The company paid $8 million in legal fees during the quarter, including $5.4 million paid in a whistleblower lawsuit filed by a pair of former sales reps. Inventory and equipment write-downs took another $4.6 million from Masimo’s bottom line.
Wall Street responded with a 4.2% dip in MASI shares, which were trading at $27.90 as of about 1:40 p.m.
Overall the company reported a 38% drop in net profits amid a 7.8% increase in sales during the 3 months ended December 28. For the full year Masimo posted a 6.3% dip in sales on an 11% increase in profits.
Masimo plans to challenge the $5.4 million award paid out to former sales reps Michael Ruhe and Vicente Catala, the company said in a January SEC filing. The pair had accused Masimo of promoting off-label uses of its Pronto and Pronto-7 devices, improperly billing government insurance programs, withholding sales records and interfering with subpoenas.
Masimo went a few rounds in court and in October won summary judgment to dismiss the lawsuit, a decision that the reps have appealed, according to Masimo filings. Orange County, Calif., arbitrator sided with the reps and ordered the company to pay Ruhe and Catala damages, a decision that is subject to court confirmation.
Excluding legal charges and other one-time fees, Masimo’s earnings for the quarter amounting to 31¢ per share, right on target with analysts’ consensus estimates.
Net profits amounted to $9.3 million, or 16¢ per diluted share, on sales of $142.4 million for Q4 2013. That compared with profits of $15 million, or 26¢ per share, on sales of $132.2 million during the same period the previous year.
For the full year of 2013 Masimo reported profits of $58.4 million, or $1.02 per diluted share, on sales of $547.2 million. That compared with profits of $62.3 million, or $1.07 per share, on sales of $493.2 million in 2012. Excluding special charges, Masimo’s adjusted 2013 earnings were $1.17, 1 penny higher than analysts had projected.
The company also provided its outlook for 2014, projecting total revenues in the range of $578-$598 million and per-share earnings in the range of $1.13-$1.28.