NVIDIA 2010 Annual Report Download - page 70

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 twelve 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.
We expect to spend approximately $110.0 million to $200.0 million for capital expenditures during fiscal year 2011, primarily
for property development, leasehold improvements, software licenses, emulation equipment, computers and engineering
workstations. In addition, we may continue to use cash in connection with the acquisition of new businesses or assets.
For additional factors see “Item 1A. Risk Factors - Risks Related to Our Business, Industry and Partners - Our revenue may fluctuate
while our operating expenses are relatively fixed, which makes our results difficult to predict and could cause our results to fall short
of expectations.”
3dfx Asset Purchase
On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an Asset Purchase Agreement, or
APA, which closed on April 18, 2001, to purchase certain graphics chip assets from 3dfx. Under the terms of the APA, 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 APA 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 one million shares, which due to subsequent
stock splits now totals six 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.
In October 2002, 3dfx filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern
District of California. In March 2003, we were served with a complaint filed by the Trustee appointed by the Bankruptcy Court which
sought, among other things, payments from us as additional purchase price related to our purchase of certain assets of 3dfx. In early
November 2005, NVIDIA and the Official Committee of Unsecured Creditors, or the Creditors’ Committee, agreed to a Plan of
Liquidation of 3dfx, which included a conditional settlement of the Trustee’s claims against us. This conditional settlement was
subject to a confirmation process through a vote of creditors and the review and approval of the Bankruptcy Court. The conditional
settlement called for a payment by NVIDIA of approximately $30.6 million to the 3dfx estate. Under the settlement, $5.6 million
related to various administrative expenses and Trustee fees, and $25.0 million related to the satisfaction of debts and liabilities owed to
the general unsecured creditors of 3dfx. Accordingly, during the three month period ended October 30, 2005, we recorded $5.6 million
as a charge to settlement costs and $25.0 million as additional purchase price for 3dfx. The Trustee advised that he intended to object
to the settlement.
The conditional settlement reached in November 2005 never progressed through the confirmation process and the Trustee’s
case still remains pending appeal. As such, we have not reversed the accrual of $30.6 million ($5.6 million as a charge to settlement
costs and $25.0 million as additional purchase price for 3dfx) that we recorded during the three months ended October 30, 2005,
pending resolution of the appeal of the Trustee’s case.
Please refer to Note 13 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Form 10-K for further
information regarding this litigation.
56
Source: NVIDIA CORP, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠