SEC Filings

10-K
INTUITIVE SURGICAL INC filed this Form 10-K on 02/02/2018
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changes in competition;
changes in production volume driven by demand for our products;
changes in material, labor, or other manufacturing-related costs, including the impact of foreign exchange rate fluctuations for foreign-currency denominated costs;
changes to U.S. and foreign trade policies, including the enactment of tariffs on goods imported into the U.S., including but not limited to, goods imported from Mexico where we manufacture a majority of our instruments that we sell;
inventory obsolescence and product recall charges; and
market conditions.
If we are unable to offset the unfavorable impact of the factors noted above by increasing the volume of products shipped, reducing product manufacturing costs, or otherwise, our business, financial condition, results of operations, or cash flows may be materially adversely affected.
WE EXPERIENCE LONG AND VARIABLE CAPITAL SALES CYCLES AND SEASONALITY IN OUR BUSINESS, WHICH MAY CAUSE FLUCTUATIONS IN OUR FINANCIAL RESULTS.
The sales and purchase order cycle of our da Vinci Surgical System is lengthy because it is a major capital item and its purchase generally requires the approval of senior management of hospitals, their parent organizations, purchasing groups, and government bodies, as applicable. In addition, sales to some of our customers are subject to competitive bidding or public tender processes. These approval and bidding processes can be lengthy. As a result, hospitals may delay or accelerate system purchases in conjunction with timing of their capital budget timelines. Further, IDN groups are creating larger networks of da Vinci system operators with increasing purchasing power and are increasingly evaluating their da Vinci Surgery programs to optimize the efficiency of the da Vinci system operations. Further, the introduction of new products could adversely impact our sales cycle as customers take additional time to assess the benefits and costs of such products. As a result, it is difficult for us to predict the length of capital sales cycles and, therefore, the exact timing of capital sales. Historically, our sales of da Vinci Surgical Systems have tended to be heaviest during the third month of each fiscal quarter, lighter in the first fiscal quarter and heavier in the fourth fiscal quarter.
We have experienced procedure growth for a number of benign conditions, including hysterectomies for benign conditions, sacrocolpopexies, hernia repairs, cholecystectomies, and certain other surgeries. Many of these types of surgeries may be postponed in the short term by patients to avoid vacation periods and for other personal scheduling reasons. Patients may also accelerate procedures to take advantage of insurance funding cut-off dates. Historically, we have experienced lower procedure volume in the first and third fiscal quarters and higher procedure volume in the second and fourth fiscal quarters. Timing of procedures and changes in procedure growth directly affect the timing of instrument and accessory purchases and capital purchases by customers.
The above factors may contribute to substantial fluctuations in our quarterly operating results. Because of these fluctuations, it is possible that in future periods our operating results will fall below the expectations of securities analysts or investors. If that happens, the market price of our stock would likely decrease. These fluctuations, among other factors, also mean that our operating results in any particular period may not be relied upon as an indication of future performance.
WE ARE SUBJECT TO A VARIETY OF RISKS DUE TO OUR OPERATIONS OUTSIDE OF THE U.S.
We manufacture, perform research and development activities, and distribute our products in OUS markets. Revenue from OUS markets accounted for approximately 27%, 28%, and 29% of our revenue for the years ended December 31, 2017, 2016, and 2015, respectively. Our OUS operations are, and will continue to be, subject to a number of risks including:
failure to obtain or maintain the same degree of protection against infringement of our intellectual property rights as we have in the U.S.;
multiple OUS regulatory requirements that are subject to change and that could impact our ability to manufacture and sell our products;
changes in tariffs, trade barriers, and regulatory requirements;
protectionist laws and business practices that favor local competitors, which could slow our growth in OUS markets;
local or national regulations that make it difficult or impractical to market or use our products;
U.S. relations with the governments of the foreign countries in which we operate;
inability or regulatory limitations on our ability to move goods across borders;
the risks associated with foreign currency exchange rate fluctuations;
difficulty in establishing, staffing, and managing OUS operations;
the expense of establishing facilities and operations in new foreign markets;
building and maintaining an organization capable of supporting geographically dispersed operations;

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