x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 77-0416458 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer | x | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller Reporting company | ¨ |
Page No. | ||
PART I. FINANCIAL INFORMATION | ||
PART II. OTHER INFORMATION | ||
in millions (except par values) | September 30, 2016 | December 31, 2015 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,021.6 | $ | 714.6 | |||
Short-term investments | 1,193.7 | 845.2 | |||||
Accounts receivable, net | 432.0 | 394.3 | |||||
Inventory | 183.5 | 167.9 | |||||
Prepaids and other current assets | 80.6 | 73.5 | |||||
Total current assets | 2,911.4 | 2,195.5 | |||||
Property, plant and equipment, net | 447.3 | 432.1 | |||||
Long-term investments | 2,346.0 | 1,788.0 | |||||
Long-term deferred tax assets | 133.1 | 167.8 | |||||
Intangible and other assets, net | 135.8 | 122.8 | |||||
Goodwill | 201.1 | 201.1 | |||||
Total assets | $ | 6,174.7 | $ | 4,907.3 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 60.6 | $ | 52.6 | |||
Accrued compensation and employee benefits | 104.1 | 117.3 | |||||
Deferred revenue | 229.6 | 225.6 | |||||
Other accrued liabilities | 133.8 | 96.4 | |||||
Total current liabilities | 528.1 | 491.9 | |||||
Other long-term liabilities | 104.8 | 95.9 | |||||
Total liabilities | 632.9 | 587.8 | |||||
Contingencies (Note 6) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, 2.5 shares authorized, $0.001 par value, issuable in series; no shares issued and outstanding as of September 30, 2016, and December 31, 2015 | — | — | |||||
Common stock, 100.0 shares authorized, $0.001 par value, 38.7 shares and 37.4 shares issued and outstanding as of September 30, 2016, and December 31, 2015, respectively | — | — | |||||
Additional paid-in capital | 4,135.0 | 3,429.8 | |||||
Retained earnings | 1,402.8 | 899.2 | |||||
Accumulated other comprehensive gain (loss) | 4.0 | (9.5 | ) | ||||
Total stockholders’ equity | 5,541.8 | 4,319.5 | |||||
Total liabilities and stockholders’ equity | $ | 6,174.7 | $ | 4,907.3 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
in millions (except per share amounts) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Revenue: | |||||||||||||||
Product | $ | 553.2 | $ | 472.3 | $ | 1,565.2 | $ | 1,363.3 | |||||||
Service | 129.7 | 117.4 | 382.3 | 344.6 | |||||||||||
Total revenue | 682.9 | 589.7 | 1,947.5 | 1,707.9 | |||||||||||
Cost of revenue: | |||||||||||||||
Product | 158.4 | 155.3 | 475.8 | 468.9 | |||||||||||
Service | 37.5 | 38.6 | 108.8 | 119.9 | |||||||||||
Total cost of revenue | 195.9 | 193.9 | 584.6 | 588.8 | |||||||||||
Gross profit | 487.0 | 395.8 | 1,362.9 | 1,119.1 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 168.0 | 154.9 | 511.6 | 480.2 | |||||||||||
Research and development | 62.6 | 51.0 | 170.5 | 144.8 | |||||||||||
Total operating expenses | 230.6 | 205.9 | 682.1 | 625.0 | |||||||||||
Income from operations | 256.4 | 189.9 | 680.8 | 494.1 | |||||||||||
Interest and other income, net | 10.4 | 3.7 | 23.9 | 12.6 | |||||||||||
Income before taxes | 266.8 | 193.6 | 704.7 | 506.7 | |||||||||||
Income tax expense | 55.8 | 26.3 | 172.8 | 107.9 | |||||||||||
Net income | $ | 211.0 | $ | 167.3 | $ | 531.9 | $ | 398.8 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 5.45 | $ | 4.49 | $ | 13.92 | $ | 10.78 | |||||||
Diluted | $ | 5.31 | $ | 4.40 | $ | 13.57 | $ | 10.55 | |||||||
Shares used in computing net income per share: | |||||||||||||||
Basic | 38.7 | 37.3 | 38.2 | 37.0 | |||||||||||
Diluted | 39.7 | 38.0 | 39.2 | 37.8 | |||||||||||
Total comprehensive income | $ | 205.7 | $ | 171.0 | $ | 545.4 | $ | 401.2 |
Nine Months Ended September 30, | |||||||
in millions | 2016 | 2015 | |||||
Operating activities: | |||||||
Net income | $ | 531.9 | $ | 398.8 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and loss on disposal of property, plant, and equipment | 54.0 | 46.3 | |||||
Amortization of intangible assets | 14.0 | 18.6 | |||||
Loss on investments, accretion of discounts and amortization of premiums on investments, net | 26.3 | 18.5 | |||||
Deferred income taxes | 31.7 | 2.8 | |||||
Income tax benefits from employee stock plans | 25.6 | 24.2 | |||||
Excess tax benefit from employee stock plans | (39.5 | ) | (33.2 | ) | |||
Share-based compensation expense | 132.1 | 126.6 | |||||
Changes in operating assets and liabilities | |||||||
Accounts receivable | (37.7 | ) | (19.7 | ) | |||
Inventory | (40.8 | ) | (30.7 | ) | |||
Prepaids and other assets | (19.0 | ) | (41.1 | ) | |||
Accounts payable | 6.4 | (8.4 | ) | ||||
Accrued compensation and employee benefits | (12.9 | ) | (5.1 | ) | |||
Deferred revenue | 5.9 | 7.6 | |||||
Other liabilities | 39.8 | (16.7 | ) | ||||
Net cash provided by operating activities | 717.8 | 488.5 | |||||
Investing activities: | |||||||
Purchase of investments | (1,896.6 | ) | (1,128.2 | ) | |||
Proceeds from sales of investments | 278.4 | 177.6 | |||||
Proceeds from maturities of investments | 683.9 | 575.5 | |||||
Purchase of property, plant and equipment | (36.1 | ) | (61.3 | ) | |||
Net cash used in investing activities | (970.4 | ) | (436.4 | ) | |||
Financing activities: | |||||||
Proceeds from issuance of common stock relating to employee stock plans | 550.4 | 294.0 | |||||
Excess tax benefit from employee stock plans | 39.5 | 33.2 | |||||
Taxes paid related to net share settlement of equity awards | (23.2 | ) | (10.5 | ) | |||
Repurchase and retirement of common stock | (8.1 | ) | (99.5 | ) | |||
Net cash provided by financing activities | 558.6 | 217.2 | |||||
Effect of exchange rate changes on cash and cash equivalents | 1.0 | (1.4 | ) | ||||
Net increase in cash and cash equivalents | 307.0 | 267.9 | |||||
Cash and cash equivalents, beginning of period | 714.6 | 600.3 | |||||
Cash and cash equivalents, end of period | $ | 1,021.6 | $ | 868.2 |
Reported as: | |||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cash and Cash Equivalents | Short- term Investments | Long- term Investments | |||||||||||||||||||||
September 30, 2016 | |||||||||||||||||||||||||||
Cash | $ | 252.2 | $ | — | $ | — | $ | 252.2 | $ | 252.2 | $ | — | $ | — | |||||||||||||
Level 1: | |||||||||||||||||||||||||||
Money market funds | 688.3 | — | — | 688.3 | 688.3 | — | — | ||||||||||||||||||||
U.S. treasuries | 429.6 | 1.0 | (0.1 | ) | 430.5 | 11.0 | 126.5 | 293.0 | |||||||||||||||||||
Subtotal | 1,117.9 | 1.0 | (0.1 | ) | 1,118.8 | 699.3 | 126.5 | 293.0 | |||||||||||||||||||
Level 2: | |||||||||||||||||||||||||||
Commercial paper | 151.4 | — | — | 151.4 | 52.8 | 98.6 | — | ||||||||||||||||||||
Corporate debt securities | 1,328.9 | 4.3 | (0.6 | ) | 1,332.6 | — | 415.3 | 917.3 | |||||||||||||||||||
U.S. government agencies | 959.5 | 1.6 | (0.3 | ) | 960.8 | 6.8 | 280.6 | 673.4 | |||||||||||||||||||
Non-U.S. government securities | 18.5 | — | — | 18.5 | — | 12.5 | 6.0 | ||||||||||||||||||||
Municipal securities | 726.7 | 1.0 | (0.7 | ) | 727.0 | 10.5 | 260.2 | 456.3 | |||||||||||||||||||
Subtotal | 3,185.0 | 6.9 | (1.6 | ) | 3,190.3 | 70.1 | 1,067.2 | 2,053.0 | |||||||||||||||||||
Total assets measured at fair value | $ | 4,555.1 | $ | 7.9 | $ | (1.7 | ) | $ | 4,561.3 | $ | 1,021.6 | $ | 1,193.7 | $ | 2,346.0 |
Reported as: | |||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cash and Cash Equivalents | Short- term Investments | Long- term Investments | |||||||||||||||||||||
December 31, 2015 | |||||||||||||||||||||||||||
Cash | $ | 202.6 | $ | — | $ | — | $ | 202.6 | $ | 202.6 | $ | — | $ | — | |||||||||||||
Level 1: | |||||||||||||||||||||||||||
Money market funds | 430.6 | — | — | 430.6 | 430.6 | — | — | ||||||||||||||||||||
U.S. treasuries & corporate equity securities | 253.6 | — | (1.8 | ) | 251.8 | 50.6 | 52.4 | 148.8 | |||||||||||||||||||
Subtotal | 684.2 | — | (1.8 | ) | 682.4 | 481.2 | 52.4 | 148.8 | |||||||||||||||||||
Level 2: | |||||||||||||||||||||||||||
Commercial paper | 76.4 | — | — | 76.4 | 3.8 | 72.6 | — | ||||||||||||||||||||
Corporate debt securities | 1,131.0 | 0.8 | (3.0 | ) | 1,128.8 | — | 384.5 | 744.3 | |||||||||||||||||||
U.S. government agencies | 618.5 | — | (1.5 | ) | 617.0 | 27.0 | 194.8 | 395.2 | |||||||||||||||||||
Non-U.S. government securities | 28.8 | — | (0.1 | ) | 28.7 | — | 10.3 | 18.4 | |||||||||||||||||||
Municipal securities | 611.9 | 0.6 | (0.6 | ) | 611.9 | — | 130.6 | 481.3 | |||||||||||||||||||
Subtotal | 2,466.6 | 1.4 | (5.2 | ) | 2,462.8 | 30.8 | 792.8 | 1,639.2 | |||||||||||||||||||
Total assets measured at fair value | $ | 3,353.4 | $ | 1.4 | $ | (7.0 | ) | $ | 3,347.8 | $ | 714.6 | $ | 845.2 | $ | 1,788.0 |
Amortized Cost | Fair Value | ||||||
Mature in less than one year | $ | 1,274.3 | $ | 1,274.8 | |||
Mature in one to five years | 2,340.3 | 2,346.0 | |||||
Total | $ | 3,614.6 | $ | 3,620.8 |
Derivatives Designated as Hedging Instruments | Derivatives Not Designated as Hedging Instruments | ||||||||||||||
September 30, 2016 | December 31, 2015 | September 30, 2016 | December 31, 2015 | ||||||||||||
Notional amounts: | |||||||||||||||
Forward contracts | $ | 140.6 | $ | 89.1 | $ | 119.5 | $ | 128.7 | |||||||
Gross fair value recorded in: | |||||||||||||||
Prepaid and other current assets | $ | 1.5 | $ | 2.0 | $ | 1.0 | $ | 2.6 | |||||||
Other accrued liabilities | $ | 2.9 | $ | 0.5 | $ | 2.5 | $ | 0.2 |
September 30, 2016 | December 31, 2015 | ||||||
Inventory: | |||||||
Raw materials | $ | 52.1 | $ | 53.3 | |||
Work-in-process | 11.0 | 10.2 | |||||
Finished goods | 120.4 | 104.4 | |||||
Total inventory | $ | 183.5 | $ | 167.9 |
September 30, 2016 | December 31, 2015 | ||||||
Other accrued liabilities—short term: | |||||||
Taxes payable | $ | 32.2 | $ | 11.4 | |||
Tolled product liability claims accrued | 24.8 | 24.4 | |||||
Other accrued liabilities | 76.8 | 60.6 | |||||
Total other accrued liabilities—short-term | $ | 133.8 | $ | 96.4 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Equipment transfers, including operating lease assets, from inventory to property, plant and equipment | $ | 31.1 | $ | 19.9 |
As of | |||||||
September 30, 2016 | December 31, 2015 | ||||||
Gross lease receivable | $ | 92.3 | $ | 67.1 | |||
Unearned income | (4.0 | ) | (3.4 | ) | |||
Allowance for credit loss | (2.1 | ) | (0.4 | ) | |||
Net investment in sales-type leases | 86.2 | 63.3 | |||||
Reported as: | |||||||
Prepaids and other current assets | 27.5 | 16.1 | |||||
Intangible and other assets, net | 58.7 | 47.2 | |||||
Total, net | $ | 86.2 | $ | 63.3 |
Amount | |||
2016 | $ | 8.2 | |
2017 | 26.6 | ||
2018 | 27.2 | ||
2019 | 17.7 | ||
2020 | 9.2 | ||
Thereafter | 3.4 | ||
Total | $ | 92.3 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Shares repurchased | — | 0.1 | — | 0.2 | |||||||||||
Average price per share | $ | — | $ | 509.36 | $ | 516.54 | $ | 499.81 | |||||||
Value of shares repurchased | $ | — | $ | 35.5 | $ | 8.1 | $ | 99.5 |
Three Months Ended September 30, 2016 | |||||||||||||||||||
Gains (Losses) on Hedge Instruments | Unrealized Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation Gains (Losses) | Employee Benefit Plans | Total | |||||||||||||||
Beginning balance | $ | (1.0 | ) | $ | 10.5 | $ | 3.1 | $ | (3.3 | ) | $ | 9.3 | |||||||
Other comprehensive income before reclassifications | (1.9 | ) | (5.6 | ) | 0.7 | — | (6.8 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income | 1.3 | — | — | 0.2 | 1.5 | ||||||||||||||
Net current-period other comprehensive income (loss) | (0.6 | ) | (5.6 | ) | 0.7 | 0.2 | (5.3 | ) | |||||||||||
Ending balance | $ | (1.6 | ) | $ | 4.9 | $ | 3.8 | $ | (3.1 | ) | $ | 4.0 | |||||||
Three Months Ended September 30, 2015 | |||||||||||||||||||
Gains (Losses) on Hedge Instruments | Unrealized Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation Gains (Losses) | Employee Benefit Plans | Total | |||||||||||||||
Beginning balance | $ | 0.8 | $ | 2.3 | $ | (6.2 | ) | $ | (3.3 | ) | $ | (6.4 | ) | ||||||
Other comprehensive income before reclassifications | 1.1 | 0.4 | 2.9 | — | 4.4 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income | (0.7 | ) | (0.1 | ) | — | 0.1 | (0.7 | ) | |||||||||||
Net current-period other comprehensive income (loss) | 0.4 | 0.3 | 2.9 | 0.1 | 3.7 | ||||||||||||||
Ending balance | $ | 1.2 | $ | 2.6 | $ | (3.3 | ) | $ | (3.2 | ) | $ | (2.7 | ) |
Nine Months Ended September 30, 2016 | |||||||||||||||||||
Gains (Losses) on Hedge Instruments | Unrealized Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation Gains (Losses) | Employee Benefit Plans | Total | |||||||||||||||
Beginning balance | $ | 1.5 | $ | (4.2 | ) | $ | (3.3 | ) | $ | (3.5 | ) | $ | (9.5 | ) | |||||
Other comprehensive income before reclassifications | (4.4 | ) | 8.8 | 7.1 | — | 11.5 | |||||||||||||
Amounts reclassified from accumulated other comprehensive income | 1.3 | 0.3 | — | 0.4 | 2.0 | ||||||||||||||
Net current-period other comprehensive income (loss) | (3.1 | ) | 9.1 | 7.1 | 0.4 | 13.5 | |||||||||||||
Ending balance | $ | (1.6 | ) | $ | 4.9 | $ | 3.8 | $ | (3.1 | ) | $ | 4.0 | |||||||
Nine Months Ended September 30, 2015 | |||||||||||||||||||
Gains (Losses) on Hedge Instruments | Unrealized Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation Gains (Losses) | Employee Benefit Plans | Total | |||||||||||||||
Beginning balance | $ | 1.1 | $ | (0.2 | ) | $ | (2.1 | ) | $ | (3.9 | ) | $ | (5.1 | ) | |||||
Other comprehensive income before reclassifications | 5.6 | 3.5 | (1.2 | ) | 0.4 | 8.3 | |||||||||||||
Amounts reclassified from accumulated other comprehensive income | (5.5 | ) | (0.7 | ) | — | 0.3 | (5.9 | ) | |||||||||||
Net current-period other comprehensive income (loss) | 0.1 | 2.8 | (1.2 | ) | 0.7 | 2.4 | |||||||||||||
Ending balance | $ | 1.2 | $ | 2.6 | $ | (3.3 | ) | $ | (3.2 | ) | $ | (2.7 | ) |
Stock Options Outstanding | |||||||
Number Outstanding | Weighted Average Exercise Price Per Share | ||||||
Balance at December 31, 2015 | 4.2 | $ | 421.00 | ||||
Options granted | 0.3 | $ | 614.59 | ||||
Options exercised | (1.2 | ) | $ | 415.78 | |||
Options forfeited/expired | (0.1 | ) | $ | 491.27 | |||
Balance at September 30, 2016 | 3.2 | $ | 441.34 |
Shares | Weighted Average Grant Date Fair Value | |||||
Unvested balance at December 31, 2015 | 0.4 | $ | 485.55 | |||
Granted | 0.3 | $ | 548.54 | |||
Vested | (0.1 | ) | $ | 481.54 | ||
Forfeited | — | $ | 506.93 | |||
Unvested balance at September 30, 2016 | 0.6 | $ | 520.35 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cost of sales - products | $ | 6.9 | $ | 6.2 | $ | 18.6 | $ | 16.9 | |||||||
Cost of sales - services | 3.3 | 3.2 | 9.4 | 9.8 | |||||||||||
Total cost of sales | 10.2 | 9.4 | 28.0 | 26.7 | |||||||||||
Selling, general and administrative | 25.3 | 25.0 | 72.9 | 71.7 | |||||||||||
Research and development | 11.4 | 9.8 | 31.5 | 28.2 | |||||||||||
Share-based compensation expense before income taxes | 46.9 | 44.2 | 132.4 | 126.6 | |||||||||||
Income tax benefit | 14.8 | 14.9 | 41.5 | 41.5 | |||||||||||
Share-based compensation expense after income taxes | $ | 32.1 | $ | 29.3 | $ | 90.9 | $ | 85.1 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Stock Option Plans | |||||||||||||||
Risk free interest rate | 1.0 | % | 1.6 | % | 1.1 | % | 1.6 | % | |||||||
Expected term (in years) | 3.9 | 4.0 | 4.2 | 4.3 | |||||||||||
Expected volatility | 24 | % | 27 | % | 27 | % | 28 | % | |||||||
Weighted average fair value at grant date | $ | 141.96 | $ | 127.14 | $ | 140.69 | $ | 131.44 | |||||||
Employee Stock Purchase Plan | |||||||||||||||
Risk free interest rate | 0.5 | % | 0.4 | % | 0.6 | % | 0.4 | % | |||||||
Expected term (in years) | 1.2 | 1.2 | 1.2 | 1.2 | |||||||||||
Expected volatility | 27 | % | 31 | % | 30 | % | 31 | % | |||||||
Weighted average fair value at grant date | $ | 183.42 | $ | 146.87 | $ | 172.71 | $ | 146.72 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 211.0 | $ | 167.3 | $ | 531.9 | $ | 398.8 | |||||||
Denominator: | |||||||||||||||
Weighted-average shares outstanding used in basic calculation | 38.7 | 37.3 | 38.2 | 37.0 | |||||||||||
Add: dilutive effect of potential common shares | 1.0 | 0.7 | 1.0 | 0.8 | |||||||||||
Weighted-average shares used in computing diluted net income per share | 39.7 | 38.0 | 39.2 | 37.8 | |||||||||||
Net income per share: | |||||||||||||||
Basic | $ | 5.45 | $ | 4.49 | $ | 13.92 | $ | 10.78 | |||||||
Diluted | $ | 5.31 | $ | 4.40 | $ | 13.57 | $ | 10.55 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | A new overhead instrument arm architecture designed to facilitate anatomical access from virtually any position. |
• | A new digital endoscope architecture that creates a simpler, more compact design with improved vision definition and clarity. |
• | An ability to attach the endoscope to any arm, providing flexibility for visualizing the surgical site. |
• | Smaller, thinner arms with newly designed joints that offer a greater range of motion than before. |
• | Longer instrument shafts designed to give surgeons greater operative reach. |
• | Ease of use enhancements, including automated pre-surgical deployment of the da Vinci robot arms. |
• | Total revenue increased by 16% to $682.9 million during the three months ended September 30, 2016, compared with $589.7 million during the three months ended September 30, 2015. |
• | Approximately 186,000 da Vinci procedures were performed during the three months ended September 30, 2016, an increase of approximately 14% compared with 162,000 for the three months ended September 30, 2015. |
• | Instrument and accessory revenue increased by 17% to $348.1 million during the three months ended September 30, 2016, compared with $298.1 million during the three months ended September 30, 2015. |
• | Recurring revenue increased by 15% to $477.8 million during the three months ended September 30, 2016, compared with $415.5 million during the three months ended September 30, 2015, representing 70% of total revenue in both periods. |
• | Systems revenue increased by 18% to $205.1 million during the three months ended September 30, 2016, compared with $174.2 million during the three months ended September 30, 2015. A total of 134 da Vinci Surgical Systems were shipped during the three months ended September 30, 2016, compared with 117 during the three months ended September 30, 2015. As of September 30, 2016, we had a da Vinci Surgical System installed base of approximately 3,803 systems, an increase of approximately 9% compared with the installed base as of September 30, 2015. |
• | Gross profit as a percentage of revenue increased to 71.3% for the three months ended September 30, 2016, compared with 67.1% for the three months ended September 30, 2015. Gross profit for the three months ended September 30, 2016, included a $7.1 million benefit due to an IRS approved Medical Device Excise Tax (“MDET”) refund claim. |
• | Operating income increased by 35% to $256.4 million during the three months ended September 30, 2016, compared with $189.9 million during the three months ended September 30, 2015. Operating income included $46.9 million and $44.2 million of share-based compensation expense related to employee stock plans during the three months ended September 30, 2016, and 2015, respectively. |
• | As of September 30, 2016, we had $4.6 billion in cash, cash equivalents and investments. Cash, cash equivalents and investments increased by $1.2 billion, compared with December 31, 2015, primarily as a result of cash provided by operating activities and employee stock option exercises. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2016 | % of total revenue | 2015 | % of total revenue | 2016 | % of total revenue | 2015 | % of total revenue | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||
Product | $ | 553.2 | 81 | % | $ | 472.3 | 80 | % | $ | 1,565.2 | 80 | % | $ | 1,363.3 | 80 | % | |||||||||||
Service | 129.7 | 19 | % | 117.4 | 20 | % | 382.3 | 20 | % | 344.6 | 20 | % | |||||||||||||||
Total revenue | 682.9 | 100 | % | 589.7 | 100 | % | 1,947.5 | 100 | % | 1,707.9 | 100 | % | |||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||||
Product | 158.4 | 23 | % | 155.3 | 26 | % | 475.8 | 24 | % | 468.9 | 27 | % | |||||||||||||||
Service | 37.5 | 6 | % | 38.6 | 7 | % | 108.8 | 6 | % | 119.9 | 7 | % | |||||||||||||||
Total cost of revenue | 195.9 | 29 | % | 193.9 | 33 | % | 584.6 | 30 | % | 588.8 | 34 | % | |||||||||||||||
Product gross profit | 394.8 | 58 | % | 317.0 | 54 | % | 1,089.4 | 56 | % | 894.4 | 53 | % | |||||||||||||||
Service gross profit | 92.2 | 13 | % | 78.8 | 13 | % | 273.5 | 14 | % | 224.7 | 13 | % | |||||||||||||||
Gross profit | 487.0 | 71 | % | 395.8 | 67 | % | 1,362.9 | 70 | % | 1,119.1 | 66 | % | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Selling, general and administrative | 168.0 | 25 | % | 154.9 | 26 | % | 511.6 | 26 | % | 480.2 | 28 | % | |||||||||||||||
Research and development | 62.6 | 9 | % | 51.0 | 9 | % | 170.5 | 9 | % | 144.8 | 9 | % | |||||||||||||||
Total operating expenses | 230.6 | 34 | % | 205.9 | 35 | % | 682.1 | 35 | % | 625.0 | 37 | % | |||||||||||||||
Income from operations | 256.4 | 37 | % | 189.9 | 32 | % | 680.8 | 35 | % | 494.1 | 29 | % | |||||||||||||||
Interest and other income, net | 10.4 | 2 | % | 3.7 | 1 | % | 23.9 | 1 | % | 12.6 | 1 | % | |||||||||||||||
Income before taxes | 266.8 | 39 | % | 193.6 | 33 | % | 704.7 | 36 | % | 506.7 | 30 | % | |||||||||||||||
Income tax expense | 55.8 | 8 | % | 26.3 | 5 | % | 172.8 | 9 | % | 107.9 | 7 | % | |||||||||||||||
Net income | $ | 211.0 | 31 | % | $ | 167.3 | 28 | % | $ | 531.9 | 27 | % | $ | 398.8 | 23 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | |||||||||||||||
Instruments and accessories | $ | 348.1 | $ | 298.1 | $ | 1,009.5 | $ | 872.1 | |||||||
Systems | 205.1 | 174.2 | 555.7 | 491.2 | |||||||||||
Total product revenue | 553.2 | 472.3 | 1,565.2 | 1,363.3 | |||||||||||
Services | 129.7 | 117.4 | 382.3 | 344.6 | |||||||||||
Total revenue | $ | 682.9 | $ | 589.7 | $ | 1,947.5 | $ | 1,707.9 | |||||||
Recurring revenue | $ | 477.8 | $ | 415.5 | $ | 1,391.8 | $ | 1,216.7 | |||||||
% of total revenue | 70 | % | 70 | % | 71 | % | 71 | % | |||||||
United States | $ | 494.1 | $ | 438.5 | $ | 1,409.6 | $ | 1,238.7 | |||||||
OUS | 188.8 | 151.2 | 537.9 | 469.2 | |||||||||||
Total revenue | $ | 682.9 | $ | 589.7 | $ | 1,947.5 | $ | 1,707.9 | |||||||
% of Revenue - United States | 72 | % | 74 | % | 72 | % | 73 | % | |||||||
% of Revenue - OUS | 28 | % | 26 | % | 28 | % | 27 | % | |||||||
Unit Shipments by Region: | |||||||||||||||
United States unit shipments | 85 | 80 | 238 | 215 | |||||||||||
OUS unit shipments | 49 | 37 | 136 | 119 | |||||||||||
Total unit shipments* | 134 | 117 | 374 | 334 | |||||||||||
Unit Shipments by Model: | |||||||||||||||
da Vinci S | — | — | 1 | 1 | |||||||||||
da Vinci Si-e - Single console (3 arm) | 1 | — | 2 | 6 | |||||||||||
da Vinci Si - Single console (4 arm) | 30 | 22 | 83 | 68 | |||||||||||
da Vinci Si - Dual console | 1 | 5 | 2 | 18 | |||||||||||
da Vinci Xi - Single console | 80 | 61 | 213 | 167 | |||||||||||
da Vinci Xi - Dual console | 22 | 29 | 73 | 74 | |||||||||||
Total unit shipments* | 134 | 117 | 374 | 334 | |||||||||||
Unit Shipments involving System Trade-ins: | |||||||||||||||
Unit shipments involving trade-ins of da Vinci standard Surgical Systems | — | — | 1 | 4 | |||||||||||
Unit shipments involving trade-ins of da Vinci S Surgical Systems | 14 | 22 | 63 | 72 | |||||||||||
Unit shipments involving trade-ins of da Vinci Si Surgical Systems | 19 | 15 | 49 | 39 | |||||||||||
Total unit shipments involving trade-ins | 33 | 37 | 113 | 115 | |||||||||||
Unit shipments not involving trade-ins | 101 | 80 | 261 | 219 | |||||||||||
Total unit shipments* | 134 | 117 | 374 | 334 | |||||||||||
*Systems shipped under operating leases (included in total unit shipments) | 15 | 13 | 49 | 27 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Net cash provided by (used in) | |||||||
Operating activities | $ | 717.8 | $ | 488.5 | |||
Investing activities | (970.4 | ) | (436.4 | ) | |||
Financing activities | 558.6 | 217.2 | |||||
Effect of exchange rates on cash and cash equivalents | 1.0 | (1.4 | ) | ||||
Net increase in cash and cash equivalents | $ | 307.0 | $ | 267.9 |
1. | Our net income included non-cash charges, including share-based compensation of $132.1 million; deferred income taxes of $31.7 million; depreciation of $54.0 million; investment related non-cash charges of $26.3 million; and amortization of intangible assets of $14.0 million, partly offset by tax benefits from employee stock plans of $13.9 million. |
2. | The non-cash charges outlined above were partly offset by changes in operating assets and liabilities that resulted in $58.3 million of cash used by operating activities. Operating assets and liabilities are primarily comprised of accounts receivable, inventory, prepaid expenses, deferred revenue, and other accrued liabilities. Inventory, including the transfer of equipment from inventory to property, plant and equipment, increased by $40.8 million. Accounts receivable increased $37.7 million primarily driven by higher revenue and timing of collections. Prepaids and other assets increased $19.0 million primarily driven by higher lease receivable balances resulting from sales-type lease arrangement transactions entered into during the nine months ended September 30, 2016. Accrued compensation and employee benefits decreased $12.9 million primarily due to the payments of 2015 incentive compensation. The unfavorable impact of these items on cash provided by operating activities was partly offset by a $39.8 million increase in other liabilities, primarily due to higher income tax payable, a $6.4 million increase in accounts payable, and a $5.9 million increase in deferred revenue. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit Number | Exhibit Description |
3.1 | Amended and Restated Certificate of Incorporation of Intuitive Surgical, Inc. (incorporated by reference to Exhibit 3.1 on Form 10-K filed with the Securities and Exchange Commission on February 6, 2009). |
3.2 | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Intuitive Surgical, Inc. (incorporated by reference to Exhibit 3.2 on Form 10-K filed with the Securities and Exchange Commission on February 6, 2009). |
3.3 | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Intuitive Surgical, Inc. (incorporated by reference to Exhibit A to Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March 1, 2012). |
3.4 | Amended and Restated Bylaws of Intuitive Surgical, Inc. (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 24, 2012). |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101 | The following materials from Intuitive Surgical, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Comprehensive Income, (iii) the unaudited Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements (unaudited), tagged at Level I through IV. |
INTUITIVE SURGICAL, INC. | ||
By: | /s/ MARSHALL L. MOHR | |
Marshall L. Mohr | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer and duly authorized signatory) |
1. | I have reviewed this quarterly report on Form 10-Q of Intuitive Surgical, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /S/ GARY S. GUTHART |
Gary S. Guthart, Ph.D. President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Intuitive Surgical, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /S/ MARSHALL L. MOHR |
Marshall L. Mohr Senior Vice President and Chief Financial Officer |
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /S/ GARY S. GUTHART |
Gary S. Guthart, Ph.D. President and Chief Executive Officer |
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /S/ MARSHALL L. MOHR |
Marshall L. Mohr Senior Vice President and Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 13, 2016 |
|
Document Document And Entity Information [Abstract] | ||
Entity Registrant Name | INTUITIVE SURGICAL INC | |
Trading Symbol | ISRG | |
Entity Central Index Key | 0001035267 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 38,747,011 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized (in shares) | 2,500,000.0 | 2,500,000.0 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, shares authorized (in shares) | 100,000,000.0 | 100,000,000.0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares issued (in shares) | 38,700,000 | 37,400,000 |
Common stock, shares outstanding (in shares) | 38,700,000 | 37,400,000 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Revenue: | ||||
Product | $ 553.2 | $ 472.3 | $ 1,565.2 | $ 1,363.3 |
Service | 129.7 | 117.4 | 382.3 | 344.6 |
Total revenue | 682.9 | 589.7 | 1,947.5 | 1,707.9 |
Cost of revenue: | ||||
Product | 158.4 | 155.3 | 475.8 | 468.9 |
Service | 37.5 | 38.6 | 108.8 | 119.9 |
Total cost of revenue | 195.9 | 193.9 | 584.6 | 588.8 |
Gross profit | 487.0 | 395.8 | 1,362.9 | 1,119.1 |
Operating expenses: | ||||
Selling, general and administrative | 168.0 | 154.9 | 511.6 | 480.2 |
Research and development | 62.6 | 51.0 | 170.5 | 144.8 |
Total operating expenses | 230.6 | 205.9 | 682.1 | 625.0 |
Income from operations | 256.4 | 189.9 | 680.8 | 494.1 |
Interest and other income, net | 10.4 | 3.7 | 23.9 | 12.6 |
Income before taxes | 266.8 | 193.6 | 704.7 | 506.7 |
Income tax expense | 55.8 | 26.3 | 172.8 | 107.9 |
Net income | $ 211.0 | $ 167.3 | $ 531.9 | $ 398.8 |
Net income per share: | ||||
Basic (in dollars per share) | $ 5.45 | $ 4.49 | $ 13.92 | $ 10.78 |
Diluted (in dollars per share) | $ 5.31 | $ 4.40 | $ 13.57 | $ 10.55 |
Shares used in computing net income per share: | ||||
Weighted-average shares outstanding used in basic calculation | 38.7 | 37.3 | 38.2 | 37.0 |
Diluted (in shares) | 39.7 | 38.0 | 39.2 | 37.8 |
Total comprehensive income | $ 205.7 | $ 171.0 | $ 545.4 | $ 401.2 |
DESCRIPTION OF THE BUSINESS |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF THE BUSINESS | DESCRIPTION OF THE BUSINESS Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci® Surgical Systems and related instruments and accessories, which taken together, are advanced surgical systems that the Company believes enable a new generation of surgery. This advanced generation of surgery, which the Company calls da Vinci Surgery, combines the benefits of minimally invasive surgery (“MIS”) for patients with the ease of use, precision, and dexterity of open surgery. A da Vinci Surgical System consists of a surgeon’s console, a patient-side cart, and a high performance vision system. The da Vinci Surgical System translates a surgeon’s natural hand movements, which are performed on instrument controls at a console, into corresponding micro-movements of instruments positioned inside the patient through small incisions, or ports. The da Vinci Surgical System is designed to provide its operating surgeons with intuitive control, range of motion, fine tissue manipulation capability, and Three Dimensional (“3-D”) High-Definition (“HD”) vision while simultaneously allowing surgeons to work through the small ports enabled by MIS procedures. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements (“financial statements”) of Intuitive Surgical, Inc. and its wholly-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2015, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein. The financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and therefore, omit certain information and footnote disclosure necessary to present the financial statements in accordance with accounting principles generally accepted in the United States (“U.S.”) (“U.S. GAAP”). These financial statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the SEC on February 2, 2016. The results of operations for the first nine months of fiscal year 2016 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2014-09, Revenue from Contracts with Customers. This updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update by one year. This updated standard becomes effective for the Company in the first quarter of fiscal year 2018, but allows the Company to adopt the standard one year earlier if it so chooses. The Company currently plans to adopt this accounting standard in the first quarter of fiscal year 2018. The Company has not yet selected a transition method and is evaluating the effect that the updated standard will have on its Consolidated Financial Statements and related disclosures. In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This ASU becomes effective for the Company in the first quarter of fiscal year 2019 and early adoption is permitted. This ASU is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. The Company generally does not finance purchases of equipment or other capital, but does lease some of its facilities. The Company’s customers finance purchases of da Vinci systems and ancillary products, including directly with the Company. It is currently unknown whether this ASU will change customer buying patterns or behaviors. The Company is evaluating the effect that this ASU will have on its Consolidated Financial Statements and related disclosures. In March 2016, FASB issued ASU No. 2016-09, Improvements to Employee Share-based Payment Accounting. This ASU simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU requires that excess tax benefits and deficiencies be recognized as income tax benefit or expense in the income statement, and therefore, the Company anticipates increased income tax expense volatility after adoption of this ASU. The Company currently plans to implement this ASU as required in the first quarter of fiscal year 2017. The Company is evaluating the effect that this ASU will have on its Consolidated Financial Statements and related disclosures. Significant Accounting Policies There have been no new or material changes to the significant accounting policies discussed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015, that are of significance, or potential significance to the Company. |
FINANCIAL INSTRUMENTS |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS | FINANCIAL INSTRUMENTS Cash, Cash Equivalents and Investments The following tables summarize the Company’s cash and available-for-sale marketable securities’ amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category reported as cash and cash equivalents, short-term, or long-term investments as of September 30, 2016, and December 31, 2015 (in millions):
The following table summarizes the contractual maturities of the Company’s cash equivalents and available-for-sale investments (excluding cash and money market funds), as of September 30, 2016 (in millions):
Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations. Realized gains and losses, recognized on the sale of investments, were not material for any of the periods presented. There were no transfers between Level 1 and Level 2 measurements during the three and nine months ended September 30, 2016, and there were no changes in the valuation techniques used by the Company. Foreign Currency Derivatives The objective of the Company’s hedging program is to mitigate the impact of changes in currency exchange rates on cash flow from foreign currency denominated sales, expenses, intercompany balances, and other monetary assets or liabilities denominated in currencies other than the U.S. dollar (“USD”). The terms of the Company's derivative contracts are generally twelve months or shorter. The derivative assets and liabilities are measured using Level 2 fair value inputs. Cash Flow Hedges The Company enters into currency forward contracts as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the USD, primarily the European Euro (“EUR”), the British Pound (“GBP”), the Japanese Yen (“JPY”), and the Korean Won (“KRW”). The Company also enters into currency forward contracts as cash flow hedges to hedge certain forecasted expense transactions denominated in EUR. For these derivatives, the Company reports the after-tax gain or loss from the hedge as a component of accumulated other comprehensive gain (loss) in stockholders’ equity and reclassifies it into earnings in the same period in which the hedged transaction affects earnings. The gains/(losses) reclassified to revenue related to the hedged transactions were $(1.4) million and $(1.3) million for the three and nine months ended September 30, 2016, respectively, and $0.6 million and $5.1 million for the three and nine months ended September 30, 2015, respectively. The amounts reclassified to expenses related to the hedged transactions and the ineffective portions of cash flow hedges were not material for the periods presented. Other Derivatives Not Designated as Hedging Instruments Other derivatives not designated as hedging instruments consist primarily of forward contracts that the Company uses to hedge intercompany balances and other monetary assets or liabilities denominated in currencies other than the USD, primarily the EUR, GBP, JPY, KRW, and the Swiss Franc (“CHF”). The net gains (losses) recognized in interest and other income, net in the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2016, and 2015, were not material. The notional amounts for derivative instruments provide one measure of the transaction volume. Total gross notional amounts (in USD) for outstanding derivatives and aggregate gross fair value at the end of each period were as follows (in millions):
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BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION | BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION The following table provides further details of inventory (in millions):
The following table provides details of the other accrued liabilities—short term (in millions):
Supplemental Cash Flow Information The following table provides supplemental non-cash investing activities (in millions):
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LEASE RECEIVABLES |
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LEASE RECEIVABLES | LEASE RECEIVABLES Lease receivables relating to sales-type lease arrangements are presented on the Condensed Consolidated Balance Sheets as follows (in millions):
Contractual maturities of gross lease receivables at September 30, 2016, are as follows (in millions):
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CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | CONTINGENCIES The Company is involved in a variety of claims, lawsuits, investigations and proceedings relating to securities laws, product liability, intellectual property, insurance, contract disputes, employee related, and other matters. Certain of these lawsuits and claims are described in further detail below. It is not possible to predict what the outcome of these matters will be and the Company cannot guarantee that any resolution will be reached on commercially reasonable terms, if at all. With the exception of the charges recorded related to the Company’s estimate of the probable loss associated with the tolled product liability claims described below, the Company has determined that an estimate of either probable losses or range of loss related to material pending or threatened litigation matters cannot be determined as of September 30, 2016. Nevertheless, it is possible that future legal costs (including settlements, judgments, legal fees, and other related defense costs) could have a material adverse effect on the Company's business, financial position, or future results of operations. The Company is also a party to various other legal actions that arise in the ordinary course of business and does not believe that any of these other legal actions will have a material adverse impact on the Company's business, financial position, or future results of operations. In accordance with U.S. GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to each case. Purported Shareholder Class Action Lawsuits filed April 26, 2013, and May 24, 2013 On April 26, 2013, a purported class action lawsuit entitled Abrams v. Intuitive Surgical, et al., No. 5-13-cv-1920, was filed against a number of the Company's current and former officers and directors in the United States District Court for the Northern District of California. A substantially identical complaint, entitled Adel v. Intuitive Surgical, et al., No. 5:13-cv-02365, was filed in the same court against the same defendants on May 24, 2013. The Adel case was voluntarily dismissed without prejudice on August 20, 2013. On October 15, 2013, plaintiffs in the Abrams matter filed an amended complaint. The case has since been re-titled In re Intuitive Surgical Securities Litigation, No. 5:13-cv-1920. The plaintiffs seek unspecified damages on behalf of a putative class of persons who purchased or otherwise acquired the Company's common stock between February 6, 2012, and July 18, 2013. The amended complaint alleges that the defendants violated federal securities laws by allegedly making false and misleading statements and omitting certain material facts in certain public statements and in the Company's filings with the SEC. On November 18, 2013, the court appointed the Employees’ Retirement System of the State of Hawaii as lead plaintiff and appointed lead counsel. The Company filed a motion to dismiss the amended complaint on December 16, 2013, which was granted in part and denied in part on August 21, 2014. The plaintiffs elected not to further amend their complaint. On October 22, 2014, the court granted the Company’s motion for leave to file a motion for reconsideration of the court’s August 21, 2014, order. The Company filed its motion for reconsideration on November 5, 2014, the plaintiffs filed their opposition on November 19, 2014, and the Company filed its reply on November 26, 2014. The court denied the motion for reconsideration on December 15, 2014. The case is moving forward on the claims that remain, and discovery is ongoing. The plaintiffs moved for class certification on September 1, 2015, the Company filed its opposition on October 15, 2015, and the plaintiffs filed their reply on November 16, 2015. On January 21, 2016, the court held a hearing on the motion, which remains pending. No trial date has been set. Based on currently available information, the Company does not believe the resolution of this matter will have a material adverse effect on the Company's business, financial position, or future results of operations. Purported Derivative Actions filed on February 3, 2014, February 21, 2014, March 21, 2014, June 3, 2014, and March 5, 2015 On February 3, 2014, an alleged stockholder, Robert Berg, caused a purported stockholder’s derivative lawsuit entitled Berg v. Guthart et al., No. 4:14-CV-00515, to be filed in the United States District Court for the Northern District of California. The lawsuit names the Company as a nominal defendant and names a number of the Company’s current and former officers and directors as defendants. The plaintiff seeks to recover, on the Company’s behalf, unspecified damages purportedly sustained by the Company in connection with allegedly misleading statements and/or omissions made in connection with the Company’s financial reporting for the period between 2012 and early 2014. The plaintiff also seeks a series of changes to the Company’s corporate governance policies and an award of attorneys’ fees. On April 3, 2014, the case was related to In re Intuitive Surgical Securities Litigation. On July 30, 2014, the court granted Berg’s motion to be appointed lead plaintiff, denied the City of Birmingham’s motion seeking such appointment (see below for additional description), and re-titled the matter In re Intuitive Surgical, Inc. Shareholder Derivative Litigation, No. 4:14-CV-00515. On August 13, 2014, the plaintiffs filed a consolidated complaint, making allegations substantially similar to the allegations in the original complaint. On September 12, 2014, the Company filed a motion to dismiss the consolidated complaint. The plaintiffs filed an opposition on October 9, 2014, and the Company filed its reply on October 30, 2014. The court denied the Company's motion to dismiss on November 16, 2015. On January 26, 2016, the Company moved to stay this lawsuit in favor of Public School Teachers’ Pension and Retirement Fund of Chicago v. Guthart et al. (see below for additional description). Plaintiff opposed the motion to stay on February 16, 2016, the Company filed its reply on March 1, 2016, and a hearing was set for June 16, 2016. While the motion was pending, however, the Company and the plaintiff agreed in principle that the plaintiff would file a motion to intervene in the Public School Teachers’ Pension and Retirement Fund of Chicago action and withdraw his opposition to the motion to stay. On March 17, 2016, the parties jointly requested that the court not rule on the motion to stay while the agreement was being implemented. Following additional negotiations, the plaintiff filed an unopposed motion to intervene on April 29, 2016. After additional briefing, on May 23, 2016, the court in the Public School Teacher's Pension and Retirement Fund of Chicago action granted the motion. Accordingly, on May 31, 2016, the parties filed a stipulation requesting that the court stay In re Intuitive Surgical, Inc. Shareholder Derivative Litigation. The court granted the stay on June 2, 2016. Additional discussions between the parties ensued, and on September 15, 2016, they executed a Memorandum of Understanding that contains the essential terms of a confidential settlement to which the parties have agreed in principle. That settlement, which is still being finalized, will provide for a dismissal with prejudice and release of all claims brought in both the In re Intuitive Surgical, Inc. Shareholder Derivative Litigation action and the Public School Teachers’ Pension and Retirement Fund of Chicago action, as well as City of Plantation Police Officers’ Employees’ Retirement System v. Guthart et al. (see below for additional description). The settlement will be subject to court approval as described below. In the interim, the In re Intuitive Surgical, Inc. Shareholder Derivative Litigation action remains stayed. Based on currently available information, the Company does not believe the resolution of this matter will have a material adverse effect on the Company's business, financial position or future results of operations. On February 21, 2014, a second alleged stockholder caused a substantially similar purported stockholder’s derivative lawsuit entitled Public School Teachers’ Pension and Retirement Fund of Chicago v. Guthart et al., No. CIV 526930, to be filed in the Superior Court of the State of California, County of San Mateo, against the same parties and seeking the same relief. On March 26, 2014, the case was removed to the United States District Court for the Northern District of California, where it was related to In re Intuitive Surgical Securities Litigation and Berg v. Guthart on April 30, 2014. The district court remanded the case back to San Mateo County Superior Court on June 30, 2014. On August 28, 2014, the Company filed a motion seeking to stay the case in favor of the federal action and asking that the plaintiff be required to post a bond on the grounds that the action was duplicative and was not in the Company’s best interests. On November 13, 2014, the superior court entered an order denying in part the Company’s motion to stay and denying the Company's request for plaintiff's bond. On November 18, 2014, the Company petitioned the First Appellate District of the California, Court of Appeal for a writ of mandate directing the superior court to stay the case in its entirety. At the same time, the Company requested an immediate stay of proceedings pending resolution of the petition. On November 19, 2014, the court of appeal granted the Company’s request for an immediate stay of the proceedings and set a briefing schedule for the petition. The plaintiff filed its opposition to the petition on December 8, 2014, and the Company filed its reply on December 22, 2014. The petition was denied on January 8, 2015. On January 20, 2015, the Company filed a demurer (moved to dismiss the complaint). The plaintiff filed its opposition to the demurrer on February 10, 2015, and the Company filed its reply on February 20, 2015. A hearing was held on February 27, 2015, and the court overruled the demurrer on March 27, 2015. The court's order was entered on April 2, 2015. On June 19, 2015, the Company moved for summary judgment, and a hearing on the Company's motion was set for September 4, 2015. On July 6, 2015, the court amended the case schedule, and the Company withdrew its motion for summary judgment. The court later further amended the case schedule, and trial was eventually reset for September 16, 2016. On May 23, 2016, the court granted an unopposed motion to intervene filed by the plaintiffs in In re Intuitive Surgical, Inc. Shareholder Derivative Litigation and City of Birmingham Relief and Retirement System v. Guthart et al. (see above and below for additional description). The Company filed a new motion for summary judgment on June 1, 2016, and the plaintiff filed a motion for summary adjudication regarding certain affirmative defenses on June 2, 2016. Following opposition and reply briefing, the court heard argument on the motions for summary judgment and summary adjudication on August 24, 2016. While the motions were pending, on September 15, 2016, the parties executed the Memorandum of Understanding described above, which contains the essential terms of a confidential settlement to which the parties have agreed in principle. That settlement, which is still being finalized, will provide for a dismissal with prejudice and release of all claims brought in the Public School Teachers’ Pension and Retirement Fund of Chicago action, as well as the In re Intuitive Surgical, Inc. Shareholder Derivative Litigation action and the City of Plantation Police Officers’ Employees’ Retirement System action (see above and below, respectively, for additional description). The settlement will be subject to court approval. The parties notified the court of the Memorandum of Understanding on September 15, 2016, and on September 16, 2016, the court entered an order vacating the trial date, ruling that the motions for summary judgment and summary adjudication (along with other pre-trial motions) are moot, and scheduling an approval hearing regarding the settlement for January 17, 2017. Based on currently available information, the Company does not believe the resolution of this matter will have a material adverse effect on the Company's business, financial position, or future results of operations. On March 21, 2014, a third alleged stockholder caused a substantially similar purported stockholder’s derivative lawsuit entitled City of Birmingham Relief and Retirement System v. Guthart et al., No. 5-14-CV-01307, to be filed in the United States District Court for the Northern District of California against the same parties and seeking the same relief. On April 8, 2014, the lawsuit was related to In re Intuitive Surgical Securities Litigation and Berg v. Guthart. On July 30, 2014, the court consolidated the case with Berg v. Guthart and, as noted above, granted Berg’s motion to be appointed lead plaintiff and denied the City of Birmingham’s motion seeking such appointment. Accordingly, the City of Birmingham Relief and Retirement System action will be resolved by the pending settlement of the In re Intuitive Surgical, Inc. Shareholder Derivative Litigation action (see above for additional description). Based on currently available information, the Company does not believe the resolution of this matter will have a material adverse effect on the Company's business, financial position, or future results of operations. On June 3, 2014, a fourth alleged stockholder caused a substantially similar purported stockholder’s derivative lawsuit entitled City of Plantation Police Officers’ Employees’ Retirement System v. Guthart et al., C.A. No. 9726-CB, to be filed in the Court of Chancery of the State of Delaware. The Company filed a motion to stay proceedings in favor of the earlier-filed stockholder derivative lawsuits pending in federal and state courts in California. In light of the Company’s motion, the plaintiff agreed to a stay of all proceedings in the case in favor of the earlier-filed actions. While the case was stayed, the parties agreed that the plaintiff would file a motion to intervene in the Public School Teachers’ Pension and Retirement Fund of Chicago action (see above for additional description). The plaintiff filed an unopposed motion to intervene on April 29, 2016. After additional briefing, on May 23, 2016, the court in the Public School Teachers’ Pension and Retirement Fund of Chicago action granted the plaintiff’s motion. However, on June 21, 2016, in response to discovery requests, the plaintiff admitted that it did not continuously hold the Company’s stock during all relevant times. Accordingly, on July 21, 2016, the plaintiff filed a request for dismissal as an additional plaintiff in the Public School Teachers’ Pension and Retirement Fund of Chicago action, which the court in that action granted with prejudice on July 22, 2016. On September 15, 2016, the parties executed the Memorandum of Understanding described above, which contains the essential terms of a confidential settlement to which the parties have agreed in principle. That settlement, which is still being finalized, will provide for a dismissal with prejudice and release of all claims brought in the City of Plantation Police Officers’ Employees’ Retirement System action, as well as both the In re Intuitive Surgical, Inc. Shareholder Derivative Litigation action and the Public School Teachers’ Pension and Retirement Fund of Chicago action (see above for additional description). The settlement will be subject to court approval as described above. In the interim, the City of Plantation Police Officers’ Employees’ Retirement System action remains stayed. Based on currently available information, the Company does not believe the resolution of this matter will have a material adverse effect on the Company's business, financial position, or future results of operations. On March 5, 2015, a fifth alleged stockholder caused a substantially similar purported stockholder’s derivative lawsuit entitled Back v. Guthart et al., No. 3:15-CV-01037, to be filed in the United States District Court for the Northern District of California. On April 7, 2015, the lawsuit was related to In re Intuitive Surgical Securities Litigation and Berg v. Guthart. The Company filed a motion to dismiss the complaint on July 10, 2015. On August 13, 2015, the parties stipulated to a complete stay of the matter and the court entered an order reflecting the stay on August 17, 2015. The Company believes the settlement of the cases described above will make this action moot and will move for dismissal on that basis. Based on currently available information, the Company does not believe the resolution of this matter will have a material adverse effect on the Company's business, financial position, or future results of operations. Product Liability Litigation The Company is currently named as a defendant in approximately 74 individual product liability lawsuits filed in various state and federal courts by plaintiffs who allege that they or a family member underwent surgical procedures that utilized the da Vinci Surgical System and sustained a variety of personal injuries and, in some cases death, as a result of such surgery. The Company has also received a large number of product liability claims from plaintiffs' attorneys, many of which are subject to certain tolling agreements further discussed below. The Company has also been named as a defendant in a multi-plaintiff lawsuit filed in Missouri state court. In total, plaintiffs seek damages on behalf of 55 patients who had da Vinci Surgeries in 22 different states. The cases raise a variety of allegations including, to varying degrees, that plaintiffs’ injuries resulted from purported defects in the da Vinci Surgical System and/or failure on the Company's part to provide adequate training resources to the healthcare professionals who performed plaintiffs’ surgeries. The cases further allege that the Company failed to adequately disclose and/or misrepresented the potential risks and/or benefits of the da Vinci Surgical System. Plaintiffs also assert a variety of causes of action, including for example, strict liability based on purported design defects, negligence, fraud, breach of express and implied warranties, unjust enrichment, and loss of consortium. Plaintiffs seek recovery for alleged personal injuries and, in many cases, punitive damages. The Company has reached confidential settlements in many of the filed cases. Plaintiffs’ attorneys have also engaged in well-funded national advertising efforts seeking patients dissatisfied with da Vinci Surgery. The Company has received a significant number of such claims from plaintiffs’ attorneys that it believes are a result of these advertising efforts. A substantial number of claims relate to alleged complications from surgeries performed with certain versions of Monopolar Curved Scissor (“MCS”) instruments which included an MCS tip cover accessory that was the subject of a market withdrawal in 2012 and MCS instruments that were the subject of a recall in 2013. In an effort to avoid the expense and distraction of defending multiple lawsuits, the Company entered into tolling agreements to pause the applicable statutes of limitations for these claims and engaged in confidential mediation efforts. After an extended confidential mediation process with legal counsel for many of the claimants covered by the tolling agreements, the Company determined during 2014 that, while it denies any and all liability, in light of the costs and risks of litigation, settlement of certain claims was appropriate. During the nine months ended September 30, 2016, and 2015, the Company recorded pre-tax charges of $6.3 million and $13.8 million, respectively, to reflect the estimated cost of settling a number of the product liability claims covered by the tolling agreements. No charges were recorded during the three months ended September 30, 2016, and 2015, related to these claims. The Company’s estimate of the anticipated cost of resolving these claims is based on negotiations with attorneys for claimants who have participated in the mediation process. Nonetheless, it is possible that more claims will be made by additional individuals and that the claimants whose claims were not resolved through the mediation program, as well as those claimants who have not participated in mediations, will choose to pursue greater amounts in a court of law. Consequently, the final outcome of these claims is dependent on many variables that are difficult to predict and the ultimate cost associated with these product liability claims may be materially different than the amount of the current estimate and accruals and could have a material adverse effect on the Company's business, financial position, and future results of operations. Although there is a reasonable possibility that a loss in excess of the amount recognized exists, the Company is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time. As of September 30, 2016, and December 31, 2015, a total of $24.8 million and $24.4 million, respectively, were included in other accrued liabilities in the accompanying Condensed Consolidated Balance Sheets related to the tolled product liability claims. In February 2011, the Company was named as a defendant in a product liability action that had originally been filed in Washington State Superior Court for Kitsap County against the healthcare providers and hospital involved in a decedent’s surgery on such decedent's behalf (Josette Taylor, as Personal Representative of the Estate of Fred E. Taylor, deceased; and on behalf of the Estate of Fred E. Taylor v. Intuitive Surgical, Inc., No. 09-2-03136-5). In Taylor, plaintiff asserted wrongful death and product liability claims against the Company, generally alleging that the decedent died four years after surgery as a result of injuries purportedly suffered during the surgery, which was conducted with the use of the da Vinci Surgical System. The plaintiff in Taylor asserted that such injuries were caused, in whole or in part, by the Company's purported failure to properly train, warn, and instruct the surgeon. The lawsuit sought unspecified damages for past medical expenses, pain and suffering, loss of consortium as well as punitive damages. A trial commenced on April 15, 2013. On May 23, 2013, the jury returned a defense verdict, finding that the Company was not negligent. Judgment was entered in the Company's favor on June 7, 2013. Subsequent to the verdict, the plaintiff filed a notice of appeal. That appeal was denied on July 7, 2015. On July 27, 2015, plaintiff filed a motion for reconsideration with the Court of Appeal; the Court of Appeal denied the motion for reconsideration on August 10, 2015. On September 9, 2015, plaintiff filed a Petition for Review with the Washington State Supreme Court. On February 10, 2016, the Washington Supreme Court issued an order granting the plaintiff’s Petition for Review. Oral argument on the appeal before the Washington Supreme Court was heard on June 7, 2016. The court will issue an opinion at a future time. Insurance Litigation In October 2013, the Company was named as a defendant in an insurance action entitled Illinois Union Insurance Co. v. Intuitive Surgical, Inc., No. 3:13-cv-04863-JST, filed in the United States District Court for the Northern District of California. Plaintiff Illinois Union Insurance Co. (“Illinois Union”) seeks to rescind the Life Sciences Products-Completed Operations Liability Policy issued by plaintiff to the Company, which provides coverage for product liability claims first made against the Company during the policy period March 1, 2013 to March 1, 2014. In December 2013, the Company was named as a defendant in another insurance action entitled Navigators Specialty Insurance Co. v. Intuitive Surgical, Inc., No. 5:13-cv-05801-JST, also filed in the Northern District of California. Plaintiff Navigators Specialty Insurance Co. (“Navigators”) alleges that the Follow Form Excess Liability Insurance Policy issued by plaintiff to the Company for product liability claims first made against the Company during the policy period March 1, 2013 to March 1, 2014, should be rescinded. These cases have been consolidated under docket number 3:13-cv-04863. Both plaintiffs generally allege that the Company did not disclose the existence of tolling agreements or the number of claimants incorporated within those agreements, and allege that those agreements were material to plaintiffs’ underwriting processes. On October 20, 2015, the Company filed a complaint alleging breach of contract and bad faith against Illinois Union and Navigators in an action entitled Intuitive Surgical Inc. v. Illinois Union Insurance Co., et al., No. 3:15-cv-04834-JST, based on the defendants failure to indemnify the Company for losses incurred in the defense and settlement of certain product liability claims brought against the Company during the insurance policy period March 1, 2013 to March 1, 2014. The Company’s breach of contract and bad faith action against the insurers has been consolidated with the insurers’ rescission actions for all purposes except for trial. Both Illinois Union and Navigators moved to dismiss the Company’s complaint in that action. The court denied both Illinois Union and Navigators’ motions to dismiss the breach of contract claims against the insurers, denied the motion to dismiss the bad faith claim against Illinois Union, and granted the motion to dismiss the bad faith claim against Navigators. On March 15, 2016, Illinois Union and Navigators filed motions for summary judgment. On May 26, 2016, the Company and Navigators filed a notice with the court that they had reached a confidential settlement of the litigation between the two parties. On May 27, 2016, the Court denied Illinois Union’s motion for summary judgment. Illinois Union sought leave to move for reconsideration of the Court’s order denying Illinois Union’s motion for summary judgment, which the court denied. On July 27, 2016, Illinois Union filed a motion to stay the case and for permission to file an interlocutory appeal with respect to the denial of summary judgment with the U.S. Court of Appeals for the Ninth Circuit. The Court denied the motion to stay on October 11, 2016. On September 15, 2016, the Court dismissed both the Company’s breach of contract claim against Navigators and Navigators’ rescission case against the Company with prejudice. Based on currently available information, the Company does not believe the Navigators settlement or resolution of the Illinois Union matter will have a material adverse effect on the Company's business, financial position, or future results of operations. |
STOCKHOLDERS' EQUITY |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Stock Repurchase Program Since March 2009, the Company has had a stock repurchase program authorized by the Board of Directors (the “Board”). As of September 30, 2016, the Board has authorized an aggregate amount of up to $4.0 billion for repurchases of the Company’s outstanding common stock, of which the most recent authorization occurred in January 2015 when the Board increased the authorization for stock repurchases by $1.0 billion. As of September 30, 2016, the remaining amount of share repurchases authorized by the Board was approximately $808.2 million. The Company repurchased approximately 16,000 shares of the Company's common stock during the nine months ended September 30, 2016. The following table provides the share repurchase activities during the three and nine months ended September 30, 2016, and 2015 (in millions, except per share amounts):
Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2016, and 2015, are as follows (in millions):
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SHARE-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION In April 2016, the Company's shareholders approved an amended and restated 2010 Incentive Award Plan (“2010 Plan”) to provide for an increase in the number of shares of common stock reserved for issuance from 6,250,000 to 7,050,000. As of September 30, 2016, approximately 2.0 million shares of common stock were reserved for future issuance under the Company’s stock plans. A maximum of approximately 0.9 million of these shares can be awarded as restricted stock units (“RSUs”). Stock Option Information A summary of stock option activity under all stock plans for the nine months ended September 30, 2016, is presented as follows (in millions, except per share amounts):
As of September 30, 2016, options to purchase an aggregate of 2.3 million shares of common stock were exercisable at a weighted-average price of $410.72 per share. Restricted Stock Units Information A summary of RSU activity for the nine months ended September 30, 2016, is presented as follows (in millions, except per share amounts):
During the nine months ended September 30, 2016, approximately 32,000 RSUs were forfeited. Employee Stock Purchase Plan Under the Employee Stock Purchase Plan (“ESPP”), employees purchased approximately 0.1 million shares for $32.5 million and 0.1 million shares for $31.2 million during the nine months ended September 30, 2016, and 2015, respectively. Share-based Compensation Expense The following table summarizes share-based compensation expense for the three and nine months ended September 30, 2016, and 2015 (in millions):
The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans and rights to acquire stock granted under the Company’s ESPP. The weighted average estimated fair values of stock options, the rights to acquire stock granted, and the weighted average assumptions used in calculating those fair values were as follows:
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INCOME TAXES |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Income tax expense for the three months ended September 30, 2016, was $55.8 million, or 20.9% of income before taxes, compared with $26.3 million, or 13.6% of income before taxes for the three months ended September 30, 2015. Income tax expense for the nine months ended September 30, 2016, was $172.8 million, or 24.5% of income before taxes, compared with $107.9 million, or 21.3% of income before taxes for the nine months ended September 30, 2015. The Company’s effective tax rates for these periods differ from the U.S. federal statutory rate of 35% due primarily to the effect of income earned by certain of the Company’s overseas entities being taxed at rates lower than the federal statutory rate, partially offset by state income taxes. The Company intends to indefinitely reinvest outside the U.S. all of its undistributed foreign earnings that were not previously subject to U.S. tax. The effective tax rates for the three and nine months ended September 30, 2016, also reflected a $15.8 million tax benefit mainly related to the release of unrecognized tax benefits due to statute of limitation expirations in various jurisdictions. The effective tax rate for the three and nine months ended September 30, 2015, reflected a $29.3 million tax benefit due to a U.S. Tax Court opinion involving an independent third party, issued in the third quarter of 2015. Based on the findings of the U.S. Tax Court, the Company was required to, and did, refund to its foreign subsidiary the share-based compensation element of certain intercompany charges made in prior periods. The effective tax rates for the three and nine months ended September 30, 2015, did not reflect the tax benefit of federal R&D credit as it expired at the end of 2014 and was reinstated retroactively in December 2015. As of September 30, 2016, the Company had total gross unrecognized tax benefits of approximately $100.2 million compared with approximately $92.4 million as of December 31, 2015, representing a net increase of approximately $7.8 million for the nine months ended September 30, 2016. If recognized, these gross unrecognized tax benefits would reduce the effective tax rate in the period of recognition. The Company files federal, state, and foreign income tax returns in many jurisdictions in the U.S. and abroad. Years prior to 2013 are considered closed for most significant jurisdictions. Certain of the Company’s unrecognized tax benefits could reverse based on the normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they reverse. The Company is subject to the examination of its income tax returns by various tax authorities. The outcome of these audits cannot be predicted with certainty. Management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. |
NET INCOME PER SHARE |
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NET INCOME PER SHARE | NET INCOME PER SHARE The following table presents the computation of basic and diluted net income per share for the three and nine months ended September 30, 2016, and 2015 (in millions, except per share amounts):
Share-based compensation awards of approximately 0.1 million and 1.5 million weighted-average shares for the three months ended September 30, 2016, and 2015, respectively, and approximately 0.2 million and 1.7 million weighted-average shares for the nine months ended September 30, 2016, and 2015, respectively, were outstanding but were not included in the computation of diluted net income per share because the effect of including such shares would have been anti-dilutive. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements (“financial statements”) of Intuitive Surgical, Inc. and its wholly-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2015, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein. The financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and therefore, omit certain information and footnote disclosure necessary to present the financial statements in accordance with accounting principles generally accepted in the United States (“U.S.”) (“U.S. GAAP”). These financial statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the SEC on February 2, 2016. The results of operations for the first nine months of fiscal year 2016 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2014-09, Revenue from Contracts with Customers. This updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued an update to defer the effective date of this update by one year. This updated standard becomes effective for the Company in the first quarter of fiscal year 2018, but allows the Company to adopt the standard one year earlier if it so chooses. The Company currently plans to adopt this accounting standard in the first quarter of fiscal year 2018. The Company has not yet selected a transition method and is evaluating the effect that the updated standard will have on its Consolidated Financial Statements and related disclosures. In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for leases. The new standard requires lessees to record a right-of-use asset and a corresponding lease liability on the balance sheet (with the exception of short-term leases). For lessees, leases will continue to be classified as either operating or financing in the income statement. This ASU becomes effective for the Company in the first quarter of fiscal year 2019 and early adoption is permitted. This ASU is required to be applied with a modified retrospective approach and requires application of the new standard at the beginning of the earliest comparative period presented. The Company generally does not finance purchases of equipment or other capital, but does lease some of its facilities. The Company’s customers finance purchases of da Vinci systems and ancillary products, including directly with the Company. It is currently unknown whether this ASU will change customer buying patterns or behaviors. The Company is evaluating the effect that this ASU will have on its Consolidated Financial Statements and related disclosures. In March 2016, FASB issued ASU No. 2016-09, Improvements to Employee Share-based Payment Accounting. This ASU simplifies the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU requires that excess tax benefits and deficiencies be recognized as income tax benefit or expense in the income statement, and therefore, the Company anticipates increased income tax expense volatility after adoption of this ASU. The Company currently plans to implement this ASU as required in the first quarter of fiscal year 2017. The Company is evaluating the effect that this ASU will have on its Consolidated Financial Statements and related disclosures. |
FINANCIAL INSTRUMENTS (Tables) |
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Investments, All Other Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Cash and Available-For-Sale Securities | The following tables summarize the Company’s cash and available-for-sale marketable securities’ amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category reported as cash and cash equivalents, short-term, or long-term investments as of September 30, 2016, and December 31, 2015 (in millions):
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Summary of Contractual Maturities of Cash Equivalents and Available-For-Sale Investments | The following table summarizes the contractual maturities of the Company’s cash equivalents and available-for-sale investments (excluding cash and money market funds), as of September 30, 2016 (in millions):
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Gross Notional Amounts for Derivatives and Aggregate Gross Fair Value Outstanding | The notional amounts for derivative instruments provide one measure of the transaction volume. Total gross notional amounts (in USD) for outstanding derivatives and aggregate gross fair value at the end of each period were as follows (in millions):
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BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Details | The following table provides further details of inventory (in millions):
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Other Accrued Liabilities - Short Term | The following table provides details of the other accrued liabilities—short term (in millions):
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Supplemental Cash Flow Information | The following table provides supplemental non-cash investing activities (in millions):
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LEASE RECEIVABLES (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Lease Receivables | Lease receivables relating to sales-type lease arrangements are presented on the Condensed Consolidated Balance Sheets as follows (in millions):
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Schedule of Contractual Maturities of Gross Lease Receivables | Contractual maturities of gross lease receivables at September 30, 2016, are as follows (in millions):
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STOCKHOLDERS' EQUITY (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Repurchase Activities | The following table provides the share repurchase activities during the three and nine months ended September 30, 2016, and 2015 (in millions, except per share amounts):
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Components of Accumulated Other Comprehensive Income, Net of Tax | The components of accumulated other comprehensive income (loss), net of tax, for the three and nine months ended September 30, 2016, and 2015, are as follows (in millions):
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SHARE-BASED COMPENSATION (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity Under All Stock Plans | A summary of stock option activity under all stock plans for the nine months ended September 30, 2016, is presented as follows (in millions, except per share amounts):
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Summary of RSU Activity | A summary of RSU activity for the nine months ended September 30, 2016, is presented as follows (in millions, except per share amounts):
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Summary of Share-Based Compensation Expense | The following table summarizes share-based compensation expense for the three and nine months ended September 30, 2016, and 2015 (in millions):
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Schedule of Estimated Fair Value of the Option Using Black-Scholes Option Pricing Model, Weighted Average Assumptions | The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans and rights to acquire stock granted under the Company’s ESPP. The weighted average estimated fair values of stock options, the rights to acquire stock granted, and the weighted average assumptions used in calculating those fair values were as follows:
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NET INCOME PER SHARE (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Net Income Per Share | The following table presents the computation of basic and diluted net income per share for the three and nine months ended September 30, 2016, and 2015 (in millions, except per share amounts):
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FINANCIAL INSTRUMENTS - Summary of Contractual Maturities of Cash Equivalents and Available-For-Sale Investments (Detail) $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
Amortized Cost | |
Mature in less than one year, Amortized Cost | $ 1,274.3 |
Mature in one to five years, Amortized Cost | 2,340.3 |
Total, Amortized Cost | 3,614.6 |
Fair Value | |
Mature in less than one year, Fair Value | 1,274.8 |
Mature in one to five years, Fair Value | 2,346.0 |
Total, Fair Value | $ 3,620.8 |
FINANCIAL INSTRUMENTS - Gross Notional Amounts for Outstanding Derivatives (Detail) - Forward contracts - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Derivatives Designated as Hedging Instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Notional amount, forward contracts | $ 140.6 | $ 89.1 |
Gross fair value of derivative assets | 1.5 | 2.0 |
Gross fair value of derivative liabilities | 2.9 | 0.5 |
Derivatives Not Designated as Hedging Instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Notional amount, forward contracts | 119.5 | 128.7 |
Gross fair value of derivative assets | 1.0 | 2.6 |
Gross fair value of derivative liabilities | $ 2.5 | $ 0.2 |
FINANCIAL INSTRUMENTS - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Reclassification out of Accumulated Other Comprehensive Income | Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||
Revenues | $ (1.4) | $ 0.6 | $ (1.3) | $ 5.1 |
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION - Inventory (Detail) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory: | ||
Raw materials | $ 52.1 | $ 53.3 |
Work-in-process | 11.0 | 10.2 |
Finished goods | 120.4 | 104.4 |
Total inventory | $ 183.5 | $ 167.9 |
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION - Other accrued liabilities-short term (Details) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Other accrued liabilities—short term: | ||
Taxes payable | $ 32.2 | $ 11.4 |
Tolled product liability claims accrued | 24.8 | 24.4 |
Other accrued liabilities | 76.8 | 60.6 |
Total other accrued liabilities—short-term | $ 133.8 | $ 96.4 |
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION - Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Supplemental non-cash investing activities: | ||
Equipment transfers, including operating lease assets, from inventory to property, plant and equipment | $ 31.1 | $ 19.9 |
LEASE RECEIVABLES - Lease Receivables (Details) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Capital Leased Assets [Line Items] | ||
Gross lease receivable | $ 92.3 | $ 67.1 |
Unearned income | (4.0) | (3.4) |
Allowance for credit loss | (2.1) | (0.4) |
Net investment in sales-type leases | 86.2 | 63.3 |
Reported as: | ||
Net investment in sales-type leases | 86.2 | 63.3 |
Prepaids and other current assets | ||
Reported as: | ||
Prepaids and other current assets | 27.5 | 16.1 |
Intangible and other assets, net | ||
Reported as: | ||
Intangible and other assets, net | $ 58.7 | $ 47.2 |
LEASE RECEIVABLES - Gross Contractual Maturities of Lease Receivables (Details) $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
Leases [Abstract] | |
2016 | $ 8.2 |
2017 | 26.6 |
2018 | 27.2 |
2019 | 17.7 |
2020 | 9.2 |
Thereafter | 3.4 |
Total | $ 92.3 |
CONTINGENCIES - Additional Information (Detail) - Product liability claims - da Vinci Surgical System Product Liability Matters $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016
USD ($)
state
lawsuit
|
Sep. 30, 2015
USD ($)
|
Sep. 30, 2016
USD ($)
state
patient
lawsuit
|
Sep. 30, 2015
USD ($)
|
Dec. 31, 2015
USD ($)
|
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Commitments and Contingencies [Line Items] | |||||
Number of lawsuits | lawsuit | 74 | 74 | |||
Number of patients for which damages sought | patient | 55 | ||||
Number of states in which surgeries were performed and damages are sought on behalf of patients | state | 22 | 22 | |||
Additional loss contingency accrual | $ 0.0 | $ 0.0 | $ 6.3 | $ 13.8 | |
Loss contingency liability | $ 24.8 | $ 24.8 | $ 24.4 |
STOCKHOLDERS' EQUITY - Share Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Jan. 31, 2015 |
|
Equity [Abstract] | |||||
Amount of share repurchases authorized | $ 4,000,000,000.0 | $ 4,000,000,000.0 | $ 1,000,000,000.0 | ||
Remaining amount of share repurchases authorized | $ 808,200,000 | $ 808,200,000 | |||
Shares repurchased (in shares) | 0 | 100 | 16 | 200 | |
Average price per share (in dollars per share) | $ 0.00 | $ 509.36 | $ 516.54 | $ 499.81 | |
Value of shares repurchased | $ 0 | $ 35,500,000 | $ 8,100,000 | $ 99,500,000 |
SHARE-BASED COMPENSATION - Summary Of Stock Option Activity Under All Stock Plans (Detail) shares in Millions |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options exercisable, weighted-average exercise price (usd per share) | $ 410.72 |
Number Outstanding | |
Beginning balance, Number Outstanding | shares | 4.2 |
Options granted, Number Outstanding | shares | 0.3 |
Options exercised, Number Outstanding | shares | (1.2) |
Options forfeited/expired, Number Outstanding | shares | (0.1) |
Ending balance, Number Outstanding | shares | 3.2 |
Weighted Average Exercise Price Per Share | |
Beginning balance, Weighted Average Exercise Price Per Share | $ 421.00 |
Options granted, Weighted Average Exercise Price Per Share | 614.59 |
Options exercised, Weighted Average Exercise Price Per Share | 415.78 |
Options forfeited/expired, Weighted Average Exercise Price Per Share | 491.27 |
Ending balance, Weighted Average Exercise Price Per Share | $ 441.34 |
SHARE-BASED COMPENSATION - Summary of RSU Activity (Details) - Restricted Stock Units (RSUs) shares in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
$ / shares
shares
| |
Shares | |
Unvested balance at December 31, 2015 (in shares) | shares | 400 |
Granted (in shares) | shares | 300 |
Vested (in shares) | shares | (100) |
Forfeited (in shares) | shares | 32 |
Unvested balance at September 30, 2016 (in shares) | shares | 600 |
Weighted Average Grant Date Fair Value | |
Unvested beginning balance (usd per share) | $ / shares | $ 485.55 |
Granted (usd per share) | $ / shares | 548.54 |
Vested (usd per share) | $ / shares | 481.54 |
Forfeited (usd per share) | $ / shares | 506.93 |
Unvested ending balance (usd per share) | $ / shares | $ 520.35 |
SHARE-BASED COMPENSATION - Schedule Of Estimated Fair Value Of Option Using Black-Scholes Option Pricing Model, Weighted Average Assumptions (Detail) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Stock Option Plans | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 1.00% | 1.60% | 1.10% | 1.60% |
Expected term (in years) | 3 years 10 months 17 days | 4 years | 4 years 2 months 24 days | 4 years 4 months |
Expected volatility (percent) | 24.00% | 27.00% | 27.00% | 28.00% |
Weighted average fair value at grant date (usd per share) | $ 141.96 | $ 127.14 | $ 140.69 | $ 131.44 |
Employee Stock Purchase Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk free interest rate | 0.50% | 0.40% | 0.60% | 0.40% |
Expected term (in years) | 1 year 2 months 12 days | 1 year 2 months 12 days | 1 year 2 months 12 days | 1 year 2 months 12 days |
Expected volatility (percent) | 27.00% | 31.00% | 30.00% | 31.00% |
Weighted average fair value at grant date (usd per share) | $ 183.42 | $ 146.87 | $ 172.71 | $ 146.72 |
INCOME TAXES - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Tax Credit Carryforward [Line Items] | |||||
Income tax expense (benefit) | $ 55.8 | $ 26.3 | $ 172.8 | $ 107.9 | |
Income tax expense, percentage of pre-tax income | 20.90% | 13.60% | 24.50% | 21.30% | |
Federal statutory tax rate | 35.00% | 35.00% | |||
Unrecognized tax benefits due to statute of limitation expirations | $ 15.8 | $ 15.8 | |||
Total gross unrecognized tax benefits | $ 100.2 | 100.2 | $ 92.4 | ||
Net increase of unrecognized tax benefits | $ 7.8 | ||||
Tax Year 2015 | |||||
Tax Credit Carryforward [Line Items] | |||||
Income tax expense (benefit) | $ (29.3) | $ (29.3) |
NET INCOME PER SHARE - Computation of Basic and Diluted Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Numerator: | ||||
Net income | $ 211.0 | $ 167.3 | $ 531.9 | $ 398.8 |
Denominator: | ||||
Weighted-average shares outstanding used in basic calculation | 38.7 | 37.3 | 38.2 | 37.0 |
Add: dilutive effect of potential common shares | 1.0 | 0.7 | 1.0 | 0.8 |
Weighted-average shares used in computing diluted net income per share | 39.7 | 38.0 | 39.2 | 37.8 |
Net income per share: | ||||
Basic (in dollars per share) | $ 5.45 | $ 4.49 | $ 13.92 | $ 10.78 |
Diluted (in dollars per share) | $ 5.31 | $ 4.40 | $ 13.57 | $ 10.55 |
NET INCOME PER SHARE - Additional Information (Detail) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Earnings Per Share [Abstract] | ||||
Employee stock options excluded from computation of diluted net income per share | 0.1 | 1.5 | 0.2 | 1.7 |
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