SEC Filings

10-K
INTUITIVE SURGICAL INC filed this Form 10-K on 02/02/2018
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Product gross profit for the year ended December 31, 2017, 2016, and 2015, included share-based compensation expense of $28.1 million, $25.2 million, and $22.8 million, respectively, and amortization expense of intangible assets of $5.4 million, $7.8 million, and $12.7 million, respectively.
Service gross profit for the year ended December 31, 2017, increased to $401.9 million, or 69.1% of service revenue, compared with $366.0 million, or 70.8% of service revenue, for the year ended December 31, 2016. The higher 2017 service gross profit was driven by higher service revenue, reflecting a larger installed base of da Vinci Surgical Systems, partially offset by lower service gross profit margin. The lower service gross profit margin for the year ended December 31, 2017, was primarily driven by higher costs associated with the repair of da Vinci Xi endoscope products.
Service gross profit for the year ended December 31, 2016, increased to $366.0 million, or 70.8% of service revenue, compared with $305.5 million, or 65.7% of service revenue, for the year ended December 31, 2015. The higher service gross profit margin for the year ended December 31, 2016, was primarily driven by improved efficiency and gains made in servicing the da Vinci Xi Surgical System.
Service gross profit for the years ended December 31, 2017, 2016, and 2015, included share-based compensation expense of $14.0 million, $12.4 million, and $12.9 million, respectively.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs for sales, marketing and administrative personnel, sales and marketing activities, tradeshow expenses, legal expenses, regulatory fees, and general corporate expenses.
Selling, general and administrative expenses for the year ended December 31, 2017, increased by 15% to $810.9 million, compared with $705.3 million for the year ended December 31, 2016. The increase was primarily due to higher variable compensation costs, higher OUS expenses associated with our expanded Asian and European teams, infrastructure to support our growth, higher headcount, and higher litigation charges. Selling, general and administrative expenses also included pre-tax litigation charges of $17.5 million and $12.1 million for the year ended December 31, 2017, and 2016, respectively.
Selling, general and administrative expenses for the year ended December 31, 2016, increased by 10% to $705.3 million compared with $640.5 million for the year ended December 31, 2015. The increase was primarily due to higher OUS expenses associated with our expanded Asian and European teams, infrastructure, higher headcount, and higher legal fees. Selling, general and administrative expenses also included pre-tax litigation charges of $12.1 million and $13.2 million for the years ended December 31, 2016, and 2015 respectively.
Share-based compensation expense charged to selling, general and administrative expenses during the years ended December 31, 2017, 2016, and 2015, was $111.8 million, $97.4 million, and $94.7 million, respectively.
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses include costs associated with the design, development, testing, and significant enhancement of our products.
Research and development expenses for the year ended December 31, 2017, increased by 37% to $328.6 million, compared with $239.6 million for the year ended December 31, 2016. The increase was primarily due to higher personnel and other project costs to support a broader set of product development initiatives, including our da Vinci Single Port Surgical System; robotic-assisted catheter-based medical devices; advanced imaging and analytics; advanced instrumentation; future generations of robotics; and expense related to licensed intellectual property.
Research and development expenses for the year ended December 31, 2016, increased by 21% to $239.6 million compared with $197.4 million for the year ended December 31, 2015. The increase was primarily due to higher personnel and other project costs to support a broader set of product development initiatives, including additional da Vinci Xi platform products; da Vinci Single Port Surgical System; our robotic-assisted catheter-based system; advanced imaging and analytics; advanced instrumentation; and next generation robotics.
Share-based compensation expense charged to research and development expense during the years ended December 31, 2017, 2016, and 2015, was $56.0 million, $43.0 million, and $37.7 million, respectively. Amortization expense related to intangible assets for the years ended December 31, 2017, 2016, and 2015, was $7.5 million, $10.4 million, and $11.7 million, respectively.
Research and development expenses fluctuate with project timing. Based upon our broader set of product development initiatives and the stage of the underlying projects, we expect to continue to make substantial investments in research and development and anticipate that research and development expenses will continue to increase in the future.

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