NVIDIA 2009 Annual Report Download - page 27

In addition, the consideration for any future acquisition could be paid in cash, shares of our common stock, the issuance of
convertible debt securities or a combination of cash, convertible debt and common stock. If we make an investment in cash or use cash
to pay for all or a portion of an acquisition, our cash reserves would be reduced which could negatively impact the growth of our
business or our ability to develop new products. However, if we pay the consideration with shares of common stock, or convertible
debentures, the holdings of our existing stockholders would be diluted. The significant decline in the trading price of our common
stock would make the dilution to our stockholders more extreme and could negatively impact our ability to pay the consideration with
shares of common stock or convertible debentures. We cannot forecast the number, timing or size of future strategic investments or
acquisitions, or the effect that any such investments or acquisitions might have on our operations or financial results.
We are exposed to credit risk, fluctuations in the market values of our portfolio investments and in interest rates.
We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities. All of the cash equivalents and marketable securities are
treated as “available-for-sale” under SFAS No. 115. Investments in both fixed rate and floating rate interest earning instruments carry
a degree of interest rate risk. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates, while
floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment
income may fall short of expectations due to changes in interest rates or if the decline in fair value of our publicly traded debt or
equity investments is judged to be other-than-temporary. We may suffer losses in principal if we are forced to sell securities that
decline in securities market value due to changes in interest rates. Future declines in the market values of our cash, cash equivalents
and marketable securities could have a material adverse effect on our financial condition and operating results. However, because any
debt securities we hold are classified as “available-for-sale,” no gains or losses are realized in our Consolidated Statements of
Operations due to changes in interest rates unless such securities are sold prior to maturity or unless declines in value are determined
to be other-than-temporary.
At January 25, 2009 and January 27, 2008, we had $1.26 billion and $1.81 billion, respectively, in cash, cash equivalents and
marketable securities. Given the global nature of our business, we have invested both domestically and internationally. All of our
investments are denominated in United States dollars. We invest in a variety of financial instruments, consisting principally of cash
and cash equivalents, asset-backed securities, commercial paper, mortgage-backed securities issued by Government-sponsored
enterprises, equity securities, money market funds and debt securities of corporations, municipalities and the United
States government and its agencies. As of January 25, 2009, we did not have any investments in auction-rate preferred securities. As
of January 25, 2009, our investments in government agencies and government sponsored enterprises represented approximately 71%
of our total investment portfolio, while the financial sector accounted for approximately 17% of our total investment portfolio.
The current volatility in the financial markets and overall economic uncertainty increases the risk that the actual amounts realized in
the future on our financial instruments could differ significantly from the fair values currently assigned to them. Other income and
expense could also vary materially from expectations depending on gains or losses realized on the sale or exchange of financial
instruments; impairment charges related to debt securities as well as equity and other investments; interest rates; and cash, cash
equivalent and marketable securities balances. For instance, we recorded other than temporary impairment charges of $9.9 million
during fiscal year 2009. These charges include $5.6 million related to what we believe is an other than temporary impairment of our
investment in the money market funds held by the Reserve International Liquidity Fund, Ltd., or International Reserve Fund; $2.5
million related to a decline in the value of publicly traded equity securities and $1.8 million related to debt securities held by us that
were issued by companies that have filed for bankruptcy as of January 25, 2009. Please refer to Note 17 of these Notes to the
Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for further details. Subsequent to year-end, on January 30,
2009, we received $84.4 million from the International Reserve Fund. This was our portion of a payout of approximately 65% of the
total assets of the Fund. Each shareholder’s percentage of this distribution was determined by dividing the shareholder’s total
unfunded redeemed shares by the aggregate unfunded redeemed shares of the Fund, which was then used to calculate the
shareholder’s pro rata portion of this distribution. We expect to receive the proceeds of our remaining investment in the International
Reserve Fund, excluding the $5.6 million that we have recorded as an other than temporary impairment, by no later than October
2009, when all of the underlying securities held by the International Reserve Fund are scheduled to have matured. However,
redemptions from the International Reserve Fund are currently subject to pending litigation, which could cause further delay in receipt
of our funds. In addition, we may determine that further impairment of our investment in the International Reserve Fund may be
necessary.
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Source: NVIDIA CORP, 10-K, March 13, 2009 Powered by Morningstar® Document Research℠