NVIDIA 2007 Annual Report Download - page 54

Financing activities used cash of $53.6 million, $61.4 million and provided cash of $13.8 million during fiscal years 2007, 2006
and fiscal 2005, respectively. Net cash used by financing activities in fiscal 2007 was primarily due to $275.0 million paid towards our
stock repurchase program, offset by cash proceeds of $221.2 million from common stock issued under employee stock plans. Cash
used in fiscal 2006 resulted primarily from $188.5 million related to our stock repurchase program, offset by $127.5 million of
common stock issued under employee stock plans.
Stock Repurchase Program
On August 9, 2004 we announced that our Board had authorized a stock repurchase program to repurchase shares of our common
stock, subject to certain specifications, up to an aggregate maximum amount of $300 million. Subsequently, on March 6, 2006, we
announced that our Board had approved a $400 million increase to the original stock repurchase program. As a result of this increase,
the amount of common stock the Board has authorized to be repurchased has now been increased to a total of $700 million. The
repurchases will be made from time to time in the open market, in privately negotiated transactions, or in structured stock repurchase
programs, in compliance with the Securities Exchange Act of 1934, or the Exchange Act, Rule 10b−18, subject to market conditions,
applicable legal requirements, and other factors. The program does not obligate NVIDIA to acquire any particular amount of common
stock and the program may be suspended at any time at our discretion.
As part of our share repurchase program, we have entered into and we may continue to enter into structured share repurchase
transactions with financial institutions. These agreements generally require that we make an up−front payment in exchange for the
right to receive a fixed number of shares of our common stock upon execution of the agreement, and a potential incremental number
of shares of our common stock, within a pre−determined range, at the end of the term of the agreement. During fiscal 2007, we
repurchased 10.3 million shares of our common stock for $275.0 million under structured share repurchase transactions, which we
recorded on the trade date of the transaction. Through the end of fiscal 2007, we have repurchased 27.3 million shares under our stock
repurchase program for a total cost of $488.1 million. During the first quarter of fiscal 2008, we entered into a structured share
repurchase transaction to repurchase shares of our common stock for $125.0 million that we expect to settle prior to the end of our first
fiscal quarter.
Operating Capital and Capital Expenditure Requirements
We believe that our existing cash balances and anticipated cash flows from operations will be sufficient to meet our operating,
acquisition and capital requirements for at least the next 12 months. However, there is no assurance that we will not need to raise
additional equity or debt financing within this time frame. Additional financing may not be available on favorable terms or at all and
may be dilutive to our then−current stockholders. We also may require additional capital for other purposes not presently
contemplated. If we are unable to obtain sufficient capital, we could be required to curtail capital equipment purchases or research and
development expenditures, which could harm our business. Factors that could affect our cash used or generated from operations and,
as a result, our need to seek additional borrowings or capital include:
• decreased demand and market acceptance for our products and/or our customers' products;
• inability to successfully develop and produce in volume production our next−generation products;
• competitive pressures resulting in lower than expected average selling prices; and
• new product announcements or product introductions by our competitors.
For additional factors see “Item 1A. Risk Factors − Risks Related to Our Operations − Our operating results are unpredictable and
may fluctuate, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline.”
3dfx Asset Purchase
On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an agreement, which closed on
April 18, 2001, to purchase certain graphics chip assets from 3dfx. Under the terms of the Asset Purchase Agreement, the cash
consideration due at the closing was $70.0 million, less $15.0 million that was loaned to 3dfx pursuant to a Credit Agreement dated
December 15, 2000. The Asset Purchase Agreement also provided, subject to the other provisions thereof, that if 3dfx properly
certified that all its debts and other liabilities had been provided for, then we would have been obligated to pay 3dfx two million shares
of NVIDIA common stock. If 3dfx could not make such a certification, but instead properly certified that its debts and liabilities could
be satisfied for less than $25.0 million, then 3dfx could have elected to receive a cash payment equal to the amount of such debts and
liabilities and a reduced number of shares of our common stock, with such reduction calculated by dividing the cash payment by
$25.00 per share. If 3dfx could not certify that all of its debts and liabilities had been provided for, or could not be satisfied, for less
than $25.0 million, we would not be obligated under the agreement to pay any additional consideration for the assets.
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Source: NVIDIA CORP, 10−K, March 16, 2007