOs was as follows: Mr. Kiani: $17,999,867 and Messrs. Young, Sampath, Levy and Muhsin: $1,799,865.
|
(2)
|
All amounts for fiscal 2018 and 2017 were paid pursuant to the Executive Bonus Incentive Plan. All amounts for fiscal 2016 were paid pursuant to our prior executive bonus plans.
|
(3)
|
Consists of $
7,063
in retirement savings plan matching contributions,
$161,347
related to the net incremental costs of certain lodging, meals and other travel-related expenses incurred by his family and household members accompanying him during certain business travel pursuant to Mr. Kiani’s employment agreement (see “—Employment Arrangements with Named Executive Officers—Employment Agreement with Mr. Kiani” on page
67
of this Proxy Statement), and $
158,939
related to the net incremental costs of security personnel and security services provided to Mr. Kiani during certain personal, non-business-related occasions, which represents the actual amounts paid by us for such security arrangements for Mr. Kiani that were not security arrangements provided at our business facilities, and for business travel. We have established a security program for Mr. Kiani that provides physical and personal security services as they may, from time to time, be deemed necessary. This security program is not limited to providing security services only at business facilities or functions or during business-related travel and can include providing security services during certain non-business occasions, including at his primary residence and during personal travel. We do not consider any such security services to be personal benefits as the requirement for this occasional security is directly the result of Mr. Kiani’s role as our CEO and as our CEO, his personal safety is vital to our continued success.
|
(4)
|
Consists of
$3,201
in retirement savings plan matching contributions,
$300
in employer HSA contributions and
$889
of other travel-related expenses.
|
(5)
|
Consists of
$8,250
in retirement savings plan matching contributions and
$1,076
of other travel-related expenses.
|
(6)
|
Mr. Levy joined Masimo Corporation on January 3, 2018.
|
(7)
|
Consists solely of a sign-on bonus.
|
(8)
|
Consists solely of
$8,250
in retirement savings plan matching contributions and
$20,000
of a relocation allowance.
|
(9)
|
Mr. Muhsin was promoted to Executive Vice President, Engineering, Marketing & Regulatory Affairs effective March 1, 2018.
|
(10)
|
Consist solely of a one-time cash bonus related to the successful and timely completion of a strategic management business objective.
|
(11)
|
Consists of
$8,250
in retirement savings plan matching contributions,
$300
in employer HSA contributions and
$3,601
of other travel-related expenses.
|
|
|
EXECUTIVE COMPENSATION
|
GRANTS OF PLAN-BASED AWARDS DURING FISCAL YEAR 2018
|
|
|
Estimated Possible Payout Under Non-Equity
Incentive Plan Awards (1) |
|
Estimated Future Payouts Under
Equity Incentive Plan Awards (2) |
|
All Other
Option Awards: Number of Shares of Stock or Units (#) (3) |
|
Exercise Price
Per Share ($/Sh) |
|
Grant Date
Fair Value of Stock and Option Awards ($) (4) |
||||||||||||||||||||||||
Name
|
|
Grant Date
|
|
Threshold
($) |
|
Target
($) |
|
Maximum
($) |
|
Threshold
(#) |
|
Target
(#) |
|
Maximum
(#) |
|
|||||||||||||||||||
Joe Kiani
|
|
March 16, 2018
|
|
$
|
—
|
|
|
$
|
1,595,383
|
|
|
$
|
3,190,766
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51,753
|
|
|
103,507
|
|
|
207,014
|
|
|
—
|
|
|
—
|
|
|
8,999,934
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
104,362
|
|
|
86.95
|
|
|
2,984,635
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Micah Young
|
|
March 16, 2018
|
|
—
|
|
|
293,095
|
|
|
586,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,175
|
|
|
10,350
|
|
|
20,700
|
|
|
—
|
|
|
—
|
|
|
899,933
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
298,458
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Anand Sampath
|
|
March 16, 2018
|
|
—
|
|
|
335,031
|
|
|
670,062
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,175
|
|
|
10,350
|
|
|
20,700
|
|
|
—
|
|
|
—
|
|
|
899,933
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
298,458
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Tao Levy
|
|
March 16, 2018
|
|
—
|
|
|
240,780
|
|
|
481,560
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,175
|
|
|
10,350
|
|
|
20,700
|
|
|
—
|
|
|
—
|
|
|
899,933
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
86.95
|
|
|
714,972
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
298,458
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE COMPENSATION
|
|
|
Estimated Possible Payout Under Non-Equity
Incentive Plan Awards (1) |
|
Estimated Future Payouts Under
Equity Incentive Plan Awards (2) |
|
All Other
Option Awards: Number of Shares of Stock or Units (#) (3) |
|
Exercise Price
Per Share ($/Sh) |
|
Grant Date
Fair Value of Stock and Option Awards ($) (4) |
||||||||||||||||||||||||
Name
|
|
Grant Date
|
|
Threshold
($) |
|
Target
($) |
|
Maximum
($) |
|
Threshold
(#) |
|
Target
(#) |
|
Maximum
(#) |
|
|||||||||||||||||||
Bilal Muhsin
|
|
March 16, 2018
|
|
—
|
|
|
326,882
|
|
|
653,764
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,175
|
|
|
10,350
|
|
|
20,700
|
|
|
—
|
|
|
—
|
|
|
899,933
|
|
|||||
|
|
March 16, 2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
298,458
|
|
(1)
|
Represents possible payments under the Executive Bonus Incentive Plan based on the base salary in effect for each NEO as of March 16, 2018, the grant date of the award. The fiscal 2018 Executive Bonus Incentive Plan provided that amounts payable thereunder would be based on the base salary in effect for each NEO as of the end of fiscal 2018, and actual payouts were therefore based on base salaries as of the end of fiscal 2018.
|
(2)
|
For fiscal 2018, the Compensation Committee selected fiscal 2020 Adjusted Product Revenue
2
and fiscal 2020 Non-GAAP Operating Profit Margin
2
as the performance measures for the target PSU award percentages, each weighted equally. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).
|
(3)
|
This option vests over a five-year period, with 20% of the shares subject to the option vesting on each anniversary of the grant date.
|
(4)
|
For PSUs, amounts reflect the fair value of the award as of the grant date assuming achievement of the “target” performance achievement level. For stock options,
amounts reflect the fair value per share as of the grant date of the award multiplied by the number of shares granted. Regardless of the value on the grant date, the actual value will depend on the market value of our common stock on a date in the future when an award vests or stock option is exercised. As described below, the PSUs earned will range from 50% - 200% of target based on the achievement of performance goals, which vests in the form of shares of our common stock following the conclusion of the three-year performance period. The maximum potential value of the PSUs (assuming 200% of target, the maximum potential value of the award) granted to each of our NEOs was as follows: Mr. Kiani: $17,999,867 and Messrs. Young, Sampath, Levy and Muhsin: $1,799,865.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
|
EXECUTIVE COMPENSATION
|
OUTSTANDING EQUITY AWARDS AT DECEMBER 29, 2018
|
|
|
Option Awards
(1)
|
|
Stock Awards
|
|
||||||||||||||||||
Name
|
|
Grant Date
|
|
Number of
Securities Underlying Unexercised Options (#) Exercisable |
|
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
|
|
||||||||
Joe Kiani
|
|
2/22/2011
|
|
300,000
|
|
|
—
|
|
|
$
|
30.06
|
|
|
2/22/2021
|
|
|
—
|
|
|
—
|
|
|
|
|
|
10/27/2011
|
|
300,000
|
|
|
—
|
|
|
20.19
|
|
|
10/27/2021
|
|
|
—
|
|
|
—
|
|
|
||
|
|
5/28/2013
|
|
300,000
|
|
|
—
|
|
|
21.97
|
|
|
5/28/2023
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/18/2014
|
|
240,000
|
|
|
60,000
|
|
|
28.03
|
|
|
2/18/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/15/2015
|
|
180,000
|
|
|
120,000
|
|
|
38.76
|
|
|
6/15/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
11/4/2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,700,000
|
|
(2)
|
$
|
111,915,000
|
|
(2)
|
|
|
|
2/29/2016
|
|
120,000
|
|
|
180,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/5/2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80,000
|
|
(3)
|
7,269,600
|
|
(3)
|
||
|
|
6/5/2017
|
|
20,000
|
|
|
80,000
|
|
|
90.87
|
|
|
6/5/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103,507
|
|
(4)
|
8,999,934
|
|
(4)
|
||
|
|
3/16/2018
|
|
—
|
|
|
104,362
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Micah Young
|
|
10/16/2017
|
|
10,000
|
|
|
40,000
|
|
|
84.97
|
|
|
10/16/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(5)
|
899,933
|
|
(5)
|
||
|
|
3/16/2018
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Anand Sampath
|
|
5/28/2013
|
|
30,000
|
|
|
—
|
|
|
21.97
|
|
|
5/28/2023
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/18/2014
|
|
24,000
|
|
|
6,000
|
|
|
28.03
|
|
|
2/18/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
8/12/2014
|
|
40,000
|
|
|
10,000
|
|
|
21.77
|
|
|
8/12/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/20/2015
|
|
18,000
|
|
|
12,000
|
|
|
31.01
|
|
|
3/20/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/29/2016
|
|
12,000
|
|
|
18,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/5/2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,000
|
|
(6)
|
726,960
|
|
(6)
|
||
|
|
6/5/2017
|
|
2,000
|
|
|
8,000
|
|
|
90.87
|
|
|
6/5/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(5)
|
899,933
|
|
(5)
|
||
|
|
3/16/2018
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Tao Levy
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(5)
|
899,933
|
|
(5)
|
||
|
|
3/16/2018
|
|
—
|
|
|
25,000
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
10,436
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Option Awards
(1)
|
|
Stock Awards
|
|
||||||||||||||||||
Name
|
|
Grant Date
|
|
Number of
Securities Underlying Unexercised Options (#) Exercisable |
|
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Bilal Muhsin
|
|
8/20/2014
|
|
10,000
|
|
|
5,000
|
|
|
21.69
|
|
|
8/20/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
5/13/2015
|
|
30,000
|
|
|
20,000
|
|
|
34.51
|
|
|
5/13/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/29/2016
|
|
12,000
|
|
|
18,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
8/14/2017
|
|
6,000
|
|
|
24,000
|
|
|
85.54
|
|
|
8/14/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(5)
|
899,933
|
|
(5)
|
||
|
|
3/16/2018
|
|
—
|
|
|
10,346
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For each NEO, the shares listed in this table are subject to a single stock option award carrying the varying exercise prices as set forth herein. The shares subject to each stock option vest over a five-year period, with 20% of the shares subject to the option vesting on each anniversary of the grant date, with partial or full vesting under certain circumstances upon a change in control of Masimo or various events specified in the NEO’s employment agreement or severance agreement, if applicable. The option awards remain exercisable until they expire ten years from the date of grant subject to earlier expiration following termination of employment.
|
(2)
|
Represents the original grant date fair value of an award of 2.7 million RSUs with contingent vesting granted to Mr. Kiani in November 2015 in connection with the amendment and restatement of his employment agreement. In July 2017, Mr. Kiani’s employment agreement was amended, at which time the 2.7 million RSUs were remeasured, resulting in a revaluation of the modified award under ASC Topic 718 to $259,011,000, representing the fair value of the RSUs as of the date of the 2017 amendment to the employment agreement.
|
(3)
|
Represents the grant date fair value of an award of
80,000
RSUs, vesting over a five-year period, with 20% of the units subject to Masimo common stock vesting on each anniversary of the grant date, with partial or full vesting under certain circumstances upon a change in control of Masimo or various events specified in the NEO’s employment agreement or severance agreement, if applicable.
|
(4)
|
Represents the target number of shares issuable pursuant to this PSU award. The target number of shares issuable pursuant to this PSU award was
103,507
shares and the grant date fair value of such
103,507
shares was $
8,999,934
. The maximum number of shares issuable pursuant to this PSU award was 207,014 shares and the grant date fair value of such 207,014 shares was $17,999,867.
|
(5)
|
Represents the target number of shares issuable pursuant to this PSU award. The target number of shares issuable pursuant to this PSU award was
10,350
shares and the grant date fair value of such
10,350
shares was $
899,933
. The maximum number of shares issuable pursuant to this PSU award was 20,700 shares and the grant date fair value of such 20,700 shares was $1,799,865.
|
(6)
|
Represents the grant date fair value of an award of
8,000
RSUs, vesting over a five-year period, with 20% of the units subject to Masimo common stock vesting on each anniversary of the grant date, with partial or full vesting under certain circumstances upon a change in control of Masimo or various events specified in the NEO’s employment agreement or severance agreement, if applicable.
|
|
EXECUTIVE COMPENSATION
|
OPTIONS EXERCISES AND STOCK VESTED DURING FISCAL 2018
|
|
|
Option Awards
|
|
Stock awards
|
||||||||||
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
Value
Realized on
Exercise ($)
(1)
|
|
Number of
Shares Acquired on Vesting (#) |
|
Value
Realized on
Vesting ($)
(2)
|
||||||
Joe Kiani
|
|
600,000
|
|
|
$
|
56,472,897
|
|
|
20,000
|
|
|
$
|
1,721,600
|
|
Micah Young
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Anand Sampath
|
|
30,000
|
|
|
2,694,300
|
|
|
2,000
|
|
|
172,160
|
|
||
Tao Levy
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Bilal Muhsin
|
|
30,000
|
|
|
2,913,206
|
|
|
—
|
|
|
—
|
|
(1)
|
The value realized equals the excess of the sale price of our common stock at the date of exercise over the option exercise price, multiplied by the number of shares for which the option was exercised.
|
(2)
|
The value realized equals the closing sale price of our common stock as reported by Nasdaq at the date of vesting multiplied by the number of shares which were granted.
|
EMPLOYMENT ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
|
•
|
Eligibility to receive a base salary of $1,000,000 per year, which is subject to adjustment by our Board or the Compensation Committee, and was adjusted to
$1,092,728
per year in July 2018.
|
•
|
Eligibility to receive an annual bonus equal to 100% of his base salary in the event we attain certain performance criteria set by our Board or the Compensation Committee under our annual incentive plan for our executive officers. The bonus payable will not be increased above the payment level determined based on actual achievement of the applicable performance criteria. In addition, Mr. Kiani’s annual bonus payable if all applicable performance criteria are achieved at maximum levels will not exceed 200% of his base salary.
|
•
|
Under the prior employment agreement, during fiscal year 2016, Mr. Kiani was granted a non-qualified stock option to purchase an aggregate of at least 300,000 shares of common stock that vests at a rate of 20% per year, with an exercise price per share equal to 100% of the fair market value of one share of common stock on the date of grant. Under the Amended CEO Agreement, Mr. Kiani is eligible to receive equity awards with a value at least consistent with equity awards granted to comparable CEOs of comparable companies (taking into account revenues, market capitalization and industry). Following approval of our 2017 Equity Plan by our stockholders at the 2017 Annual Meeting, Mr. Kiani agreed that the only equity awards he may be awarded must be approved by the
|
|
EXECUTIVE COMPENSATION
|
•
|
Right to participate in or receive benefits under all of our employee benefits plans and to be eligible to participate in any pension plan, profit-sharing plan, savings plan, stock option plan, life insurance, health-and-accident plan or similar arrangements made available to members of our management.
|
•
|
Reimbursement for all reasonable expenses incurred and paid by him in the course of the performance of his duties under the Amended CEO Agreement and reimbursement for all reasonable travel and lodging expenses for his family and household members in the event they accompany him during business travel, which includes travel and hospitality expenses for first class airplane travel and accommodations, including travel by private or chartered aircraft. To the extent inconsistent with the Amended CEO Agreement, Mr. Kiani is exempt from our travel and expense policy and our expense reimbursement policy.
|
•
|
If Mr. Kiani’s employment is terminated for cause, he is entitled to receive his full base salary through the date of termination.
|
•
|
If Mr. Kiani’s employment is terminated as a result of his death, his designee or estate is entitled to receive his full base salary through the date of termination and an additional amount equal to 50% of his base salary then in effect as of the date of his death for each of three consecutive years following his death, which will be paid in substantially equal monthly installments over the three-year period.
|
•
|
If Mr. Kiani’s employment is terminated as a result of his disability, he is entitled to receive his full base salary through the date of termination and an additional amount equal to 75% of his base salary then in effect for each of two consecutive years following the date of termination, which will be paid in substantially equal monthly installments over the two-year period.
|
•
|
In the event (i) we terminate Mr. Kiani’s employment other than for cause, death or disability, or (ii) Mr. Kiani terminates his employment with us for Good Reason (each, a “Qualifying Termination”), Mr. Kiani will receive the following payments and benefits:
|
◦
|
payment of an amount equal to his full base salary through the date of termination, if applicable, and an additional amount equal to twice the sum of his base salary then in effect and the average annual bonus paid to him over the prior three years, which will be paid in installments over two years pursuant to our normal payroll practices; and
|
◦
|
all of his outstanding options and other equity awards will immediately vest.
|
|
EXECUTIVE COMPENSATION
|
•
|
termination for “cause” generally means his termination of employment as a result of his willful and continued failure to substantially perform his duties under the Amended CEO Agreement, his willful engaging in gross misconduct materially injurious to us or his willful violation of the confidentiality and trade secret protection provisions contained in a restrictive covenant agreement with us if the violation results in demonstrably material injury to us. Any termination for cause must be approved by at least 75% of the entire membership of our Board.
|
•
|
termination for “Good Reason” generally means a termination of his employment by Mr. Kiani subsequent to (A) a diminution in his responsibilities, duties and authority, including him ceasing to serve as CEO of the Company or him ceasing to serve as Chairman of the Board or the designation of any director other than him as the lead director of the Board, (B) any reduction in his rate of compensation or fringe benefits, (C) Masimo’s failure to comply with certain obligations relating to his compensation or place of work, (D) the provision of a notice not to renew the Amended CEO Agreement by Masimo, or (E) (1) a change in control (as defined below) was triggered as a result of a change in more than one third of the directors on the Board during a rolling twenty-four month period, or (2) following, or in connection with, a “change in control” triggered as a result of an acquisition, (i) the highest level of parent entity holding, directly or indirectly, majority voting control of the Company after the “change in control” (the “Acquirer Parent”) is not a publicly-traded company, (ii) he does not become the, or is removed from the position of, CEO and Chairman of the Board of the Acquirer Parent, with such position being on terms and conditions reasonably acceptable to him, provided that the terms and conditions of employment providing for total compensation with a value comparable to the total compensation paid to the chief executive officers of comparable companies shall be deemed to be reasonable, or (iii) any other director is designated the lead director of the board of directors of the Acquirer Parent; provided that, in the case of clauses (A), (B), (C) and (E) above, “Good Reason” will not be deemed to exist unless certain notice and cure period conditions are met and his resignation for Good Reason is effective within thirty days after the expiration of the cure period.
|
•
|
a “change in control” generally means (i) the acquisition by any person or group of more than 35% of our outstanding voting stock, (ii) the acquisition of our assets that have a total fair market value of 40% or more of the total fair market value of all of our assets immediately before the acquisition by any person or group, or (iii) a change in
|
|
EXECUTIVE COMPENSATION
|
•
|
the participant must execute, within 60 days of termination, a general release of claims (which becomes irrevocable within such 60-day period), a non-disparagement agreement, an intellectual property nondisclosure agreement, and a non-competition agreement that covers the period during which the participant is receiving severance benefits;
|
•
|
a participant entitled to the basic benefit must not have received any change in control severance benefits under the Severance Plan or any severance benefits equal to, or better than, the basic severance benefits pursuant to another arrangement between the participant and us;
|
•
|
a participant entitled to the change in control benefit must not have received any basic severance benefits under the Severance Plan or any severance benefits equal to, or better than, the change in control severance benefits pursuant to another arrangement between the participant and us; and
|
•
|
the participant must waive any and all rights, benefits and privileges to severance benefits that he might otherwise be entitled to receive under any other oral or written plan, employment agreement, or arrangement with us.
|
|
EXECUTIVE COMPENSATION
|
•
|
an amount equal to annual salary determined at the highest rate in effect during the one-year period immediately prior to the date of termination, paid in installments according to normal payroll practices over 12 months commencing within 60 days following the participant’s termination;
|
•
|
COBRA continuation coverage at Company expense during the 12 months following termination; and
|
•
|
the right to purchase life insurance through the Company during the 12 month period following his termination.
|
•
|
if the participant has a covered termination because his current job is not offered to him on the date of the change in control, the participant will receive (i) an amount equal to his annual salary determined at the highest rate in effect during the one-year period immediately prior to the date of the covered termination, plus the average annual bonus paid to him over the three-year period prior to the change in control, and (ii) life insurance for the 12-month period following his termination;
|
•
|
if the participant has a covered termination for a reason not described in the preceding clause, instead of one times base salary, he will receive two times base salary;
|
•
|
the participant will receive COBRA continuation coverage at Company expense during the 12-month period following his termination; and
|
•
|
upon the change in control, 50% of the participant’s unvested stock options and other equity-based awards shall be fully accelerated as of the change in control and 100% of the unvested stock options and other equity-based awards shall be fully accelerated upon the participant’s termination under circumstances that entitle him to change in control severance benefits noted above.
|
•
|
“cause” generally means the participant’s: (i) refusal or failure to perform his duties with us or to comply in all respects with our policies or the policies of any affiliate of ours after notice of a deficiency and failure to cure the deficiency within three business days following notice from us, unless he has delivered a bona fide notice of termination for Good Reason to us, and the reason for the termination has not been cured by us within 30 days of receipt of notice; (ii) engagement in illegal or unethical conduct that could be injurious to us or our affiliates;
|
1
|
Messrs. Levy and Young are currently not entitled to any Basic Severance Benefits under the Severance Plan. In addition, each of Messrs Levy’s and Young’s Change in Control Severance Benefits under the Severance Plan are currently limited to the acceleration of 50% of their respective unvested stock options and other equity-based awards upon a covered termination on or after a change in control.
|
|
EXECUTIVE COMPENSATION
|
•
|
“change in control” generally means: (i) a merger or consolidation or a sale of all or substantially all of our assets unless more than 50% of the voting securities of the surviving or acquiring entity are held by our stockholders as of immediately prior to the transaction; (ii) the approval by our stockholders of the sale of all or substantially all of our assets; or (iii) without the prior approval of our Board, the acquisition by any person or group of securities representing beneficial ownership of 50% or more of our outstanding voting securities.
|
•
|
“Good Reason” generally means, provided that the executive has provided us with notice of one of the following events within 15 days after it occurs, and we fail to cure the event within 30 days after receiving notice from the executive: (i) any material reduction by us in the participant’s annual salary; (ii) any requirement that the participant change his principal location of work to any location that is more than 40 miles from the address of our current principal executive offices; or (iii) any material change in the participant’s responsibilities.
|
|
EXECUTIVE COMPENSATION
|
|
|
Termination
|
|
|
||||||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Options |
|
Upon Death
|
|
Upon
Disability |
|
By Masimo
Without Cause or by Mr. Kiani for Good Reason |
|
Change In
Control (CIC)
W
ithout
Termination and Two Years
Post-CIC Continuous Service
|
||||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
—
|
|
|
811,710
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Value of Equity Award Shares Accelerated
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
56,195,997
|
|
|
$
|
—
|
|
Special Payment - Value of Award Shares Vesting
(2)(3)
|
|
—
|
|
|
—
|
|
|
285,012,000
|
|
|
285,012,000
|
|
||||
Special Payment - Cash Payment
(4)(5)
|
|
—
|
|
|
—
|
|
|
35,000,000
|
|
|
35,000,000
|
|
||||
Other Cash Payments
|
|
1,639,092
|
|
|
1,639,092
|
|
|
6,392,364
|
|
|
—
|
|
||||
Continuation of Benefits
(6)
|
|
16,942
|
|
|
16,942
|
|
|
16,942
|
|
|
—
|
|
||||
Total Cash Benefits and Payments
|
|
$
|
1,656,034
|
|
|
$
|
1,656,034
|
|
|
$
|
382,617,303
|
|
|
$
|
320,012,000
|
|
(1)
|
Consists of the value of in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Kiani as of
December 29, 2018
, the vesting of which would be accelerated.
|
(2)
|
Upon the qualifying event, all of the Award Shares subject to the RSU award granted to Mr. Kiani under the Amended CEO Agreement will become vested. The amount represents the value of 100% of the Award Shares subject to the RSU award based on the closing stock price of
$105.56
per share.
|
(3)
|
Subject to Mr. Kiani’s continuous employment following a Change in Control, 50% of the Award Shares will vest on each of the first two anniversaries of such Change in Control. The amount represents the value of the Award Shares subject to the RSU award based on the closing stock price of
$105.56
per share.
|
(4)
|
Upon the qualifying event, the Company shall pay to Mr. Kiani the Cash Payment as consideration for his agreement to comply with certain non-competition and non-solicitation obligations under a non-competition and confidentiality agreement between Masimo and Mr. Kiani, and will be subject to repayment to Masimo if Mr. Kiani materially breaches any of such obligations.
|
(5)
|
Subject to Mr. Kiani’s continuous employment following a Change in Control, 50% of the Cash Payment will vest and become payable on each of the first two anniversaries of such Change in Control.
|
(6)
|
Presumes a remaining term of one year. Comprised of the cash equivalent of the Company’s cost of standard employee benefits, including health, dental and vision insurance for Mr. Kiani and his eligible dependents for 12 months, and life, accidental death and dismemberment and long-term disability insurance for Mr. Kiani for 12 months.
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Options
|
|
By Masimo
Without
Cause
Outside
a Change In
Control
|
|
By Masimo
Without Cause or
by Mr. Young for
Good Reason in
Connection with
a Change In
Control
|
|
Change In
Control
Without
Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
69,170
|
|
|
—
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
(1)
|
|
$
|
—
|
|
|
$
|
2,995,322
|
|
(1)
|
$
|
—
|
|
|
Cash Payments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Continuation of Benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
—
|
|
|
$
|
2,995,322
|
|
|
$
|
—
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Young as of
December 29, 2018
, the vesting of which would be accelerated.
|
|
EXECUTIVE COMPENSATION
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Options
|
|
By Masimo
Without
Cause
Outside
a Change In
Control
|
|
By Masimo
Without Cause or by Mr. Sampath for Good Reason in Connection with a Change In Control |
|
Change In
Control
Without
Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
|
|
91,170
|
|
|
45,585
|
|
|
||||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
|
|
$
|
—
|
|
|
$
|
6,550,362
|
|
(1)
|
$
|
3,275,181
|
|
(2)
|
Cash Payments
|
|
458,946
|
|
|
1,357,481
|
|
|
—
|
|
|
|||
Continuation of Benefits
(3)
|
|
33,935
|
|
(4)
|
35,262
|
|
(5)
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
492,881
|
|
|
$
|
7,943,105
|
|
|
$
|
3,275,181
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Sampath as of
December 29, 2018
, the vesting of which would be accelerated.
|
(2)
|
Consists of the value of 50% of the in-the-money stock options 50% of the unvested PSUs (on the basis of 50% target achievement) that were held by Mr. Sampath as of
December 29, 2018
, the vesting of which would be accelerated.
|
(3)
|
Assumes that Mr. Sampath does not commence employment with another employer during the period from
December 30, 2018
through
December 28, 2019
.
|
(4)
|
Comprised of health, dental and vision insurance benefits for Mr. Sampath and his dependents for 12 months.
|
(5)
|
Comprised of health, dental and vision insurance benefits for Mr. Sampath and his dependents for 12 months and life insurance for Mr. Sampath for 12 months.
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Options
|
|
By Masimo
Without
Cause
Outside
a Change In
Control
|
|
By Masimo
Without Cause or
by Mr. Levy for
Good Reason in
Connection with
a Change In
Control
|
|
Change In
Control
Without
Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
27,085
|
|
|
—
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
|
|
$
|
—
|
|
|
$
|
1,318,486
|
|
(1)
|
$
|
—
|
|
|
Cash Payments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Continuation of Benefits
(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
—
|
|
|
$
|
1,318,486
|
|
|
$
|
—
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Levy as of
December 29, 2018
, the vesting of which would be accelerated.
|
|
EXECUTIVE COMPENSATION
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Options
|
|
By Masimo
Without
Cause
Outside
a Change In
Control
|
|
By Masimo
Without Cause or
by Mr. Muhsin for
Good Reason in
Connection with
a Change In
Control
|
|
Change In
Control
Without
Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
96,170
|
|
|
48,085
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
|
|
$
|
—
|
|
|
$
|
5,711,512
|
|
(1)
|
$
|
2,855,756
|
|
(2)
|
Cash Payments
|
|
447,784
|
|
|
1,004,529
|
|
|
—
|
|
|
|||
Continuation of Benefits
(3)
|
|
31,502
|
|
(4)
|
32,743
|
|
(5)
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
479,286
|
|
|
$
|
6,748,784
|
|
|
$
|
2,855,756
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Muhsin as of
December 29, 2018
, the vesting of which would be accelerated.
|
(2)
|
Consists of the value of 50% of the in-the-money stock options and 50% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Muhsin as of
December 29, 2018
, the vesting of which would be accelerated.
|
(3)
|
Assumes that Mr. Muhsin does not commence employment with another employer during the period from
December 30, 2018
through
December 28, 2019
.
|
(4)
|
Comprised of health, dental and vision insurance benefits for Mr. Muhsin and his eligible dependents for 12 months.
|
(5)
|
Comprised of health, dental and vision insurance benefits for Mr. Muhsin and his eligible dependents for 12 months and life insurance for Mr. Muhsin for 12 months.
|
|
EXECUTIVE COMPENSATION
|
PAY RATIO DISCLOSURE
|
•
|
the median of the annual total compensation of all employees of our Company (other than our CEO) was
$110,932
; and
|
•
|
the annual total compensation of our CEO, Mr. Kiani, was
$15,047,156
.
|
•
|
To identify our median employee, we selected total cash compensation, which we calculated as annual base pay (using a reasonable estimate of the hours worked during 2017 for hourly employees and actual salary paid for our remaining employees) and the actual annual cash incentive awards earned for fiscal 2017, as the compensation measure to be used to compare the compensation of our employees as of October 31, 2017 for the 12-month period from January 1, 2017 through December 31, 2017.
|
•
|
As of October 31, 2017, our employee population consisted of approximately 1,420 individuals, with approximately 983 employees in the United States and approximately 437 employees outside the United States. In determining this population, we considered the employees of our subsidiaries and all of our worldwide employees other than our CEO, whether employed on a full-time, part-time, temporary or seasonal basis. We did not include any contractors or other non-employee workers in our employee population.
|
•
|
We annualized base pay for any full-time and part-time employees who commenced work during 2017.
|
•
|
Using this approach, we selected the individual at the median of our employee population. Our median employee was a Clinical Specialist based in the United States.
|
OWNERSHIP OF OUR STOCK
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
•
|
each person or group known to us to be the beneficial owner of more than five percent of our common stock;
|
•
|
each of our directors;
|
•
|
each of our named executive officers; and
|
•
|
all of our current directors and executive officers as a group.
|
|
|
Beneficial Ownership of
Common Stock |
||||
Name
|
|
Number of
Shares |
|
Percent of
Class (1) |
||
Named Executive Officers and Directors:
|
|
|
|
|
||
Joe Kiani
(2)
|
|
5,514,143
|
|
|
10.0
|
%
|
Micah Young
(3)
|
|
12,087
|
|
|
*
|
|
Anand Sampath
(4)
|
|
128,605
|
|
|
*
|
|
Tao Levy
(5)
|
|
7,087
|
|
|
*
|
|
Bilal Muhsin
(6)
|
|
76,087
|
|
|
*
|
|
Steven J. Barker, Ph.D., M.D.
(7)
|
|
128,245
|
|
|
*
|
|
H Michael Cohen
|
|
—
|
|
|
*
|
|
Sanford Fitch
(8)
|
|
113,245
|
|
|
*
|
|
Thomas Harkin
(9)
|
|
6,381
|
|
|
*
|
|
Adam Mikkelson
(10)
|
|
2,996
|
|
|
*
|
|
Craig Reynolds
(11)
|
|
102,996
|
|
|
*
|
|
Julie A. Shimer, Ph.D.
|
|
—
|
|
|
*
|
|
Total Shares Held By Current Executive Officers and Directors (15 persons)
(12)
|
|
6,386,334
|
|
|
11.5
|
%
|
5% Stockholders:
|
|||||||
Joe Kiani
(2)
|
|
5,514,143
|
|
|
10.0
|
%
|
|
BlackRock, Inc.
(13)
|
|
7,167,269
|
|
|
13.4
|
%
|
|
The Vanguard Group
(14)
|
|
4,355,990
|
|
|
8.2
|
%
|
|
FMR, LLC
(15)
|
|
3,889,562
|
|
|
7.3
|
%
|
*
|
Less than one percent.
|
(1)
|
For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of shares of common stock outstanding as of
March 30, 2019
, plus the number of shares of common stock that such person or group had the right to acquire within 60 days after
March 30, 2019
.
|
(2)
|
Comprised of
119,241
shares held directly,
2,283,453
shares held in two trusts for which Mr. Kiani is the sole trustee,
1,491,209
shares held in four trusts for which Mr. Kiani is not the trustee,
9,000
shares held by an immediate family member of Mr. Kiani for which Mr. Kiani shares voting and dispositive power, options to purchase
1,600,872
shares of Masimo common stock that were exercisable as of
March 30, 2019
or that have or will become exercisable within 60 days after
March 30, 2019
, and
10,368
shares held for the Reporting Person’s account under the Masimo Retirement Savings Plan. As of
March 30, 2019
, an aggregate of
400,000
shares of common stock owned by the Kiani Family Remainder Trust and beneficially owned by Mr. Kiani were pledged as collateral for a personal loan issued to the trustee of the Kiani Family Remainder Trust. See “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Practices” on page
56
of this Proxy Statement.
|
(3)
|
Comprised of options to purchase
12,087
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(4)
|
Comprised of
12,518
shares of common stock held directly and options to purchase
116,087
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(5)
|
Comprised of options to purchase
7,087
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(6)
|
Comprised of options to purchase
76,087
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(7)
|
Comprised of
64,832
shares of common stock held directly,
1,413
RSUs that are subject to vesting within 60 days after
March 30, 2019
, and options to purchase
62,000
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(8)
|
Comprised of
49,832
shares of common stock held directly,
1,413
RSUs that are subject to vesting within 60 days after
March 30, 2019
, and options to purchase
62,000
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(9)
|
Comprised of
4,968
shares of common stock held directly and
1,413
RSUs that are subject to vesting within 60 days after
March 30, 2019
.
|
(10)
|
Comprised of
1,583
shares of common stock held directly and
1,413
RSUs that are subject to vesting within 60 days after
March 30, 2019
.
|
(11)
|
Comprised of
1,583
shares of common stock held directly,
1,413
RSUs that are subject to vesting within 60 days after
March 30, 2019
, and options to purchase
100,000
shares of common stock that are exercisable within 60 days after
March 30, 2019
.
|
(12)
|
Comprised of shares included under “Named Executive Officers and Directors”,
89,201
shares of common stock owned directly by three of our other executive officers and options to purchase an aggregate of
205,261
shares of common stock held by three of our other executive officers that are exercisable within 60 days after
March 30, 2019
.
|
(13)
|
BlackRock, Inc. (“BlackRock”) filed a Schedule 13G/A on January 31, 2019, reporting that it had sole dispositive power with respect to 7,167,269 shares, in its capacity as a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) under the Exchange Act. BlackRock’s address is 55 East 52nd Street, New York, New York 10055.
|
(14)
|
The Vanguard Group (“Vanguard”) filed a Schedule 13G/A on February 11, 2019, reporting that it had sole voting power with respect to 26,072 shares, shared voting power with respect to 6,300 shares, sole dispositive power with respect to 4,328,183 shares, shared dispositive power with respect to 27,807 shares and beneficial ownership of an aggregate of 4,355,990 shares in its capacity as an investment adviser in accordance with Rule 13d-1(b)(1)(ii)(E) under the Exchange Act. Vanguard’s address is 100 Vanguard Blvd., Malvern, PA 19355.
|
(15)
|
FMR, LLC filed a Schedule 13G on February 13, 2019, reporting that it had sole dispositive power with respect to an aggregate of 3,889,562 shares in its capacity as a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) under the Exchange Act. FMR’s address is 245 Summer Street, Boston, Massachusetts 02210.
|
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
|
Plan Category
|
|
Number of securities to
be issued upon exercise of outstanding options, warrants and rights (a) (1) |
|
Weighted-average exercise price
of outstanding options, warrants and rights (2) |
|
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|
||||
Equity compensation plans approved by stockholders
(3)
|
|
8,155,762
|
|
|
$
|
36.26
|
|
|
3,701,861
|
|
|
Equity compensation plans not approved by stock holders
(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
|
8,155,762
|
|
|
$
|
36.26
|
|
|
3,701,861
|
|
|
(1)
|
Includes 2,707,915 RSUs and PSUs that were unvested and outstanding as of December 29, 2018.
|
(2)
|
The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs and PSUs, which have no exercise price.
|
(3)
|
Comprised of the 2007 Stock Incentive Plan and the 2017 Plan.
|
(4)
|
As of
December 29, 2018
, we did not have any equity compensation plans that were not approved by our stockholders.
|
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
STOCK OWNERSHIP POLICY
|
Stock Ownership Guidelines
|
|||||
|
|
|
|
|
|
|
6
X
|
|
1
X
|
||
|
CEO
|
|
Other NEOs
|
||
|
|
|
|
|
|
ü
|
Reflects a market value multiple of base salary
|
||||
ü
|
Reviewed annually by the Nominating, Compliance and Governance Committee
|
NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP POLICY
|
ADDITIONAL INFORMATION
|
PROPOSAL:
|
|
ELECTION OF DIRECTORS
|
|||
1
|
|||||
Nominees
|
|
Term in Office
|
Adam Mikkelson
|
|
Class III - Continuing in Office Until the 2019 Annual Meeting of the Stockholders
|
Craig Reynolds
|
|
Class III - Continuing in Office Until the 2019 Annual Meeting of the Stockholders
|
Current Directors
|
|
Class and Remaining Term in Office
|
Steven J. Barker, M.D., Ph.D.
|
|
Class I - Continuing in Office Until the 2020 Annual Meeting of the Stockholders
|
Sanford Fitch
|
|
Class I - Continuing in Office Until the 2020 Annual Meeting of the Stockholders
|
Julie A. Shimer, Ph.D.
|
|
Class I - Continuing in Office Until the 2020 Annual Meeting of the Stockholders
|
Thomas Harkin
|
|
Class II - Continuing in Office Until the 2021 Annual Meeting of the Stockholders
|
Joe Kiani
|
|
Class II - Continuing in Office Until the 2021 Annual Meeting of the Stockholders
|
H Michael Cohen
|
|
Class II - Continuing in Office Until the 2021 Annual Meeting of the Stockholders
|
PROPOSAL:
|
|
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|||
2
|
|||||
PROPOSAL:
|
|
ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
|
|||
3
|
|||||
•
|
We provide market-competitive compensation programs that enable Masimo to attract and retain highly talented individuals.
|
•
|
Pay is directly linked to the achievement of performance goals designed to foster the creation of sustainable long-term stockholder value.
|
•
|
Our pay-for-performance principles dictate that our executive officers should only receive target payouts when Masimo achieves its financial goals. For this reason, our Compensation Committee sets financial targets for incentive pay that align with or exceed the external guidance communicated to stockholders.
|
•
|
25% in the form of stock options that vest annually over a five year period; and
|
•
|
75% in the form of PSUs that vest after three years based on our actual performance as measured against multiple pre-established performance objectives. For fiscal 2018, the Compensation Committee selected fiscal 2020 Adjusted Product Revenue
2
and fiscal 2020 Non-GAAP Operating Profit Margin
2
as the performance measures for the target PSU award percentages, each weighted equally. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
Total “at risk” compensation =
|
92.3%
|
|
Total “at risk” compensation =
|
79.0%
|
|
|
l
Total revenues, including royalties and other revenue of $858 million, which significantly exceeded our original fiscal 2018 financial guidance of $836 million.
|
|||
|
l
Product revenue increased 12.4% to $830 million, or 11.9% on a constant currency basis
1
, which significantly exceeded our original fiscal 2018 financial guidance of $808 million.
|
|||
|
l
Shipments of noninvasive technology boards and monitors increased 14.1% to 231,700.
|
|||
|
l
GAAP operating profit margin was 24.2%;
l
Non-GAAP operating profit
1
margin improved 100 basis points to 24.5%;
l
Non-GAAP product operating margin
1
, excluding the impact of royalty and NRE, improved 340 bps to 22.0%.
|
|||
|
l
GAAP EPS was $3.45;
l
Non-GAAP total EPS
1
increased 31.7% to $3.03;
l
Non-GAAP product EPS
1
, excluding the impact of royalty and NRE, increased 53.2% to $2.65.
|
|||
|
l
Adjusted free cash flow was $222 million or 26.0% of total revenue, which was driven by strong earnings performance and significant working capital improvements;
l
Days sales outstanding (“DSO”) improved 10 days to reach 45 days at the end of fiscal 2018;
l
Inventory days on hand (“DOH”) improved 10 days to reach 113 days at the end of fiscal 2018.
|
1
|
Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
PROPOSAL:
|
|
STOCKHOLDER PROPOSAL FOR PROXY ACCESS
|
|||
4
|
|||||
SUPPORTING STATEMENT
|
MASIMO OPPOSING STATEMENT
|
•
|
Our bylaws allow stockholders to directly nominate candidates for election to our Board if advance notice provisions are satisfied (see above at “Corporate Governance and Board Matters-Consideration of Director Nominees”); and
|
•
|
The NCCG Committee carefully considers any potential director candidates recommended by stockholders.
|
REQUIRED VOTE
|
MASIMO RECOMMENDATION
|
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
|
RELATED PERSON TRANSACTIONS POLICY AND PROCEDURES
|
•
|
any person who is or was a director or executive of ours since the beginning of our immediately preceding fiscal year or an immediate family member of, or person sharing a household with, any of the foregoing individuals;
|
•
|
any person known by us to be the beneficial owner of more than five percent of any class of our outstanding voting securities or, if the beneficial owner is an individual, an immediate family member of, or person sharing a household with, any of the foregoing individuals; and
|
•
|
any firm, corporation or other entity in which any of the foregoing individuals is employed or is a general partner or principal or in a similar position, or in which any of the foregoing individuals has a five percent or greater beneficial interest.
|
•
|
employment and compensation of our executive officers, subject to certain exceptions;
|
•
|
compensation of our directors, subject to certain exceptions;
|
•
|
certain transactions between us and an unrelated third party entity in which the related person’s only relationship with the third party is as an employee (other than an executive officer), director or beneficial owner of less than 10% of the other entity’s shares, subject to certain limitations;
|
•
|
certain contributions to the Masimo Foundation and certain other charitable contributions; and
|
•
|
transactions in which all of our stockholders receive the same benefit on a pro rata basis.
|
TRANSACTIONS WITH RELATED PERSONS
|
CERCACOR LABORATORIES, INC.
|
MASIMO FOUNDATION FOR ETHICS, INNOVATION AND COMPETITION IN HEALTHCARE
|
PATIENT SAFETY MOVEMENT FOUNDATION
|
INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
|
QUESTIONS AND ANSWERS YOU MAY HAVE ABOUT THESE PROXY MATERIALS AND VOTING
|
1. Why am I receiving these materials?
|
2. When and where will the Annual Meeting be held?
|
3. Who can vote at the Annual Meeting?
|
4. What am I voting on?
|
•
|
To elect the Class III nominees for director to serve until our 2022 Annual Meeting of Stockholders or until their successors are duly elected and qualified;
|
•
|
To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for our fiscal year ending
December 28, 2019
;
|
•
|
To vote on an advisory resolution to approve named executive officer compensation; and
|
•
|
To vote on a stockholder proposal for proxy access, if properly presented at the meeting.
|
5. Will there be any other items of business on the agenda?
|
6. What is the Masimo Board’s voting recommendation?
|
•
|
“
For
” each of the Class III nominees;
|
•
|
“
For
” the ratification of the selection of Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending
December 28, 2019
;
|
•
|
“
For
” the approval of our named executive officer compensation; and
|
•
|
“
Against
” the stockholder proposal for proxy access, if properly presented at the meeting.
|
7. How do I vote?
|
•
|
To vote by proxy using the enclosed proxy card, complete, sign and date your proxy card and return it promptly in the envelope provided.
|
•
|
To vote by proxy on the internet, go to
www.envisionreports.com/MASI
and follow the instructions set forth on the internet site.
|
•
|
To vote by proxy over the telephone, dial the toll-free telephone number listed on your proxy card under the heading “vote by telephone” using a touch-tone telephone and follow the recorded instructions.
|
8. How do I vote my Masimo shares held through the Masimo Retirement Savings Plan?
|
9. How many votes do I have?
|
10. Will my vote be kept confidential?
|
11. Who is paying for this proxy solicitation?
|
12. Why did I receive a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a full set of proxy materials
|
13. What does it mean if I receive more than one Notice?
|
14. Can I change my vote after submitting my proxy?
|
•
|
You may submit another properly completed and executed proxy card with a later date;
|
•
|
You may submit a new proxy through the internet or by telephone (1-800-652-VOTE) (your latest internet or telephone instructions submitted prior to the deadline will be followed);
|
•
|
You may send a written notice that you are revoking your proxy to our Corporate Secretary, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, by the deadline; or
|
•
|
You may attend the Annual Meeting and vote in person. However, simply attending the Annual Meeting will not, by itself, revoke your proxy.
|
15. How are my shares voted if I give no specific instruction?
|
•
|
“
For
” the election of each of the Class III director nominees;
|
•
|
“
For
” the ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending
December 28, 2019
;
|
•
|
“
For
” the approval of our named executive officer compensation; and
|
•
|
“
Against
” the stockholder proposal for proxy access, if properly presented at the meeting.
|
16. What is a broker non-vote?
|
18. What is the effect of abstentions and broker non-votes?
|
19. What happens if an incumbent director nominee does not receive a majority of the votes cast for his re-election?
|
20. What is the quorum requirement?
|
21. Who will count the votes?
|
22. Is Masimo Corporation’s Annual Report on Form 10-K part of the proxy materials?
|
23. How can I find out the results of the voting at the Annual Meeting?
|
24. When are stockholder proposals due for next year’s annual meeting of stockholders?
|
HOUSEHOLDING
|
ANNUAL REPORT ON FORM 10-K
|
OTHER MATTERS
|
|
By Order of the Board of Directors
|
|
|
|
Chairman & Chief Executive Officer
|
APPENDICES
|
APPENDIX A
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILATION OF GAAP PRODUCT REVENUE TO
CONSTANT CURRENCY PRODUCT REVENUE
|
||||||||||||||||||
|
|
Fiscal 2018
|
|
Fiscal 2017
As Adjusted
(1)
|
||||||||||||||
(unaudited in thousands, except percentages)
|
|
$
|
|
% of
Revenue
|
|
$
|
|
% of
Revenue
|
||||||||||
GAAP product revenue
|
|
$
|
829,874
|
|
|
100.0
|
%
|
|
$
|
738,242
|
|
|
100.0
|
%
|
||||
Non-GAAP constant currency adjustments:
|
|
|
|
|
|
|
|
|
||||||||||
|
Constant currency F/X adjustments
|
|
(4,015
|
)
|
|
|
|
N/A
|
|
|
||||||||
|
|
Total non-GAAP product revenue adjustments
|
|
(4,015
|
)
|
|
|
|
N/A
|
|
|
|||||||
|
|
|
Constant currency product revenue
|
|
$
|
825,859
|
|
|
|
|
$
|
738,242
|
|
|
|
|||
Product revenue growth %:
|
|
|
|
|
|
|
|
|
||||||||||
|
GAAP
|
|
12.4
|
%
|
|
|
|
|
|
|
||||||||
|
Constant currency
|
|
11.9
|
%
|
|
|
|
|
|
|
APPENDIX A
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILATION OF GAAP OPERATING INCOME/MARGIN TO
NON-GAAP PRODUCT OPERATING INCOME/MARGIN
|
||||||||||||||
|
|
|
|
Fiscal 2018
|
|
Fiscal 2017
As Adjusted
(1)
|
||||||||
(unaudited in thousands, except percentages)
|
|
$
|
|
% of
Revenue
|
|
$
|
|
% of
Revenue
|
||||||
GAAP total operating income/margin
|
|
208,044
|
|
|
24.2
|
|
|
183,787
|
|
|
23.3
|
|
||
Non-GAAP adjustments for product operating income/margin:
|
|
|
|
|
|
|
|
|
||||||
|
Acquisition-related depreciation and amortization
|
|
1,442
|
|
|
0.3
|
|
|
1,597
|
|
|
0.2
|
|
|
|
Litigation damages, awards and settlements
|
|
425
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Royalty and NRE gross profit/margin
|
|
(27,704
|
)
|
|
(2.5
|
)
|
|
(48,385
|
)
|
|
(4.9
|
)
|
|
|
|
Total non-GAAP adjustments for product operating income/margin
|
|
(25,837
|
)
|
|
(2.2
|
)
|
|
(46,788
|
)
|
|
(4.7
|
)
|
Non-GAAP product operating income/margin
|
|
182,207
|
|
|
22.0
|
|
|
136,999
|
|
|
18.6
|
|
(1)
|
Certain information presented for the period ended December 30, 2017 has been restated to reflect the full retrospective application of ASU 2014-09. For additional information related to our adoption of this new accounting standard, see Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of our Annual Report on Form 10-K, filed with the SEC February 26, 2019.
|
APPENDIX A
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF GAAP NET INCOME AND NET INCOME PER DILUTED SHARE TO
NON-GAAP PRODUCT NET INCOME AND PRODUCT NET INCOME PER DILUTED SHARE
|
||||||||||||||||||
|
|
|
|
Fiscal 2018
|
|
Fiscal 2017
As Adjusted (1) |
||||||||||||
(in thousands, except per share amounts)
|
|
$
|
|
Per Diluted Share
|
|
$
|
|
Per Diluted Share
|
||||||||||
GAAP net income
|
$
|
193,543
|
|
|
$
|
3.45
|
|
|
$
|
124,789
|
|
|
$
|
2.23
|
|
|||
Non-GAAP adjustments to product net income:
|
|
|
|
|
|
|
|
|||||||||||
|
Acquisition-related depreciation and amortization
|
1,442
|
|
|
0.02
|
|
|
1,597
|
|
|
0.03
|
|
||||||
|
Litigation damages, awards and settlements
|
425
|
|
|
0.01
|
|
|
—
|
|
|
—
|
|
||||||
|
Realized and unrealized foreign currency gains and losses
|
2,027
|
|
|
0.03
|
|
|
270
|
|
|
—
|
|
||||||
|
Royalty and other gross profit/margin
|
(27,704
|
)
|
|
(0.49
|
)
|
|
(48,385
|
)
|
|
(0.87
|
)
|
||||||
|
Tax impact of pre-tax non-GAAP adjustments
|
5,531
|
|
|
0.10
|
|
|
16,101
|
|
|
0.29
|
|
||||||
|
Excess tax benefits from stock-based compensation
|
(22,036
|
)
|
|
(0.39
|
)
|
|
(39,241
|
)
|
|
(0.70
|
)
|
||||||
|
Tax impact of expiration of certain statutes of limitations related to unique and non-recurring tax positions
|
(4,169
|
)
|
|
(0.07
|
)
|
|
—
|
|
|
—
|
|
||||||
|
2017 U.S. Tax Reform
(2)
|
(675
|
)
|
|
(0.01
|
)
|
|
41,392
|
|
|
0.74
|
|
||||||
|
|
Total non-GAAP adjustments for product net income
|
|
(45,159
|
)
|
|
(0.80
|
)
|
|
(28,266
|
)
|
|
(0.51
|
)
|
||||
Non-GAAP product net income
|
$
|
148,384
|
|
|
$
|
2.65
|
|
|
$
|
96,523
|
|
|
$
|
1.73
|
|
|||
Non-GAAP product EPS growth
|
|
|
53.2
|
%
|
|
|
|
|
(1)
|
Certain information presented for the period ended December 30, 2017 has been restated to reflect the full retrospective application of ASU 2014-09. For additional information related to our adoption of this new accounting standard, see Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of our Annual Report on Form 10-K, filed with the SEC February 26, 2019.
|
(2)
|
Excludes 2017 U.S. Tax Reform charges related to royalty and other revenue net of associated costs.
|
(1)
|
Certain information presented for the period ended December 30, 2017 has been restated to reflect the full retrospective application of ASU 2014-09. For additional information related to our adoption of this new accounting standard, see Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of our Annual Report on Form 10-K, filed with the SEC February 26, 2019.
|
APPENDIX B
SUPPLEMENTAL FINANCIAL INFORMATION
FOR FISCAL 2018 EXECUTIVE BONUS INCENTIVE PLAN
RECONCILATION OF GAAP PRODUCT REVENUE TO ADJUSTED PRODUCT REVENUE
(unaudited)
|
|||||
(in millions)
|
Fiscal 2018
|
||||
Total GAAP product revenues
|
|
$
|
829.9
|
|
|
Non-GAAP adjustments:
|
|
|
|||
|
F/X adjustments to plan rates
|
|
(2.5
|
)
|
|
|
Total non-GAAP adjustments
|
|
(2.5
|
)
|
|
Adjusted product revenue for fiscal 2018 Executive Bonus Incentive Plan
|
|
$
|
827.4
|
|
APPENDIX B
SUPPLEMENTAL FINANCIAL INFORMATION
FOR FISCAL 2018 EXECUTIVE BONUS INCENTIVE PLAN
RECONCILATION OF GAAP NET INCOME PER DIULTED SHARE (“EPS”) TO NON-GAAP EPS
(unaudited)
|
||||||
(in dollars)
|
|
Fiscal 2018
|
||||
GAAP EPS
|
|
$
|
3.45
|
|
||
Non-GAAP adjustments:
|
|
|
||||
|
Acquisition-related depreciation and amortization
|
|
0.02
|
|
||
|
Litigation damages, awards and settlements
|
|
0.01
|
|
||
|
Realized and unrealized foreign currency gains and losses
|
|
0.03
|
|
||
|
Tax impact of pre-tax non-GAAP adjustments above
|
|
(0.01
|
)
|
||
|
Excess tax benefits from stock-based compensation
|
|
(0.39
|
)
|
||
|
Tax impact of expiration of certain statutes of limitations related to unique and non-recurring tax positions
|
|
(0.07
|
)
|
||
|
2017 U.S. Tax Reform
|
|
(0.01
|
)
|
||
|
|
Total non-GAAP adjustments
|
|
(0.42
|
)
|
|
Subtotal
|
|
3.03
|
|
|||
|
|
F/X adjustments to plan rates
|
|
(0.04
|
)
|
|
Adjusted EPS for fiscal 2018 Executive Bonus Incentive Plan
|
|
$
|
2.99
|
|
|
PROXY CARD AND DIRECTIONS
|
DIRECTION TO THE 2019 ANNUAL MEETING OF THE STOCKHOLDERS OF MASIMO CORPORATION
|
||||
|
|
PROXY CARD AND DIRECTIONS
|
|
Vote by internet
• Go to www.envisionreports.com/MASI • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website |
Using a
black ink
pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.
|
|
ý
|
|
|
PROXY CARD AND DIRECTIONS
|
|
|
Proposals
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
1.
|
Election of Class III Directors:
|
|
|
|
|
|
|
|
- Adam Mikkelson
|
|
o
|
|
o
|
|
o
|
|
- Craig Reynolds
|
|
o
|
|
o
|
|
o
|
2.
|
To ratify the selection of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal year ending December 28, 2019.
|
|
o
|
|
o
|
|
o
|
3.
|
Advisory resolution to approve named executive officer compensation.
|
|
o
|
|
o
|
|
o
|
4
|
Stockholder proposal for proxy access
|
|
o
|
|
o
|
|
o
|
NOTE:
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment of postponement thereof.
|
|
|
Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
|
|
PROXY CARD AND DIRECTIONS
|
|
|
|
|
|
|
|
Date (mm/dd/yyyy) — Please print date below.
|
|
|
Signature 1 — Please keep signature within the box.
|
|
|
Signature 2 — Please keep signature within the box.
|
/ /
|
|
|
|
|
|
|
|
PROXY CARD AND DIRECTIONS
|
|
|
+
|
Proxy — MASIMO CORPORATION
|
|
|
|
|
Non-Voting Items
|
|
|
Change of Address
— Please print new address below.
|
|
Comments
— Please print your comments below.
|
||
|
|
|
|
IF VOTING BY MAIL, YOU
MUST
COMPLETE SECTIONS A – C ON BOTH SIDES OF THIS CARD.
|
|
+
|
|
GUIDING PRINCIPALS
|
|
|
Ø
|
Remain faithful to your promises and responsibilities.
|
|||
|
Ø
|
Thrive on fascination and accomplishment and not on greed and power.
|
|||
|
Ø
|
Strive to make each year better than the year before both personally and for the team.
|
|||
|
Ø
|
Make each day as fun as possible.
|
|||
|
Ø
|
Do what is best for patient care.
|
|
|
|
Masimo
•
52 Discovery
•
Irvine, CA 92618
•
Tel: 949 297 7000
|
||
© 2019 Masimo Corporation. All rights reserved.
|
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