Masimo Corp (MASI)

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. As of April 4, 2009, the Company had $13.8 million of bank balances of which $765,000 was covered by the Federal Deposit Insurance Corporation limit. The Company invests its excess cash deposits in U.S. Treasury bills and money market accounts with major financial institutions. As of April 4, 2009, the Company had $131.8 million in U.S. Treasury bills which are backed by the U.S. federal government. Also, as of April 4, 2009, the Company had $6.6 million in money market accounts, all of which was covered under the U.S. Treasury Department Temporary Guarantee Program for Money Market Funds effective on September 19, 2008.

While the Company and its contract manufacturers rely on sole source suppliers for certain components, steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. For the three months ended April 4, 2009 and March 29, 2008, revenue from the sale of the Company’s pulse oximetry products to customers affiliated with GPOs amounted to $41.3 million and $30.7 million, respectively, of its revenue from sales to U.S. hospitals.

For the three months ended April 4, 2009 and March 29, 2008, one customer represented 17% and 13% of total revenue, respectively. This particular customer was a distributor, which takes and fulfills orders from our direct customers, many of whom have signed long-term sensor agreements with us. In the event this distributor was unable to fulfill these orders, the orders would be redirected to other distributors of ours or fulfilled directly by us.

Two customers represented 6% and 6% of accounts receivable at April 4, 2009, and 10% and 7% of accounts receivable at January 3, 2009, respectively.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. As of January 3, 2009, the Company had $7.8 million of bank balances of which $884,000 was covered by the Federal Deposit Insurance Corporation limit. The Company invests its excess cash deposits in U.S. Treasury bills and money market accounts with major financial institutions. As of January 3, 2009, the Company had $125.5 million in U.S. Treasury bills which are backed by the U.S. federal government. Also, as of January 3, 2009, the Company had $13.6 million in money market accounts, of which $11.8 million was covered under the U.S. Treasury Department Temporary Guarantee Program for Money Market Funds effective on September 19, 2008.

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MASIMO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

While the Company and its contract manufacturers rely on sole source suppliers for certain components, steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. For the years ended January 3, 2009, December 29, 2007 and December 31, 2006, revenue from the sale of the Company’s pulse oximetry products to customers affiliated with GPOs amounted to $132.1 million, $101.0 million and $66.6 million, respectively, representing, 68.1%, 89.4% and 80.7%, respectively, of its revenue from sales to U.S. hospitals.

For the years ended January 3, 2009 and December 29, 2007, one customer represented 12% and 11% of total revenue. This particular customer was a distributor, which takes and fulfills orders from our direct customers, many of whom have signed long-term sensor agreements with us. In the event this distributor was unable to fulfill these orders, the orders would be redirected to other distributors of ours or fulfilled directly by us. For the year ended December 31, 2006, no individual customer represented over 10% of total revenue.

Two customers represented 10% and 7% of accounts receivable at January 3, 2009 and 8% and 5% of accounts receivable at December 29, 2007, respectively. A third customer represented 6% of accounts receivable at December 29, 2007.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. As of September 27, 2008, the Company had $6.9 million of bank balances of which $6.5 million was in excess of the Federal Deposit Insurance Corporation limit. The Company invests its excess cash deposits in U.S. Treasury bills and money market accounts with major financial institutions. As of September 27, 2008, the Company had $103.8 million in U.S. Treasury bills which are backed by the U.S. federal government. Also, as of September 27, 2008, the Company had $11.9 million in money market accounts, of which $6.9 million was covered under the U.S. Treasury Department Temporary Guarantee Program for Money Market Funds effective on September 19, 2008.

While the Company and its contract manufacturers rely on sole source suppliers for certain components and contract manufacturing services, management believes that steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components or services that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

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The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three and nine months ended September 29, 2007, shipments of the Company’s pulse oximetry products to U.S. hospitals that are members of GPOs amounted to $24.4 million and $72.9 million, respectively. In the three and nine months ended September 27, 2008, shipments to U.S. hospitals that are members of GPOs were $35.4 million and $99.1 million, respectively.

For the three months ended September 29, 2007, no customers represented over 10% of the Company’s total revenue. For the nine months ended September 29, 2007, one customer represented 10.6% of the total revenue. For the three and nine months ended September 27, 2008, one customer represented 10.3% and 11.7% of the total revenue, respectively.

At December 29, 2007, two customers represented 8.4% and 5.3% of accounts receivable. At September 27, 2008, one customer represented 5.2% of accounts receivable.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. The Company invests its excess cash deposits in money market accounts with major financial institutions. The amount of bank balances in excess of Federal Deposit Insurance Corporation limits was $102.5 million as of June 28, 2008.

While the Company and its contract manufacturers rely on sole source suppliers for certain components and contract manufacturing services, management believes that steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components or services that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three and six months ended June 30, 2007, revenue from the sale of the Company’s pulse oximetry products to U.S. hospitals that are members of GPOs amounted to $26.7 million and $48.5 million, respectively. In the three and six months ended June 28, 2008, revenue from sales to U.S. hospitals that are members of GPOs was $33.0 million and $63.7 million, respectively.

For the three months ended June 30, 2007, no customers represented over 10% of the Company’s total revenue. For the six months ended June 30, 2007, one customer represented 11.0% of the total revenue. For the three and six months ended June 28, 2008, one customer represented 11.7% and 12.5% of the total revenue, respectively.

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Two customers represented 8.4% and 5.3% of accounts receivable at December 29, 2007, and 7.5% and 5.5% of accounts receivable at June 28, 2008.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. The Company invests its excess cash deposits in government securities and money market accounts with major financial institutions. The amount of bank balances in excess of Federal Deposit Insurance Corporation limits was $86.0 million as of March 29, 2008.

While the Company and its contract manufacturers rely on sole source suppliers for certain components and contract manufacturing services, management believes that steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components or services that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three months ended March 31, 2007 and March 29, 2008, revenue from the sale of the Company’s pulse oximetry products related to GPOs amounted to $21.8 million and $30.7 million, respectively.

For the three months ended March 31, 2007, one customer represented 15.5% of the Company’s total revenue. For the three months ended March 29, 2008, one customer represented 13.3% of the total revenue. There were no other customers that represented over 10% of the total revenue.

Two customers represented 8% and 5% of accounts receivable at December 29, 2007. Two customers represented 7% and 5% of accounts receivable at March 29, 2008.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. The Company invests its excess cash deposits in government securities and money market accounts with major financial institutions. The amount of bank balances in excess of Federal Deposit Insurance Corporation limits (for US bank accounts) and similar foreign deposit insurance entities’ limits (for certain foreign bank accounts) was $55.1 million and $96.4 million as of December 31, 2006 and December 29, 2007, respectively.

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MASIMO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

While the Company and its contract manufacturers rely on sole source suppliers for certain components, steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. In 2005, 2006 and 2007, revenue from the sale of the Company’s pulse oximetry products related to GPOs amounted to $35.8 million, $66.6 million and $101.0 million, respectively, representing, 63.0%, 80.7% and 89.4%, respectively, of its revenue from sales to U.S. hospitals.

For the years ended December 31, 2005, and December 31, 2006, no individual customer represented over 10% of total revenue. For the year ended, December 29, 2007, one customer represented 11% of total revenue.

Two customers represented 10% and 6% of accounts receivable at December 31, 2006 and 8% and 5% of accounts receivable at December 29, 2007, respectively. A third customer represented 6% of accounts receivable at December 29, 2007.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. The Company invests its excess cash deposits in government securities and money market accounts with major financial institutions. The amount of bank balances in excess of Federal Deposit Insurance Corporation limits was $88.3 million as of September 29, 2007.

While the Company and its contract manufacturers rely on sole source suppliers for certain components, steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

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The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three months ended September 30, 2006 and September 29, 2007, revenue from the sale of the Company’s pulse oximetry products related to GPOs amounted to $16.8 million and $24.4 million, respectively. In the nine months ended September 30, 2006 and September 29, 2007, revenue from sales related to GPOs was $45.8 million and $72.9 million, respectively.

For the year ended December 31, 2006, no individual customer represented over 10% of the Company’s total revenue. For the nine months ended September 29, 2007, one customer represented 10.6% of the Company’s total revenue. There were no other customers that represented over 10% of the total revenue.

Two customers represented 10% and 6% of accounts receivable at December 31, 2006. Two customers represented 14% and 8% of accounts receivable at September 29, 2007.

Concentrations of Risk

The Company is exposed to credit loss for the amount of cash deposits with financial institutions in excess of federally insured limits. The Company invests its excess cash deposits in government securities and money market accounts with major financial institutions. The amount of bank balances in excess of Federal Deposit Insurance Corporation limits was $34.7 million as of June 30, 2007.

While the Company and its contract manufacturers rely on sole source suppliers for certain components, steps have been taken to minimize the impact of a shortage or stoppage of shipments, such as maintaining excess inventory and designing products that may be easily modified to use a different component. There can be no assurance that a shortage or stoppage of shipments of the materials or components that the Company purchases will not result in a delay in production, or adversely affect the Company’s business.

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The Company’s ability to sell its products to U.S. hospitals depends in part on its relationships with Group Purchasing Organizations, or GPOs. Many existing and potential customers for the Company’s products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. During the three months ended June 30, 2006 and 2007, revenue from the sale of the Company’s pulse oximetry products related to GPOs amounted to $15.1 million and $26.7 million, respectively. In the six months ended June 30, 2006 and 2007, revenue from sales related to GPOs was $29.0 million and $48.5 million, respectively.

For the year ended December 31, 2006 and the six months ended June 30, 2007, no individual customer represented over 10% of the Company’s total revenue.

Two customers represented 10% and 6% of accounts receivable at December 31, 2006. No customer represented over 10% of accounts receivable at June 30, 2007.