Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Measurements, Recurring and Nonrecurring

The following tables represent the Company’s fair value hierarchy for its financial assets (in thousands):



December 31, 2016	Adjusted Basis Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value		Cash and Cash Equivalents
Cash	$	305,970	$	—	$	—	$	305,970	$	305,970
Level 1:
None	—		—		—		—		—
Level 2:
None	—		—		—		—		—
Level 3:
None	—		—		—		—		—
Total assets measured at fair value	$	305,970	$	—	$	—	$	305,970	$	305,970



January 2, 2016	Adjusted Basis Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Estimated Fair Value		Cash and Cash Equivalents
Cash	$	112,168	$	—	$	—	$	112,168	$	112,168
Level 1:
Money market funds	20,149		—		—		20,149		20,149
Level 2:
None	—		—		—		—		—
Level 3:
None	—		—		—		—		—
Total assets measured at fair value	$	132,317	$	—	$	—	$	132,317	$	132,317

Components of Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over estimated useful lives as follows:



	Useful Lives
Building	39 years
Building improvements	7 to 15 years
Leasehold improvements	Lesser of useful life or term of lease
Machinery and equipment	5 to 7 years
Vehicles	5 years
Tooling	3 years
Computer equipment	2 to 6 years
Furniture and office equipment	2 to 6 years
Demonstration units	3 years

Property and equipment, net consists of the following (in thousands):



	December 31, 2016			January 2, 2016
Building and building improvements	$	85,966		$	78,877
Machinery and equipment	41,683			42,460
Land	23,762			23,738
Computer equipment	13,549			15,023
Tooling	12,895			13,079
Furniture and office equipment	9,669			8,885
Leasehold improvements	8,289			7,734
Demonstration units	448			973
Vehicles	45			45
Construction-in-progress	7,923			7,124
Total property and equipment	204,229			197,938
Accumulated depreciation and amortization	(68,233		)	(65,472		)
Total property and equipment, net	$	135,996		$	132,466

Changes in Product Warranty Accrual

Changes in the product warranty accrual were as follows (in thousands):



	Year Ended
	December 31, 2016			January 2, 2016			January 3, 2015
Warranty accrual, beginning of period	$	1,222		$	1,416		$	1,161
Accrual for warranties issued (including specific accrual)	871			800			1,144
Changes in pre-existing warranties (including changes in estimates)	110			61			138
Settlements made	(1,293		)	(1,055		)	(1,027		)
Warranty accrual, end of period	$	910		$	1,222		$	1,416

Computation of Basic and Diluted Net Income Per Share

The computation of basic and diluted net income per share attributable to Masimo Corporation stockholders is as follows (in thousands, except per share data):



	Year ended
	December 31, 2016		January 2, 2016			January 3, 2015
Net income attributable to stockholders of Masimo Corporation:
Net income including noncontrolling interest	$	300,666	$	81,500		$	74,363
Net income (loss) attributable to the noncontrolling interest	—		(1,800		)	1,845
Net income attributable to Masimo Corporation stockholders	$	300,666	$	83,300		$	72,518
Basic net income per share attributable to Masimo Corporation stockholders:
Net income attributable to Masimo Corporation stockholders	$	300,666	$	83,300		$	72,518
Weighted-average shares outstanding - basic	49,530		51,311			54,708
Basic net income per share attributable to Masimo Corporation stockholders	$	6.07	$	1.62		$	1.33
Diluted net income per share attributable to Masimo Corporation stockholders:
Weighted-average shares outstanding	49,530		51,311			54,708
Diluted share equivalents: stock options and RSUs	3,665		2,396			863
Weighted-average shares outstanding - diluted	53,195		53,707			55,571
Diluted net income per share attributable to Masimo Corporation stockholders	$	5.65	$	1.55		$	1.30

Supplemental Schedule of Cash Flow

Supplemental Cash Flow Information (in thousands)



	Year ended
	December 31, 2016		January 2, 2016		January 3, 2015
Cash paid during the year for:
Interest (net of amounts capitalized)	$	4,052	$	2,293	$	469
Income taxes	31,230		36,194		19,863
Noncash investing and financing activities:
Unpaid purchases of property, plant and equipment	2,009		4,371		12,155
Unsettled common stock proceeds	165		—		—
Unsettled common stock repurchases	—		4,815		—

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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