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 | ¨ |
Emerging growth company | ¨ |
Page No. | ||
PART I. FINANCIAL INFORMATION | ||
PART II. OTHER INFORMATION | ||
in millions (except par values) | March 31, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 974.7 | $ | 648.2 | |||
Short-term investments | 1,542.6 | 1,312.4 | |||||
Accounts receivable, net | 474.9 | 507.9 | |||||
Inventory | 283.6 | 241.2 | |||||
Prepaids and other current assets | 105.9 | 99.2 | |||||
Total current assets | 3,381.7 | 2,808.9 | |||||
Property, plant, and equipment, net | 661.9 | 613.1 | |||||
Long-term investments | 1,550.9 | 1,885.9 | |||||
Deferred tax assets | 426.8 | 72.0 | |||||
Intangible and other assets, net | 203.8 | 195.8 | |||||
Goodwill | 201.1 | 201.1 | |||||
Total assets | $ | 6,426.2 | $ | 5,776.8 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 96.3 | $ | 82.5 | |||
Accrued compensation and employee benefits | 103.6 | 167.6 | |||||
Deferred revenue | 254.6 | 243.8 | |||||
Other accrued liabilities | 126.7 | 168.9 | |||||
Total current liabilities | 581.2 | 662.8 | |||||
Other long-term liabilities | 338.6 | 333.6 | |||||
Total liabilities | 919.8 | 996.4 | |||||
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 March 31, 2018, and December 31, 2017 | — | — | |||||
Common stock, 300.0 shares authorized, $0.001 par value, 113.3 shares and 112.3 shares issued and outstanding as of March 31, 2018, and December 31, 2017, respectively | 0.1 | 0.1 | |||||
Additional paid-in capital | 4,817.1 | 4,679.2 | |||||
Retained earnings | 698.0 | 115.0 | |||||
Accumulated other comprehensive loss | (18.1 | ) | (15.5 | ) | |||
Total Intuitive Surgical, Inc. stockholders’ equity | 5,497.1 | 4,778.8 | |||||
Noncontrolling interest | 9.3 | 1.6 | |||||
Total stockholders’ equity | 5,506.4 | 4,780.4 | |||||
Total liabilities and stockholders’ equity | $ | 6,426.2 | $ | 5,776.8 |
Three Months Ended March 31, | |||||||
in millions (except per share amounts) | 2018 | 2017 | |||||
Revenue: | |||||||
Product | $ | 694.8 | $ | 541.6 | |||
Service | 152.7 | 138.0 | |||||
Total revenue | 847.5 | 679.6 | |||||
Cost of revenue: | |||||||
Product | 201.5 | 165.5 | |||||
Service | 52.2 | 44.3 | |||||
Total cost of revenue | 253.7 | 209.8 | |||||
Gross profit | 593.8 | 469.8 | |||||
Operating expenses: | |||||||
Selling, general and administrative | 221.6 | 202.9 | |||||
Research and development | 95.5 | 73.5 | |||||
Total operating expenses | 317.1 | 276.4 | |||||
Income from operations | 276.7 | 193.4 | |||||
Interest and other income, net | 13.2 | 8.7 | |||||
Income before taxes | 289.9 | 202.1 | |||||
Income tax expense | 2.6 | 21.3 | |||||
Net income | 287.3 | 180.8 | |||||
Less: net loss attributable to noncontrolling interest | (0.3 | ) | — | ||||
Net income attributable to Intuitive Surgical, Inc. | $ | 287.6 | $ | 180.8 | |||
Net income per share attributable to Intuitive Surgical, Inc.: | |||||||
Basic | $ | 2.55 | $ | 1.62 | |||
Diluted | $ | 2.44 | $ | 1.57 | |||
Shares used in computing net income per share attributable to Intuitive Surgical, Inc.: | |||||||
Basic | 112.8 | 111.9 | |||||
Diluted | 118.0 | 115.5 | |||||
Total comprehensive income attributable to Intuitive Surgical, Inc. | $ | 285.0 | $ | 181.7 |
Three Months Ended March 31, | |||||||
in millions | 2018 | 2017 | |||||
Operating activities: | |||||||
Net income | $ | 287.3 | $ | 180.8 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and loss on disposal of property, plant, and equipment | 23.7 | 19.0 | |||||
Amortization of intangible assets | 2.6 | 3.7 | |||||
Loss on investments, accretion of discounts, and amortization of premiums on investments, net | 4.7 | 6.1 | |||||
Deferred income taxes | 37.4 | 30.5 | |||||
Share-based compensation expense | 57.5 | 47.4 | |||||
Amortization of contract acquisition asset | 2.7 | 2.7 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 33.0 | 16.5 | |||||
Inventory | (66.2 | ) | (39.0 | ) | |||
Prepaids and other assets | (20.6 | ) | 2.8 | ||||
Accounts payable | 8.4 | 5.5 | |||||
Accrued compensation and employee benefits | (64.0 | ) | (50.3 | ) | |||
Deferred revenue | 11.4 | 31.9 | |||||
Other liabilities | (37.7 | ) | (16.1 | ) | |||
Net cash provided by operating activities | 280.2 | 241.5 | |||||
Investing activities: | |||||||
Purchase of investments | (433.7 | ) | (168.2 | ) | |||
Proceeds from sales of investments | 226.6 | 1,421.1 | |||||
Proceeds from maturities of investments | 300.8 | 108.4 | |||||
Purchase of property, plant, and equipment and intellectual property | (40.1 | ) | (53.0 | ) | |||
Net cash provided by investing activities | 53.6 | 1,308.3 | |||||
Financing activities: | |||||||
Proceeds from issuance of common stock relating to employee stock plans | 86.2 | 169.1 | |||||
Taxes paid related to net share settlement of equity awards | (102.5 | ) | (47.4 | ) | |||
Repurchase of common stock | — | (2,000.0 | ) | ||||
Other financing activities | 8.0 | — | |||||
Net cash used in financing activities | (8.3 | ) | (1,878.3 | ) | |||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 1.0 | 0.5 | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 326.5 | (328.0 | ) | ||||
Cash, cash equivalents, and restricted cash, beginning of period | 663.2 | 1,051.6 | |||||
Cash, cash equivalents, and restricted cash, end of period | $ | 989.7 | $ | 723.6 |
Three Months Ended March 31, 2017 | |||||||||||
As Previously Reported | Adjustments | As Restated | |||||||||
Revenue: | |||||||||||
Product | $ | 534.0 | $ | 7.6 | $ | 541.6 | |||||
Service | 140.2 | (2.2 | ) | 138.0 | |||||||
Total revenue | 674.2 | 5.4 | 679.6 | ||||||||
Cost of revenue: | |||||||||||
Product | 163.8 | 1.7 | 165.5 | ||||||||
Service | 44.3 | — | 44.3 | ||||||||
Total cost of revenue | 208.1 | 1.7 | 209.8 | ||||||||
Gross profit | 466.1 | 3.7 | 469.8 | ||||||||
Operating expenses: | |||||||||||
Selling, general and administrative | 201.1 | 1.8 | 202.9 | ||||||||
Research and development | 73.5 | — | 73.5 | ||||||||
Total operating expenses | 274.6 | 1.8 | 276.4 | ||||||||
Income from operations | 191.5 | 1.9 | 193.4 | ||||||||
Interest and other income, net | 8.7 | — | 8.7 | ||||||||
Income before taxes | 200.2 | 1.9 | 202.1 | ||||||||
Income tax expense | 20.4 | 0.9 | 21.3 | ||||||||
Net income attributable to Intuitive Surgical, Inc. | $ | 179.8 | $ | 1.0 | $ | 180.8 | |||||
Net income per share attributable to Intuitive Surgical, Inc.: | |||||||||||
Basic | $ | 1.61 | $ | 0.01 | $ | 1.62 | |||||
Diluted | $ | 1.56 | $ | 0.01 | $ | 1.57 | |||||
Total comprehensive income attributable to Intuitive Surgical, Inc. | $ | 180.7 | $ | 1.0 | $ | 181.7 |
December 31, 2017 | |||||||||||
As Previously Reported | Adjustments | As Restated | |||||||||
ASSETS: | |||||||||||
Accounts receivable, net | $ | 511.9 | $ | (4.0 | ) | $ | 507.9 | ||||
Prepaids and other current assets | $ | 97.2 | $ | 2.0 | $ | 99.2 | |||||
Deferred tax assets | $ | 87.3 | $ | (15.3 | ) | $ | 72.0 | ||||
Intangibles and other assets, net | $ | 159.7 | $ | 36.1 | $ | 195.8 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Deferred revenue | $ | 284.5 | $ | (40.7 | ) | $ | 243.8 | ||||
Other accrued liabilities | $ | 169.5 | $ | (0.6 | ) | $ | 168.9 | ||||
Other long-term liabilities | $ | 327.1 | $ | 6.5 | $ | 333.6 | |||||
Retained earnings | $ | 61.4 | $ | 53.6 | $ | 115.0 |
Three Months Ended March 31, | |||||||
U.S. | 2018 | 2017 | |||||
Instruments and accessories | $ | 337.6 | $ | 287.6 | |||
Systems | 124.0 | 105.4 | |||||
Services | 110.8 | 101.8 | |||||
Total U.S. revenue | $ | 572.4 | $ | 494.8 | |||
Outside of U.S. (“OUS”) | |||||||
Instruments and accessories | $ | 122.7 | $ | 93.2 | |||
Systems | 110.5 | 55.4 | |||||
Services | 41.9 | 36.2 | |||||
Total OUS revenue | $ | 275.1 | $ | 184.8 | |||
Total | |||||||
Instruments and accessories | $ | 460.3 | $ | 380.8 | |||
Systems | 234.5 | 160.8 | |||||
Services | 152.7 | 138.0 | |||||
Total revenue | $ | 847.5 | $ | 679.6 |
As of | |||||||
March 31, 2018 | December 31, 2017 | ||||||
Contract assets | $ | 11.3 | $ | 8.3 | |||
Deferred revenue | $ | 280.0 | $ | 268.6 |
Reported as: | |||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cash and Cash Equivalents | Short- term Investments | Long- term Investments | |||||||||||||||||||||
March 31, 2018 | |||||||||||||||||||||||||||
Cash | $ | 257.9 | $ | — | $ | — | $ | 257.9 | $ | 257.9 | $ | — | $ | — | |||||||||||||
Level 1: | |||||||||||||||||||||||||||
Money market funds | 593.0 | — | — | 593.0 | 593.0 | — | — | ||||||||||||||||||||
U.S. treasuries | 1,160.3 | — | (7.8 | ) | 1,152.5 | 26.6 | 560.2 | 565.7 | |||||||||||||||||||
Subtotal | 1,753.3 | — | (7.8 | ) | 1,745.5 | 619.6 | 560.2 | 565.7 | |||||||||||||||||||
Level 2: | |||||||||||||||||||||||||||
Commercial paper | 96.2 | — | — | 96.2 | 62.7 | 33.5 | — | ||||||||||||||||||||
Corporate debt securities | 988.4 | 0.1 | (7.0 | ) | 981.5 | — | 499.5 | 482.0 | |||||||||||||||||||
U.S. government agencies | 939.1 | 0.1 | (6.2 | ) | 933.0 | 34.5 | 395.3 | 503.2 | |||||||||||||||||||
Non-U.S. government securities | 2.5 | — | — | 2.5 | — | 2.5 | — | ||||||||||||||||||||
Municipal securities | 51.6 | — | — | 51.6 | — | 51.6 | — | ||||||||||||||||||||
Subtotal | 2,077.8 | 0.2 | (13.2 | ) | 2,064.8 | 97.2 | 982.4 | 985.2 | |||||||||||||||||||
Total assets measured at fair value | $ | 4,089.0 | $ | 0.2 | $ | (21.0 | ) | $ | 4,068.2 | $ | 974.7 | $ | 1,542.6 | $ | 1,550.9 |
Reported as: | |||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cash and Cash Equivalents | Short- term Investments | Long- term Investments | |||||||||||||||||||||
December 31, 2017 | |||||||||||||||||||||||||||
Cash | $ | 197.7 | $ | — | $ | — | $ | 197.7 | $ | 197.7 | $ | — | $ | — | |||||||||||||
Level 1: | |||||||||||||||||||||||||||
Money market funds | 445.0 | — | — | 445.0 | 445.0 | — | — | ||||||||||||||||||||
U.S. treasuries | 1,029.1 | — | (4.7 | ) | 1,024.4 | 5.5 | 396.2 | 622.7 | |||||||||||||||||||
Subtotal | 1,474.1 | — | (4.7 | ) | 1,469.4 | 450.5 | 396.2 | 622.7 | |||||||||||||||||||
Level 2: | |||||||||||||||||||||||||||
Commercial paper | 38.4 | — | — | 38.4 | — | 38.4 | — | ||||||||||||||||||||
Corporate debt securities | 946.6 | 0.2 | (4.4 | ) | 942.4 | — | 403.9 | 538.5 | |||||||||||||||||||
U.S. government agencies | 901.3 | — | (4.4 | ) | 896.9 | — | 311.7 | 585.2 | |||||||||||||||||||
Non-U.S. government securities | 2.5 | — | — | 2.5 | — | 2.5 | — | ||||||||||||||||||||
Municipal securities | 301.1 | — | (1.9 | ) | 299.2 | — | 159.7 | 139.5 | |||||||||||||||||||
Subtotal | 2,189.9 | 0.2 | (10.7 | ) | 2,179.4 | — | 916.2 | 1,263.2 | |||||||||||||||||||
Total assets measured at fair value | $ | 3,861.7 | $ | 0.2 | $ | (15.4 | ) | $ | 3,846.5 | $ | 648.2 | $ | 1,312.4 | $ | 1,885.9 |
Amortized Cost | Fair Value | ||||||
Mature in less than one year | $ | 1,671.7 | $ | 1,666.4 | |||
Mature in one to five years | 1,566.4 | 1,550.9 | |||||
Total | $ | 3,238.1 | $ | 3,217.3 |
Derivatives Designated as Hedging Instruments | Derivatives Not Designated as Hedging Instruments | ||||||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2018 | December 31, 2017 | ||||||||||||
Notional amounts: | |||||||||||||||
Forward contracts | $ | 142.7 | $ | 128.5 | $ | 141.6 | $ | 168.4 | |||||||
Gross fair value recorded in: | |||||||||||||||
Prepaids and other current assets | $ | 0.4 | $ | 0.9 | $ | 0.6 | $ | 1.2 | |||||||
Other accrued liabilities | $ | 3.7 | $ | 2.9 | $ | 3.8 | $ | 4.6 |
As of | |||||||
Inventory | March 31, 2018 | December 31, 2017 | |||||
Raw materials | $ | 96.4 | $ | 80.9 | |||
Work-in-process | 28.9 | 19.7 | |||||
Finished goods | 158.3 | 140.6 | |||||
Total inventory | $ | 283.6 | $ | 241.2 |
As of | |||||||
Other long-term liabilities | March 31, 2018 | December 31, 2017 | |||||
Income taxes—long-term | $ | 292.0 | $ | 286.8 | |||
Deferred revenue—long-term | 25.4 | 24.8 | |||||
Other long-term liabilities | 21.2 | 22.0 | |||||
Total other long-term liabilities | $ | 338.6 | $ | 333.6 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Equipment transfers, including operating lease assets, from inventory to property, plant, and equipment | $ | 26.5 | $ | 10.6 |
As of | |||||||
March 31, 2018 | December 31, 2017 | ||||||
Gross lease receivables | $ | 133.7 | $ | 128.0 | |||
Unearned income | (5.4 | ) | (5.0 | ) | |||
Allowance for credit loss | (0.9 | ) | (0.9 | ) | |||
Net investment in sales-type leases | $ | 127.4 | $ | 122.1 | |||
Reported as: | |||||||
Prepaids and other current assets | $ | 44.6 | $ | 41.9 | |||
Intangible and other assets, net | 82.8 | 80.2 | |||||
Total, net | $ | 127.4 | $ | 122.1 |
Amount | |||
2018 | $ | 35.7 | |
2019 | 40.7 | ||
2020 | 30.3 | ||
2021 | 16.1 | ||
2022 | 9.1 | ||
2023 and thereafter | 1.8 | ||
Total | $ | 133.7 |
Three Months Ended March 31, 2018 | |||||||||||||||||||
Gains (Losses) on Hedge Instruments | Unrealized Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation Gains (Losses) | Employee Benefit Plans | Total | |||||||||||||||
Beginning balance | $ | (2.4 | ) | $ | (11.3 | ) | $ | 2.3 | $ | (4.1 | ) | $ | (15.5 | ) | |||||
Other comprehensive income (loss) before reclassifications | (3.0 | ) | (7.4 | ) | 4.5 | 0.3 | (5.6 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 2.2 | 1.2 | — | (0.4 | ) | 3.0 | |||||||||||||
Net current-period other comprehensive income (loss) | (0.8 | ) | (6.2 | ) | 4.5 | (0.1 | ) | (2.6 | ) | ||||||||||
Ending balance | $ | (3.2 | ) | $ | (17.5 | ) | $ | 6.8 | $ | (4.2 | ) | $ | (18.1 | ) | |||||
Three Months Ended March 31, 2017 | |||||||||||||||||||
Gains (Losses) on Hedge Instruments | Unrealized Gains (Losses) on Available-for-Sale Securities | Foreign Currency Translation Gains (Losses) | Employee Benefit Plans | Total | |||||||||||||||
Beginning balance | $ | 5.0 | $ | (8.6 | ) | $ | (1.3 | ) | $ | (4.0 | ) | $ | (8.9 | ) | |||||
Other comprehensive income (loss) before reclassifications | (2.1 | ) | 2.9 | 1.8 | 0.1 | 2.7 | |||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (1.8 | ) | (0.1 | ) | — | 0.1 | (1.8 | ) | |||||||||||
Net current-period other comprehensive income (loss) | (3.9 | ) | 2.8 | 1.8 | 0.2 | 0.9 | |||||||||||||
Ending balance | $ | 1.1 | $ | (5.8 | ) | $ | 0.5 | $ | (3.8 | ) | $ | (8.0 | ) |
Stock Options Outstanding | |||||||
Number Outstanding | Weighted Average Exercise Price Per Share | ||||||
Balance at December 31, 2017 | 7.2 | $ | 164.16 | ||||
Granted | 0.2 | $ | 417.56 | ||||
Exercised | (0.4 | ) | $ | 130.88 | |||
Forfeited/expired | (0.1 | ) | $ | 195.63 | |||
Balance at March 31, 2018 | 6.9 | $ | 174.94 |
Shares | Weighted Average Grant Date Fair Value | |||||
Unvested balance at December 31, 2017 | 2.1 | $ | 209.55 | |||
Granted | 0.7 | $ | 418.18 | |||
Vested | (0.7 | ) | $ | 190.57 | ||
Forfeited | — | $ | 248.75 | |||
Unvested balance at March 31, 2018 | 2.1 | $ | 280.90 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Cost of sales - products | $ | 8.2 | $ | 6.8 | |||
Cost of sales - services | 3.9 | 3.2 | |||||
Total cost of sales | 12.1 | 10.0 | |||||
Selling, general and administrative | 29.5 | 25.7 | |||||
Research and development | 16.3 | 11.9 | |||||
Share-based compensation expense before income taxes | 57.9 | 47.6 | |||||
Income tax benefit | 12.3 | 15.5 | |||||
Share-based compensation expense after income taxes | $ | 45.6 | $ | 32.1 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Stock Options | |||||||
Risk-free interest rate | 2.6 | % | 2.0 | % | |||
Expected term (in years) | 4.3 | 4.3 | |||||
Expected volatility | 33 | % | 25 | % | |||
Fair value at grant date | $ | 130.51 | $ | 56.52 | |||
ESPP | |||||||
Risk-free interest rate | 1.9 | % | 0.9 | % | |||
Expected term (in years) | 1.2 | 1.3 | |||||
Expected volatility | 32 | % | 26 | % | |||
Fair value at grant date | $ | 124.61 | $ | 61.59 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
Net income attributable to Intuitive Surgical, Inc. | $ | 287.6 | $ | 180.8 | |||
Denominator: | |||||||
Weighted average shares outstanding used in basic calculation | 112.8 | 111.9 | |||||
Add: dilutive effect of potential common shares | 5.2 | 3.6 | |||||
Weighted average shares outstanding used in diluted calculation | 118.0 | 115.5 | |||||
Net income per share attributable to Intuitive Surgical, Inc.: | |||||||
Basic | $ | 2.55 | $ | 1.62 | |||
Diluted | $ | 2.44 | $ | 1.57 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Total revenue increased by 25% to $847.5 million during the three months ended March 31, 2018, compared with $679.6 million during the three months ended March 31, 2017. First quarter 2017 revenue was reduced by approximately $23.4 million revenue deferral related to the da Vinci X trade-out program. |
• | Approximately 238,000 da Vinci procedures were performed during the three months ended March 31, 2018, an increase of approximately 15% compared with approximately 207,000 for the three months ended March 31, 2017. |
• | Instrument and accessory revenue increased by 21% to $460.3 million during the three months ended March 31, 2018, compared with $380.8 million during the three months ended March 31, 2017. |
• | Systems revenue increased by 46% to $234.5 million during the three months ended March 31, 2018, compared with $160.8 million during the three months ended March 31, 2017. First quarter 2017 systems revenue was reduced by the revenue deferral related to the customer trade-out program described above. |
• | A total of 185 da Vinci Surgical Systems were shipped during the three months ended March 31, 2018, compared with 133 during the three months ended March 31, 2017. As of March 31, 2018, we had a da Vinci Surgical System installed base of approximately 4,528 systems, an increase of approximately 13% compared with the installed base as of March 31, 2017. |
• | Gross profit as a percentage of revenue was 70.1% for the three months ended March 31, 2018, compared with 69.1% for the three months ended March 31, 2017. Gross profit for the first quarter of 2017 was reduced by $7.8 million, or 1.1% as a percentage of revenue, related to a litigation settlement charge. |
• | Operating income increased by 43% to $276.7 million during the three months ended March 31, 2018, compared with $193.4 million during the three months ended March 31, 2017. Operating income included $57.9 million and $47.6 million of share-based compensation expense related to employee stock plans during the three months ended March 31, 2018, and 2017, respectively. Operating income for the three months ended March 31, 2018, and 2017, included pre-tax litigation related charges of $5.2 million, and $21.3 million, respectively. Operating income for the three months ended March 31, 2018 and 2017, included intangible asset charges of $7.6 million and $3.7 million, respectively. |
• | As of March 31, 2018, we had $4.1 billion in cash, cash equivalents, and investments. Cash, cash equivalents, and investments increased by $221.7 million, compared with December 31, 2017, primarily as a result of cash generated from operating activities. |
Three Months Ended March 31, | |||||||||||||
2018 | % of total revenue | 2017 | % of total revenue | ||||||||||
Revenue: | |||||||||||||
Product | $ | 694.8 | 82 | % | $ | 541.6 | 80 | % | |||||
Service | 152.7 | 18 | % | 138.0 | 20 | % | |||||||
Total revenue | 847.5 | 100 | % | 679.6 | 100 | % | |||||||
Cost of revenue: | |||||||||||||
Product | 201.5 | 24 | % | 165.5 | 24 | % | |||||||
Service | 52.2 | 6 | % | 44.3 | 7 | % | |||||||
Total cost of revenue | 253.7 | 30 | % | 209.8 | 31 | % | |||||||
Product gross profit | 493.3 | 58 | % | 376.1 | 56 | % | |||||||
Service gross profit | 100.5 | 12 | % | 93.7 | 13 | % | |||||||
Gross profit | 593.8 | 70 | % | 469.8 | 69 | % | |||||||
Operating expenses: | |||||||||||||
Selling, general and administrative | 221.6 | 26 | % | 202.9 | 30 | % | |||||||
Research and development | 95.5 | 11 | % | 73.5 | 11 | % | |||||||
Total operating expenses | 317.1 | 37 | % | 276.4 | 41 | % | |||||||
Income from operations | 276.7 | 33 | % | 193.4 | 28 | % | |||||||
Interest and other income, net | 13.2 | 1 | % | 8.7 | 1 | % | |||||||
Income before taxes | 289.9 | 34 | % | 202.1 | 29 | % | |||||||
Income tax expense | 2.6 | — | % | 21.3 | 2 | % | |||||||
Net income | 287.3 | 34 | % | 180.8 | 27 | % | |||||||
Less: net loss attributable to noncontrolling interest | (0.3 | ) | — | % | — | — | % | ||||||
Net income attributable to Intuitive Surgical, Inc. | $ | 287.6 | 34 | % | $ | 180.8 | 27 | % |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenue | |||||||
Instruments and accessories | $ | 460.3 | $ | 380.8 | |||
Systems | 234.5 | 160.8 | |||||
Total product revenue | 694.8 | 541.6 | |||||
Services | 152.7 | 138.0 | |||||
Total revenue | $ | 847.5 | $ | 679.6 | |||
United States | $ | 572.4 | $ | 494.8 | |||
OUS | 275.1 | 184.8 | |||||
Total revenue | $ | 847.5 | $ | 679.6 | |||
% of Revenue - U.S. | 68 | % | 73 | % | |||
% of Revenue - OUS | 32 | % | 27 | % | |||
Instruments and accessories | $ | 460.3 | $ | 380.8 | |||
Services | 152.7 | 138.0 | |||||
Operating lease revenue (1) | 9.5 | 5.0 | |||||
Total recurring revenue (1) | $ | 622.5 | $ | 523.8 | |||
% of Total revenue | 73 | % | 77 | % | |||
Unit Shipments by Region: | |||||||
U.S. unit shipments | 112 | 77 | |||||
OUS unit shipments | 73 | 56 | |||||
Total unit shipments* | 185 | 133 | |||||
*Systems shipped under operating leases (included in total unit shipments) | 43 | 21 | |||||
Unit Shipments involving System Trade-ins: | |||||||
Unit shipments involving trade-ins | 57 | 28 | |||||
Unit shipments not involving trade-ins | 128 | 105 | |||||
(1) Starting fourth quarter of 2017, we included operating lease revenue that is classified as systems revenue, as a component of total recurring revenue and revised prior period total recurring revenue for comparability purposes. |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net cash provided by (used in) | |||||||
Operating activities | $ | 280.2 | $ | 241.5 | |||
Investing activities | 53.6 | 1,308.3 | |||||
Financing activities | (8.3 | ) | (1,878.3 | ) | |||
Effect of exchange rates on cash, cash equivalents, and restricted cash | 1.0 | 0.5 | |||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 326.5 | $ | (328.0 | ) |
1. | Our net income included non-cash items, including: share-based compensation of $57.5 million; deferred income taxes of $37.4 million; depreciation expense of $23.7 million; investment related non-cash charges of $4.7 million; amortization of contract acquisition asset of $2.7 million; and amortization of intangible assets of $2.6 million. |
2. | The non-cash charges outlined above were mostly offset by changes in operating assets and liabilities that resulted in $135.7 million of cash used by operating activities. Operating assets and liabilities are primarily comprised of accounts receivable, inventory, prepaid expenses and other assets, deferred revenue, and other accrued liabilities. Inventory, including the transfer of equipment from inventory to property, plant and equipment, increased by $66.2 million. Accrued compensation and employee benefits decreased by $64.0 million primarily due to the payments of 2017 incentive compensation. Other liabilities decreased by $37.7 million primarily due to a decrease in income tax payable. Prepaid expenses and other assets increased by $20.6 million primarily due to timing of prepayments and lease receivables. The unfavorable impact of these items on cash used by operating activities was partly offset by a $33.0 million decrease in accounts receivable primarily due to timing of customer billings and collections, a $11.4 million increase in deferred revenue, and a $8.4 million increase in accounts payable. |
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 | |
3.2 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101 | The following materials from Intuitive Surgical, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, 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 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/ 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 March 31, 2018 (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 March 31, 2018 (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 |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Apr. 13, 2018 |
|
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 | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 113,295,092 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
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) | 300,000,000.0 | 300,000,000.0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares issued (in shares) | 113,300,000 | 112,300,000 |
Common stock, shares outstanding (in shares) | 113,300,000 | 112,300,000 |
Condensed Consolidated Statements of Cash Flows - Footnote - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Net cash provided by financing activities | $ (8.3) | $ (1,878.3) |
Net cash provided by operating activities | $ 280.2 | $ 241.5 |
DESCRIPTION OF THE BUSINESS |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
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, the Company considers to be an advanced 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 |
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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- and majority-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2017, 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, 2017, which was filed with the SEC on February 2, 2018. The results of operations for the first three months of fiscal year 2018 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods. The Financial Statements include the results and the balances of the Company's majority owned joint venture with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. The Company holds a controlling financial interest in the joint venture and the noncontrolling interest is reflected as a separate component of consolidated stockholders’ equity. Recent Accounting Pronouncements Not Yet Adopted In February 2016, the 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). The new standard also requires expanded disclosures regarding leasing arrangements. The new standard becomes effective for the Company in the first quarter of fiscal year 2019 and early adoption is permitted. The new standard is required to be adopted using the 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 the new standard will change customer buying patterns or behaviors. The Company is evaluating the effect that this new standard will have on its Financial Statements and related disclosures. Adopted Accounting Pronouncement Revenue from Contracts with Customers The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 606 ("ASC 606), Revenue from Contracts with Customers in the first quarter of the Company's fiscal year that began on January 1, 2018, using the full retrospective method, which required the Company to restate each prior reporting period presented. This new standard replaced the previous revenue recognition guidance in U.S. GAAP. Please see the Company's "Revenue Recognition" policy in the "Significant Accounting Policies" section below. The areas impacted include future contractual billings related to services included in the Company’s multi-year contracts, which are considered performance obligations that should be part of the contract consideration allocated to all performance obligations rather than being excluded due to its contingent nature as required under the previous revenue standard. Accordingly, the amount of contract consideration allocated to the performance obligations identified in the Company’s system arrangements is different from the amounts allocated under the previous revenue standard. In general, revenue is recognized earlier as a greater amount of the contract consideration is allocated to the product-related performance obligations that generally are delivered upfront, and therefore, less consideration is allocated to the service performance obligation that is generally recognized over the service period. In addition, the Company recognized an asset associated with the incremental costs of obtaining revenue generating customer contracts that it expects to benefit from over a period longer than one year. The Company capitalized sales commissions paid in connection with system sale arrangements that include multi-year service obligations and is amortizing such asset over the economic life of those contracts. Previously, sales commissions were expensed as incurred. The impact of this change on operating expenses in any given period will depend, in part, on the amount of such commissions incurred and capitalized in relation to the amount of ongoing amortization expense. Adoption of the standard using the full retrospective method also required the Company to restate certain previously reported results, including the impact to provision for income taxes. The adjustments to the unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017, are as follows (in millions, except per share amounts):
Selected Condensed Consolidated Statements of Balance Sheet line items, which reflect the impact of adopting the new standard, are as follow (in millions) as of December 31, 2017:
In addition, the cumulative effect of ASC 606 to the Company's retained earnings at January 1, 2016 was $40.3 million. Adoption of the standard had no impact to total net cash from or used in operating, investing, or financing activities within the Condensed Consolidated Statements of Cash Flows. As part of the Company's adoption of ASC 606, the Company elected to use the following practical expedients (i) to exclude disclosures of transaction prices allocated to remaining performance obligations when the Company expects to recognize such revenue for all periods prior to the date of initial application of ASC 606; (ii) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (iii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less; (iv) not to recast revenue for contracts that begin and end in the same fiscal year; and (v) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. Intra-Entity Transfer of Assets Other than Inventory Beginning fiscal 2018, the Company adopted ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company adopted this standard using the modified retrospective approach, and as a result, recorded a deferred tax asset with a corresponding cumulative adjustment to retained earnings of $390.8 million as of January 1, 2018, associated with an intra-entity transfer of certain intellectual property rights related to the Company’s non-U.S. business to its Swiss entity. The adjustment may be materially different as a result of recording additional deferred taxes upon finalization of the assessment of global intangible low-taxed income and other aspects from additional guidance and interpretations by U.S. regulatory and standard-setting bodies related to the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017. Business Combinations: Clarifying the Definition of a Business Beginning fiscal 2018, the Company adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The impact of the adoption on the Company's financial position and results of operations will be dependent upon future acquisitions or disposals, if any. Statement of Cash Flow: Restricted Cash Beginning fiscal 2018, the Company adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires the statement of cash flows to explain the change during the period relating to total cash, cash equivalents, and restricted cash. The Company adopted this standard using the retrospective transition method by restating its condensed consolidated statements of cash flows to include restricted cash of $15.0 million in the beginning and ending cash, cash equivalents, and restricted cash balances for all periods presented. Net cash flows for the three months ended March 31, 2017, did not change as a result of including restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts presented on the statements of cash flows. Restricted cash was included in intangible and other assets, net on the Company's condensed consolidated balance sheets. Significant Accounting Policies With the exception of the change in the Company's Revenue Recognition policy as a result of the adoption of ASC 606, 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, 2017, that are of significance, or potential significance to the Company. Revenue Recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018. The Company’s revenue consists of product revenue resulting from the sale of systems, system components, instruments and accessories, and service revenue. The Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. The Company's revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities. The Company's system sale arrangements generally contain multiple products and services. For these bundled sale arrangements, the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company’s system sale arrangements include a combination of the following performance obligations: system(s), system components, system accessories, instruments, accessories, and system service. The Company’s system sale arrangements generally include a five-year period of service. The first year of service is generally free and included in the system sale arrangement and the remaining four years are generally included at a stated service price. The Company considers the service terms in the arrangements that are legally enforceable to be performance obligations. Other than service, the Company generally satisfies all of the performance obligations up-front. System components, system accessories, instruments, accessories, and service are also sold on a stand-alone basis. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer. The Company generally recognizes revenue for the performance obligations at the following points in time: •System sales. For systems, system components, and system accessories sold directly to end customers, revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. For systems sold through distributors, revenue is recognized generally at the time of shipment. The Company’s system arrangements generally do not provide a right of return. The systems are generally covered by a one-year warranty. Warranty costs were not material for the periods presented. •Instruments and accessories. Revenue from sales of instruments and accessories is recognized when control is transferred to the customers, which generally occur at the time of shipment, but also occur at the time of delivery depending on the customer arrangement. The Company allows its customers in the normal course of business to return unused products for a limited period of time subsequent to initial purchase and records an allowance against revenue. •Service. Service revenue is recognized ratably over the term of the service period as the customers benefit from the service throughout the service period. Revenue related to services performed on a time-and-materials basis is recognized when performed. The Company offers its customers the opportunity to trade in their older systems for credit towards the purchase of a newer generation system. The Company generally does not provide specified price trade-in rights or upgrade rights at the time of system purchase. Such trade-in or upgrade transactions are separately negotiated based on the circumstances at the time of the trade-in or upgrade, based on the then fair value of the system, and are generally not based on any pre-existing rights granted by the Company. Accordingly, such trade-ins and upgrades are not considered as separate performance obligations in the arrangement for a system sale. As part of a trade-in transaction, the customer receives a new generation system in exchange for its pre-owned system. The trade-in credit is negotiated at the time of the trade-in and is applied towards the purchase price of the new unit. Traded-in systems generally can be reconditioned and resold. The Company accounts for the fair value of the traded-in system in the total consideration in the arrangement by including the net realizable value of the traded-in system less a normal profit margin. The value of the traded-in system is determined as the amount, after reconditioning costs are added, that will allow a normal profit margin on the sale of the reconditioned unit to be generated. When there is no market for the traded-in units, no value is assigned. Traded-in units are reported as a component of inventory until reconditioned and resold, or otherwise disposed. In addition, customers may also have the opportunity to upgrade their systems at a price determined at the time of the upgrade, for example, by adding a fourth arm to a three-arm system, or adding a second surgeon console for use with the da Vinci Si, Xi, and X Surgical System. Such upgrades are performed by completing component level upgrades at the customer’s site. Upgrade revenue is recognized when the component level upgrades are complete and all revenue recognition criteria are met. For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, type of customer, and market conditions. The Company regularly reviews standalone selling prices and updates these estimates if necessary. The following table presents revenue disaggregated by types and geography (in millions):
Transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which the revenue that has not yet been recognized. A significant portion of this amount relates to the Company's service contracts and obligations that will be invoiced and recognized as revenue in future periods. Transaction price allocated to remaining performance obligations was approximately $1,104.3 million as of March 31, 2018. The following information summarizes the Company’s contract assets and liabilities (in millions):
The Company invoices its customers based on the billing schedules in its sales arrangements. Contract assets for the periods presented primarily represent the difference between the revenue that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented was primarily related to service contracts, for which the service fees are billed up-front, generally quarterly or annually. The associated deferred revenue is generally recognized ratably over the service period. The Company did not have any significant impairment losses on its contract assets for the periods presented. Revenue recognized for the three months ended March 31, 2018 and 2017, that was included in the deferred revenue balance at the beginning of each reporting period was $115.8 million and $98.5 million, respectively. Assets Recognized from the Costs to Obtain a Contract with a Customer The Company has determined that sales incentive programs for the Company’s sales team meet the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction. The Company considers historical service renewal rates, expectations of future customer renewals of service contracts, and other factors that could impact the economic benefits that the Company expects to generate from the relationship with its customers when determining the economic life of the contract acquisition assets. The costs capitalized as contract acquisition costs included in intangible and other assets, net in the Company’s condensed consolidated balance sheets were $30.9 million and $31.4 million as of March 31, 2018, and December 31, 2017, respectively. The Company did not incur any impairment losses during any of the periods presented. |
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 March 31, 2018, and December 31, 2017 (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 March 31, 2018 (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 months ended March 31, 2018, 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 and the Swiss Franc (“CHF”). 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 amounts reclassified to revenue and 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 CHF. The net gains (losses) recognized in interest and other income, net in the condensed consolidated statements of comprehensive income for the three months ended March 31, 2018, and 2017, 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 Balance Sheet Details The following table provides further details of inventory (in millions):
The following table provides further details of the other long-term liabilities (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 March 31, 2018, are as follows (in millions):
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CONTINGENCIES |
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Mar. 31, 2018 | |
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, employment, 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. A liability and related charge to earnings are recorded in the Company’s Consolidated Financial Statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to each case. Nevertheless, it is possible that additional 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. 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 retitled 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 at that time. The plaintiffs moved for class certification on September 1, 2015, and following opposition and reply briefing, the court held a hearing on the motion on January 21, 2016. On November 2, 2016, Labaton Sucharow LLP filed a motion for leave to file an amended complaint. On December 22, 2016, the court entered an order granting plaintiffs’ motion for class certification. On January 25, 2017, the court entered an order granting plaintiffs’ motion for leave to amend the complaint. On February 9, 2017, the Company moved to dismiss the amended complaint. Following opposition and reply briefing, the matter was fully submitted to the court on March 2, 2017. The court denied the motion on September 29, 2017. On July 13, 2017, the parties filed a stipulation vacating the case schedule, which the court entered on July 14, 2017. On November 8, 2017, the court entered a new case schedule, with trial set to begin on October 30, 2018. On December 6, 2017, plaintiffs moved for approval of a proposed notice to the class members; the Company partially opposed that motion. The Court held a hearing regarding the motion on March 8, 2018, and ordered the parties to edit the proposed notice and submit it to the Court for approval. On March 9, 2018, the parties submitted a joint proposed notice, which the Court approved on March 12, 2018. On February 9, 2018, the Company filed a motion for summary judgment, which plaintiffs opposed on March 23, 2018. The Company will file a reply in support of its motion on April 23, 2018, and a hearing on the motion is scheduled for June 14, 2018. While the Company intends to vigorously defend itself, the actual outcome of this matter is dependent on many variables that are difficult to predict. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from this matter. Product Liability Litigation The Company is currently named as a defendant in a number of individual product liability lawsuits filed in various state and federal courts. The plaintiffs generally 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. Several of these cases have trial dates in the next 12 months. 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. In addition to the filed cases, the Company received a substantial number of claims relating 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 many of these claims and engaged in confidential mediation efforts. While the majority of the claims have been resolved, there are still a number of “tolled claims” that remain outstanding. During the three months ended March 31, 2018, and 2017, the Company recorded pre-tax charges of $4.5 million and $13.5 million, respectively, to reflect the estimated cost of settling a number of the product liability claims that are or that have been covered by the tolling agreements. As of March 31, 2018, and December 31, 2017, a total of $17.4 million and $12.8 million, respectively, were included in other accrued liabilities in the accompanying Condensed Consolidated Balance Sheets related to the pending product-liability cases and the tolled product liability claims. The Company’s estimate of the anticipated cost of resolving both the pending cases and the tolled claims is based on negotiations with attorneys for the claimants. Nonetheless, it is possible that more claims will be made by additional individuals and that the claimants whose claims have not yet been resolved 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. Patent Litigation On June 30, 2017, Ethicon LLC, Ethicon Endo-Surgery, Inc., and Ethicon US LLC (collectively, “Ethicon”) filed a complaint for patent infringement against the Company in the United States District Court for the District of Delaware. The complaint, which was served on the Company on July 12, 2017, alleges that the Company’s EndoWrist Stapler instruments infringe several of Ethicon’s patents. The parties are currently engaged in fact discovery regarding Ethicon’s allegations. Based on currently available information, the Company is unable to make a reasonable estimate of loss or range of losses, if any, arising from this matter. |
STOCKHOLDERS' EQUITY |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Stock Repurchase Program The Company’s Board of Directors (the “Board”) has authorized an aggregate of $6.2 billion of funding for the Company’s common stock repurchase program (the “Repurchase Program”) since its establishment in March 2009. The most recent authorization occurred in December 2016 when the Board increased the authorized amount available under Repurchase Program to $3.0 billion. As of March 31, 2018, the remaining amount of share repurchases authorized by the Board was approximately $717.5 million. There were no shares repurchased during the three months ended March 31, 2018. During the three months ended March 31, 2017, the Company entered into an accelerated share repurchase program (the “ASR Program”) with Goldman Sachs & Co. LLC (“Goldman”) and Goldman delivered to the Company approximately 7.3 million shares of the Company’s common stock, for which the Company made a payment of $2.0 billion to Goldman. On December 7, 2017, the Company completed the ASR Program by making a final settlement payment of $274.0 million to Goldman. The final average price per share paid under the ASR Program was $310.32. Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2018, and 2017, are as follows (in millions):
Retained Earnings For the three months ended March 31, 2018, retained earnings balance includes a reduction of $96.7 million for shares withheld related to net share settlement of equity awards. |
SHARE-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION As of March 31, 2018, approximately 4.7 million shares of common stock were reserved for future issuance under the Company’s stock plans. A maximum of approximately 2.0 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 three months ended March 31, 2018, is presented as follows (in millions, except per share amounts):
As of March 31, 2018, options to purchase an aggregate of 5.4 million shares of common stock were exercisable at a weighted average price of $150.50 per share. Restricted Stock Units Information A summary of RSU activity for the three months ended March 31, 2018, is presented as follows (in millions, except per share amounts):
During the three months ended March 31, 2018, approximately 26,000 RSUs were forfeited. Employee Stock Purchase Plan Under the Employee Stock Purchase Plan (“ESPP”), employees purchased approximately 0.1 million shares for $25.3 million and approximately 0.1 million shares for $20.9 million during the three months ended March 31, 2018, and 2017, respectively. Share-based Compensation Expense The following table summarizes share-based compensation expense for the three months ended March 31, 2018, and 2017 (in millions):
The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s stock plans and rights to acquire stock granted under the Company’s ESPP. The weighted average estimated fair values of stock options and rights to acquire stock under the ESPP, as well as the weighted average assumptions used in calculating those fair values, were as follows:
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Income tax expense for the three months ended March 31, 2018, was $2.6 million, or 0.9% of income before taxes, compared with $21.3 million, or 10.5% of income before taxes, for the three months ended March 31, 2017. The effective tax rate for the three months ended March 31, 2018, differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits associated with employee equity plans and federal R&D credit benefits, partially offset by state income taxes. The effective tax rate for the three months ended March 31, 2017, differed from the U.S. federal statutory rate of 35% primarily due to excess tax benefits associated with employee equity plans, the effect of certain foreign earnings being taxed at rates lower than the federal statutory rate, and federal R&D credit benefit, partially offset by state income taxes. In connection with the Tax Act enacted in December 2017, the Company recorded a provisional amount of $317.8 million in its income tax expense for the year ended December 31, 2017. In accordance with relevant SEC guidance, the effects of the Tax Act may be adjusted within a one-year measurement period from the enactment date for items that were previously reported as provisional, or where a provisional estimate could not be made. Income tax provision for the three months ended March 31, 2018, did not reflect any adjustment to the previously assessed Tax Act enactment effect. Income tax expense for the three months ended March 31, 2018, reflected a $9.1 million estimate for the tax on global intangible low-taxed income enacted by the Tax Act. For the global intangible low-taxed income provisions of the Tax Act, the Company has not yet elected an accounting policy with respect to either recognize deferred taxes for basis differences expected to reverse as global intangible low-taxed income, or to record such as period costs if and when incurred. The Company will continue to assess forthcoming guidance and accounting interpretations on the effects of the Tax Act and expects to complete its analysis within the measurement period in accordance with the SEC guidance. As a result of the Tax Act, the Company can repatriate its cumulative undistributed foreign earnings back to the U.S. when, and if, needed with minimal additional tax consequences. As of March 31, 2018, the Company had a total of gross unrecognized tax benefits of $69.6 million compared with $65.4 million as of December 31, 2017, representing a net increase of approximately $4.2 million for the three months ended March 31, 2018. The net increase was primarily related to 2018 uncertain tax positions. If recognized, the 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 U.S. and OUS jurisdictions. Years before 2014 are closed for the significant jurisdictions. Certain of the Company’s unrecognized tax benefits could change due to activities of various tax authorities, including potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they change. Due to the uncertainty related to the timing and potential outcome of audits, the Company cannot estimate the range of reasonably possible change in unrecognized tax benefits that may occur in the next 12 months. The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company's 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 Company’s 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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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME PER SHARE | NET INCOME PER SHARE The following table presents the computation of basic and diluted net income per share attributable to Intuitive Surgical, Inc. for the three months ended March 31, 2018, and 2017 (in millions, except per share amounts):
Share-based compensation awards of approximately 0.2 million and 0.6 million shares for the three months ended March 31, 2018, and 2017, respectively, were outstanding, but were not included in the computation of diluted net income per share attributable to Intuitive Surgical, Inc. common stockholders because the effect of including such shares would have been anti-dilutive in the periods presented. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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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- and majority-owned subsidiaries have been prepared on a consistent basis with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2017, 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, 2017, which was filed with the SEC on February 2, 2018. The results of operations for the first three months of fiscal year 2018 are not necessarily indicative of the results to be expected for the entire fiscal year or any future periods. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements Not Yet Adopted In February 2016, the 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). The new standard also requires expanded disclosures regarding leasing arrangements. The new standard becomes effective for the Company in the first quarter of fiscal year 2019 and early adoption is permitted. The new standard is required to be adopted using the 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 the new standard will change customer buying patterns or behaviors. The Company is evaluating the effect that this new standard will have on its Financial Statements and related disclosures. Adopted Accounting Pronouncement Revenue from Contracts with Customers The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 606 ("ASC 606), Revenue from Contracts with Customers in the first quarter of the Company's fiscal year that began on January 1, 2018, using the full retrospective method, which required the Company to restate each prior reporting period presented. This new standard replaced the previous revenue recognition guidance in U.S. GAAP. Please see the Company's "Revenue Recognition" policy in the "Significant Accounting Policies" section below. The areas impacted include future contractual billings related to services included in the Company’s multi-year contracts, which are considered performance obligations that should be part of the contract consideration allocated to all performance obligations rather than being excluded due to its contingent nature as required under the previous revenue standard. Accordingly, the amount of contract consideration allocated to the performance obligations identified in the Company’s system arrangements is different from the amounts allocated under the previous revenue standard. In general, revenue is recognized earlier as a greater amount of the contract consideration is allocated to the product-related performance obligations that generally are delivered upfront, and therefore, less consideration is allocated to the service performance obligation that is generally recognized over the service period. In addition, the Company recognized an asset associated with the incremental costs of obtaining revenue generating customer contracts that it expects to benefit from over a period longer than one year. The Company capitalized sales commissions paid in connection with system sale arrangements that include multi-year service obligations and is amortizing such asset over the economic life of those contracts. Previously, sales commissions were expensed as incurred. The impact of this change on operating expenses in any given period will depend, in part, on the amount of such commissions incurred and capitalized in relation to the amount of ongoing amortization expense. Adoption of the standard using the full retrospective method also required the Company to restate certain previously reported results, including the impact to provision for income taxes. The adjustments to the unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017, are as follows (in millions, except per share amounts):
Selected Condensed Consolidated Statements of Balance Sheet line items, which reflect the impact of adopting the new standard, are as follow (in millions) as of December 31, 2017:
In addition, the cumulative effect of ASC 606 to the Company's retained earnings at January 1, 2016 was $40.3 million. Adoption of the standard had no impact to total net cash from or used in operating, investing, or financing activities within the Condensed Consolidated Statements of Cash Flows. As part of the Company's adoption of ASC 606, the Company elected to use the following practical expedients (i) to exclude disclosures of transaction prices allocated to remaining performance obligations when the Company expects to recognize such revenue for all periods prior to the date of initial application of ASC 606; (ii) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (iii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less; (iv) not to recast revenue for contracts that begin and end in the same fiscal year; and (v) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer. Intra-Entity Transfer of Assets Other than Inventory Beginning fiscal 2018, the Company adopted ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company adopted this standard using the modified retrospective approach, and as a result, recorded a deferred tax asset with a corresponding cumulative adjustment to retained earnings of $390.8 million as of January 1, 2018, associated with an intra-entity transfer of certain intellectual property rights related to the Company’s non-U.S. business to its Swiss entity. The adjustment may be materially different as a result of recording additional deferred taxes upon finalization of the assessment of global intangible low-taxed income and other aspects from additional guidance and interpretations by U.S. regulatory and standard-setting bodies related to the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017. Business Combinations: Clarifying the Definition of a Business Beginning fiscal 2018, the Company adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The impact of the adoption on the Company's financial position and results of operations will be dependent upon future acquisitions or disposals, if any. Statement of Cash Flow: Restricted Cash Beginning fiscal 2018, the Company adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires the statement of cash flows to explain the change during the period relating to total cash, cash equivalents, and restricted cash. The Company adopted this standard using the retrospective transition method by restating its condensed consolidated statements of cash flows to include restricted cash of $15.0 million in the beginning and ending cash, cash equivalents, and restricted cash balances for all periods presented. Net cash flows for the three months ended March 31, 2017, did not change as a result of including restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts presented on the statements of cash flows. Restricted cash was included in intangible and other assets, net on the Company's condensed consolidated balance sheets. |
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Revenue Recognition | Revenue Recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018. The Company’s revenue consists of product revenue resulting from the sale of systems, system components, instruments and accessories, and service revenue. The Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. The Company's revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities. The Company's system sale arrangements generally contain multiple products and services. For these bundled sale arrangements, the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundled package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company’s system sale arrangements include a combination of the following performance obligations: system(s), system components, system accessories, instruments, accessories, and system service. The Company’s system sale arrangements generally include a five-year period of service. The first year of service is generally free and included in the system sale arrangement and the remaining four years are generally included at a stated service price. The Company considers the service terms in the arrangements that are legally enforceable to be performance obligations. Other than service, the Company generally satisfies all of the performance obligations up-front. System components, system accessories, instruments, accessories, and service are also sold on a stand-alone basis. The Company recognizes revenues as the performance obligations are satisfied by transferring control of the product or service to a customer. The Company generally recognizes revenue for the performance obligations at the following points in time: •System sales. For systems, system components, and system accessories sold directly to end customers, revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. For systems sold through distributors, revenue is recognized generally at the time of shipment. The Company’s system arrangements generally do not provide a right of return. The systems are generally covered by a one-year warranty. Warranty costs were not material for the periods presented. •Instruments and accessories. Revenue from sales of instruments and accessories is recognized when control is transferred to the customers, which generally occur at the time of shipment, but also occur at the time of delivery depending on the customer arrangement. The Company allows its customers in the normal course of business to return unused products for a limited period of time subsequent to initial purchase and records an allowance against revenue. •Service. Service revenue is recognized ratably over the term of the service period as the customers benefit from the service throughout the service period. Revenue related to services performed on a time-and-materials basis is recognized when performed. The Company offers its customers the opportunity to trade in their older systems for credit towards the purchase of a newer generation system. The Company generally does not provide specified price trade-in rights or upgrade rights at the time of system purchase. Such trade-in or upgrade transactions are separately negotiated based on the circumstances at the time of the trade-in or upgrade, based on the then fair value of the system, and are generally not based on any pre-existing rights granted by the Company. Accordingly, such trade-ins and upgrades are not considered as separate performance obligations in the arrangement for a system sale. As part of a trade-in transaction, the customer receives a new generation system in exchange for its pre-owned system. The trade-in credit is negotiated at the time of the trade-in and is applied towards the purchase price of the new unit. Traded-in systems generally can be reconditioned and resold. The Company accounts for the fair value of the traded-in system in the total consideration in the arrangement by including the net realizable value of the traded-in system less a normal profit margin. The value of the traded-in system is determined as the amount, after reconditioning costs are added, that will allow a normal profit margin on the sale of the reconditioned unit to be generated. When there is no market for the traded-in units, no value is assigned. Traded-in units are reported as a component of inventory until reconditioned and resold, or otherwise disposed. In addition, customers may also have the opportunity to upgrade their systems at a price determined at the time of the upgrade, for example, by adding a fourth arm to a three-arm system, or adding a second surgeon console for use with the da Vinci Si, Xi, and X Surgical System. Such upgrades are performed by completing component level upgrades at the customer’s site. Upgrade revenue is recognized when the component level upgrades are complete and all revenue recognition criteria are met. For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, type of customer, and market conditions. The Company regularly reviews standalone selling prices and updates these estimates if necessary. |
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Assets Recognized from the Costs to Obtain a Contract with a Customer | Assets Recognized from the Costs to Obtain a Contract with a Customer The Company has determined that sales incentive programs for the Company’s sales team meet the requirements to be capitalized as the Company expects to generate future economic benefits from the related revenue generating contracts after the initial capital sales transaction. The Company considers historical service renewal rates, expectations of future customer renewals of service contracts, and other factors that could impact the economic benefits that the Company expects to generate from the relationship with its customers when determining the economic life of the contract acquisition assets. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impact of Adopting New Standard | Adoption of the standard using the full retrospective method also required the Company to restate certain previously reported results, including the impact to provision for income taxes. The adjustments to the unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017, are as follows (in millions, except per share amounts):
Selected Condensed Consolidated Statements of Balance Sheet line items, which reflect the impact of adopting the new standard, are as follow (in millions) as of December 31, 2017:
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Revenue Disaggregated by Types and Geography | The following table presents revenue disaggregated by types and geography (in millions):
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Summary of Contract Assets and Liabilities | The following information summarizes the Company’s contract assets and liabilities (in millions):
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FINANCIAL INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2018, and December 31, 2017 (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 March 31, 2018 (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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 Long-term Liabilities | The following table provides further details of the other long-term liabilities (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) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 March 31, 2018, are as follows (in millions):
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STOCKHOLDERS' EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Income, Net of Tax | The components of accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2018, and 2017, are as follows (in millions):
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SHARE-BASED COMPENSATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 three months ended March 31, 2018, 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 three months ended March 31, 2018, is presented as follows (in millions, except per share amounts):
During the three months ended March 31, 2018, approximately 26,000 RSUs were forfeited. |
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Summary of Share-Based Compensation Expense | The following table summarizes share-based compensation expense for the three months ended March 31, 2018, and 2017 (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 stock plans and rights to acquire stock granted under the Company’s ESPP. The weighted average estimated fair values of stock options and rights to acquire stock under the ESPP, as well as the weighted average assumptions used in calculating those fair values, were as follows:
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NET INCOME PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 attributable to Intuitive Surgical, Inc. for the three months ended March 31, 2018, and 2017 (in millions, except per share amounts):
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Contract Assets and Liabilities (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Contract assets | $ 11.3 | $ 8.3 |
Contract with Customer, Liability | $ 280.0 | $ 268.6 |
FINANCIAL INSTRUMENTS - Summary of Contractual Maturities of Cash Equivalents and Available-For-Sale Investments (Details) $ in Millions |
Mar. 31, 2018
USD ($)
|
---|---|
Amortized Cost | |
Mature in less than one year | $ 1,671.7 |
Mature in one to five years | 1,566.4 |
Total | 3,238.1 |
Fair Value | |
Mature in less than one year | 1,666.4 |
Mature in one to five years | 1,550.9 |
Total | $ 3,217.3 |
FINANCIAL INSTRUMENTS - Gross Notional Amounts for Outstanding Derivatives (Details) - Forward contracts - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivatives Designated as Hedging Instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Notional amount, forward contracts | $ 142.7 | $ 128.5 |
Gross fair value of derivative assets | 0.4 | 0.9 |
Gross fair value of derivative liabilities | 3.7 | 2.9 |
Derivatives Not Designated as Hedging Instruments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Notional amount, forward contracts | 141.6 | 168.4 |
Gross fair value of derivative assets | 0.6 | 1.2 |
Gross fair value of derivative liabilities | $ 3.8 | $ 4.6 |
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION - Inventory (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 96.4 | $ 80.9 |
Work-in-process | 28.9 | 19.7 |
Finished goods | 158.3 | 140.6 |
Total inventory | $ 283.6 | $ 241.2 |
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION - Other Long-term Liabilities (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Income taxes—long-term | $ 292.0 | $ 286.8 |
Deferred revenue—long-term | 25.4 | 24.8 |
Other long-term liabilities | 21.2 | 22.0 |
Total other long-term liabilities | $ 338.6 | $ 333.6 |
BALANCE SHEET DETAILS AND OTHER FINANCIAL INFORMATION - Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Supplemental non-cash investing activities: | ||
Equipment transfers, including operating lease assets, from inventory to property, plant, and equipment | $ 26.5 | $ 10.6 |
LEASE RECEIVABLES - Lease Receivables (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Capital Leased Assets [Line Items] | ||
Gross lease receivables | $ 133.7 | $ 128.0 |
Unearned income | (5.4) | (5.0) |
Allowance for credit loss | (0.9) | (0.9) |
Net investment in sales-type leases | 127.4 | 122.1 |
Reported as: | ||
Net investment in sales-type leases | 127.4 | 122.1 |
Prepaids and other current assets | ||
Reported as: | ||
Prepaids and other current assets | 44.6 | 41.9 |
Intangible and other assets, net | ||
Reported as: | ||
Intangible and other assets, net | $ 82.8 | $ 80.2 |
LEASE RECEIVABLES - Gross Contractual Maturities of Lease Receivables (Details) $ in Millions |
Mar. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2018 | $ 35.7 |
2019 | 40.7 |
2020 | 30.3 |
2021 | 16.1 |
2022 | 9.1 |
2023 and thereafter | 1.8 |
Total | $ 133.7 |
CONTINGENCIES (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Commitments and Contingencies [Line Items] | |||
Loss contingency liability | $ 17.4 | $ 12.8 | |
da Vinci Surgical System Product Liability Matters | |||
Commitments and Contingencies [Line Items] | |||
Estimated cost of settling product liability claims | $ 4.5 | $ 13.5 |
STOCKHOLDERS' EQUITY - Stock Repurchase Program (Details) - USD ($) $ / shares in Units, shares in Millions |
3 Months Ended | |||
---|---|---|---|---|
Dec. 07, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Equity, Class of Treasury Stock [Line Items] | ||||
Repurchase of common stock | $ 0 | $ 2,000,000,000 | ||
Repurchase Program | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Remaining amount of share repurchases authorized | 717,500,000 | |||
ASR Program | Goldman | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Repurchase of common stock | $ 274,000,000 | $ 2,000,000,000 | ||
Shares repurchased | 7.3 | |||
Final average price per share paid (in dollars per share) | $ 310.32 | |||
Common Stock | Repurchase Program | ||||
Equity, Class of Treasury Stock [Line Items] | ||||
Amount of share repurchases authorized | $ 6,200,000,000.0 | |||
Stock repurchase program, increased to authorized amount | $ 3,000,000,000.0 |
SHARE-BASED COMPENSATION - Additional Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares reserved for future issuance | 4,700 | |
Options exercisable, number of shares | 5,400 | |
Options exercisable, weighted-average exercise price (usd per share) | $ 150.50 | |
Restricted Stock Units (RSUs) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares reserved for future issuance | 2,000 | |
Forfeited (in shares) | (26) | |
ESPP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Employee Stock Purchase Plan, number of shares purchased by employees | 100 | 100 |
Employee Stock Purchase Plan, value of shares purchased by employees | $ 25.3 | $ 20.9 |
SHARE-BASED COMPENSATION - Summary Of Stock Option Activity Under All Stock Plans (Details) shares in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
$ / shares
shares
| |
Number Outstanding | |
Beginning balance, Number Outstanding | shares | 7.2 |
Options granted, Number Outstanding | shares | 0.2 |
Options exercised, Number Outstanding | shares | (0.4) |
Options forfeited/expired, Number Outstanding | shares | (0.1) |
Ending balance, Number Outstanding | shares | 6.9 |
Weighted Average Exercise Price Per Share | |
Beginning balance, Weighted Average Exercise Price Per Share | $ / shares | $ 164.16 |
Options granted, Weighted Average Exercise Price Per Share | $ / shares | 417.56 |
Options exercised, Weighted Average Exercise Price Per Share | $ / shares | 130.88 |
Options forfeited/expired, Weighted Average Exercise Price Per Share | $ / shares | 195.63 |
Ending balance, Weighted Average Exercise Price Per Share | $ / shares | $ 174.94 |
SHARE-BASED COMPENSATION - Summary of RSU Activity (Details) - Restricted Stock Units (RSUs) shares in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
$ / shares
shares
| |
Shares | |
Unvested beginning balance (in shares) | shares | 2,100 |
Granted (in shares) | shares | 700 |
Vested (in shares) | shares | (700) |
Forfeited (in shares) | shares | (26) |
Unvested ending balance (in shares) | shares | 2,100 |
Weighted Average Grant Date Fair Value | |
Unvested beginning balance (usd per share) | $ / shares | $ 209.55 |
Granted (usd per share) | $ / shares | 418.18 |
Vested (usd per share) | $ / shares | 190.57 |
Forfeited (usd per share) | $ / shares | 248.75 |
Unvested ending balance (usd per share) | $ / shares | $ 280.90 |
SHARE-BASED COMPENSATION - Schedule Of Estimated Fair Value Of Option Using Black-Scholes Option Pricing Model, Weighted Average Assumptions (Details) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 2.60% | 2.00% |
Expected term (in years) | 4 years 3 months 18 days | 4 years 4 months 1 day |
Expected volatility (percent) | 33.00% | 25.00% |
Weighted average fair value at grant date (usd per share) | $ 130.51 | $ 56.52 |
ESPP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 1.90% | 0.90% |
Expected term (in years) | 1 year 2 months 12 days | 1 year 4 months 1 day |
Expected volatility (percent) | 32.00% | 26.00% |
Weighted average fair value at grant date (usd per share) | $ 124.61 | $ 61.59 |
INCOME TAXES - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | |||
Income tax expense (benefit) | $ 2.6 | $ 21.3 | |
Income tax expense, percentage of pre-tax income | 0.90% | 10.50% | |
Effective tax rate | 21.00% | 35.00% | |
Provisional income tax expense | $ 317.8 | ||
Provisional estimate of minimum tax on foreign earnings | $ 9.1 | ||
Total gross unrecognized tax benefits | 69.6 | $ 65.4 | |
Net decrease of unrecognized tax benefits | $ (4.2) |
NET INCOME PER SHARE - Computation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Numerator: | ||
Net income attributable to Intuitive Surgical, Inc. | $ 287.6 | $ 180.8 |
Denominator: | ||
Weighted average shares outstanding used in basic calculation | 112.8 | 111.9 |
Add: dilutive effect of potential common shares | 5.2 | 3.6 |
Weighted average shares outstanding used in diluted calculation | 118.0 | 115.5 |
Net income per share attributable to Intuitive Surgical, Inc.: | ||
Basic (in dollars per share) | $ 2.55 | $ 1.62 |
Diluted (in dollars per share) | $ 2.44 | $ 1.57 |
NET INCOME PER SHARE - Additional Information (Details) - shares shares in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Earnings Per Share [Abstract] | ||
Employee stock options excluded from computation of diluted net income per share | 0.2 | 0.6 |
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