NVIDIA 2008 Annual Report Download - page 56

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Sales, General and Administrative
Fiscal Year 2009 vs. Fiscal Year 2008
Sales, general and administrative expenses were $362.2 million and $341.3 million during fiscal years 2009 and 2008, respectively, an increase of $20.9 million,
or 6%. Outside professional fees increased by $17.5 million primarily due to increased legal fees pertaining to ongoing litigation matters described in Note 12 of
the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10
-
K. Marketing and advertising expenses increased by $22.3 million, primarily
due to increased advertising campaign related activities and trade shows in the current year. Depreciation and amortization expense increased by $15.4 million
primarily due to amortization of intangible assets acquired from our acquisitions of Mental Images and Ageia, and from increased capital expenditures. Stock
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based compensation expense increased by $6.9 million primarily due to the impact of new hire and semi
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annual stock awards granted subsequent to the third
quarter of fiscal year 2008, offset by a reduction in expense related to older stock awards that were almost fully vested and for which the related expense had been
almost fully amortized by the end of the first quarter of fiscal year 2009. Headcount related to personnel in departments related to sales, general and administrative
functions remained relatively flat year
-
over
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year, but labor and related expenses decreased by $13.9 million due to lower expenses during fiscal year 2009 related to
our variable compensation programs when compared to fiscal year 2008.
Fiscal Year 2008 vs. Fiscal Year 2007
Sales, general and administrative expenses were $341.3 million and $293.5 million during fiscal years 2008 and 2007, respectively, an increase of $47.8 million,
or 16%. The increase is primarily due to an increase in salaries and benefits by approximately $31.4 million related to the growth in personnel by approximately 180
additional personnel. Additionally, salaries and benefits expenses also increased due to the increase in our variable compensation expense as a result of our
financial performance for fiscal year 2008. Advertising and promotion expenses increased by $4.2 million primarily due to costs incurred for sponsorships and
increased advertising campaign costs. The increase in personnel during the year and the expansion of our facilities worldwide to support additional
personnel resulted in increases in our facilities expenses, stock
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based compensation expense and depreciation and amortization expenses.
In response to the current economic environment, we have commenced several cost reduction measures which are designed to reduce our operating
expenses and will continue to focus on reducing our operating expenses during fiscal year 2010. Please refer to the discussion in Note 19 to the Notes to the
Consolidated Financial Statements in Part IV, Item 15 of this Form 10
-
K for the potential impact of the tender offer on operating expenses during the first quarter of
fiscal year 2010.
In
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process research and development
In connection with our acquisition of Mental Images in November 2007 and PortalPlayer in January 2007, we wrote
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off $4.0 million and $13.4 million during
fiscal years 2008 and 2007, respectively, of in
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process research and development, or IPR&D, that had not yet reached technological feasibility and had no
alternative future use. In accordance with SFAS No. 2, Accounting for Research and Development Costs, as clarified by FIN 4, Applicability of SFAS No. 2 to
Business Combinations Accounted for by the Purchase Method an interpretation of SFAS No. 2, amounts assigned to IPR&D meeting the above
-
stated criteria
must be charged to expense as part of the allocation of the purchase price.
Restructuring Charges and Other
On September 18, 2008, we announced a workforce reduction to allow for continued investment in strategic growth areas, which was completed in the third
quarter of fiscal year 2009. As a result, we eliminated approximately 360 positions worldwide, or about 6.5% of our global workforce. During fiscal year 2009,
expenses associated with the workforce reduction, which were comprised primarily of severance and benefits payments to these employees, totaled $8.0 million.
We anticipate that the expected decrease in operating expenses from this action will be offset by continued investment in strategic growth areas.
Restructuring and other expenses also included a non
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recurring charge of $18.9 million associated with the termination of a development contract related to
a new campus construction project that has been put on hold.
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