SEC Filings

10-K
INTUITIVE SURGICAL INC filed this Form 10-K on 02/02/2018
Entire Document
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Liquidity and Capital Resources
Sources and Uses of Cash
Our principal source of liquidity is cash provided by operations and issuance of common stock through exercise of stock options and our employee stock purchase program. Cash and cash equivalents plus short- and long-term investments decreased by $1.0 billion to $3.8 billion as of December 31, 2017, from $4.8 billion as of December 31, 2016, primarily as a result of the $2.3 billion accelerated share buyback program executed and settled during 2017, partly offset by cash provided by our operations and employee stock option exercises. Cash and cash equivalents plus short- and long-term investments increased from $3.3 billion as of December 31, 2015, to $4.8 billion as of December 31, 2016, primarily as a result of cash provided by our operations and employee stock option exercises. Cash generation is one of our fundamental strengths and provides us with substantial financial flexibility in meeting our operating, investing, and financing needs.
As of December 31, 2017, $1,543.4 million of our cash, cash equivalents, and investments were held by foreign subsidiaries. Previously, amounts held by foreign subsidiaries were generally subject to U.S. income tax upon repatriation to the U.S. However, the 2017 Tax Act enacted in December 2017, requires us to pay a one-time deemed repatriation toll charge on cumulative undistributed foreign earnings for which we have not previously provided U.S. taxes. We estimated that our obligation associated with this one-time deemed repatriation toll charge to be $270.2 million, which will be paid in installments over eight years. As a result of the 2017 Tax Act, we can repatriate our cumulative undistributed foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences other than the one-time deemed repatriation toll charge and do not expect other material non-U.S. tax consequences. We will continue to evaluate whether to repatriate all or a portion of the cumulative undistributed foreign earnings based on expansion needs and as circumstances change. We are still evaluating whether to change our indefinite reinvestment assertion in light of the 2017 Tax Act and consider that conclusion to be incomplete under guidance issued by the SEC. If we subsequently change our assertion during the measurement period, we will account for the change in assertion as part of the 2017 Tax Act enactment. We believe the cash flows provided by our operations will meet our liquidity needs for the foreseeable future.
See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for discussion on the impact of interest rate risk and market risk on our investment portfolio.
Consolidated Cash Flow Data
 
Years Ended December 31,
 
2017
 
2016
 
2015
(in millions)
 
 
 
 
 
Net cash provided by (used in)
 
 
 
 
 
Operating activities
$
1,143.9

 
$
1,087.0

 
$
806.2

Investing activities
378.7

 
(1,279.4
)
 
(849.5
)
Financing activities
(1,913.1
)
 
514.4

 
159.1

Effect of exchange rates on cash and cash equivalents
2.1

 

 
(1.5
)
Net increase (decrease) in cash and cash equivalents
$
(388.4
)
 
$
322.0

 
$
114.3

Operating Activities
For the year ended December 31, 2017, cash provided by our operating activities of $1,143.9 million exceeded our net income of $660.0 million due to non-cash charges and changes in operating assets and liabilities as outlined below:
1.
Our net income included non-cash charges, including share-based compensation of $209.1 million, depreciation and loss of disposal of property, plant, and equipment of $86.2 million, deferred income taxes of $62.9 million, investment related non-cash charges of $21.2 million, and amortization of intangible assets of $12.9 million.
2.
Changes in operating assets and liabilities resulted in $91.6 million of cash provided by operating activities during the year ended December 31, 2017. Operating assets and liabilities are primarily comprised of accounts receivable, inventory, prepaid expenses and other assets, deferred revenue, and other accrued liabilities. Other accrued liabilities increased by $219.3 million, primarily due to an increase in income tax payable as a result of the 2017 Tax Act. Deferred revenue, which includes deferred service revenue that is being recognized as revenue over the service contract period, increased by $52.8 million primarily due to the higher number of installed systems for which service contracts existed. Accrued compensation and employee benefits increased by $31.2 million. Accounts payable increased by $14.0 million. The favorable impact of these items on cash provided by operating activities was partly offset by an increase of $115.5 million in inventory, including the transfer of equipment from inventory to property, plant, and equipment; an increase of $81.7 million in accounts receivable; and an increase of $28.5 million in prepaids and other assets. The increase in accounts receivable was primarily driven by higher revenue and timing of collections. The increase in prepaids and other assets

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