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NVIDIA CORP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "goal," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential" and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading "Risk Factors." Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. All references to "NVIDIA," "we," "us," "our" or the "Company" mean NVIDIA Corporation and its subsidiaries, except where it is made clear that the term means only the parent company. NVIDIA, the NVIDIA logo, GeForce, Grid, Icera, Kepler, Quadro, Shield, Tegra, Tesla, and Titan are trademarks and/or registered trademarks of NVIDIA Corporation in the United States and other countries. Other company and product names may be trademarks of the respective companies with which they are associated. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Item 6. Selected Financial Data" of our Annual Report on Form 10-K for the fiscal year ended January 29, 2012 and "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q, before deciding to purchase, hold or sell shares of our common stock. Overview Our Company NVIDIA is a visual computing company, connecting people through the powerful medium of computer graphics. In a world increasingly filled with visual displays, our graphics technologies let our customers interact with the world of digital ideas, information and entertainment with an efficiency that no other communication medium can provide. Visualization transcends cultural and language boundaries and enhances the quality of life whether the setting is work or pleasure and the task is mission critical or for entertainment. We have long been known to millions around the world for creating the graphics chips used in PCs that bring video games to life. With our invention of the GPU, we introduced the world to the power of programmable shading, which defines modern computer graphics. Today, we reach well beyond PC graphics and games. Our energy-efficient processors are at the heart of products ranging from mobile devices to supercomputers. PC gamers choose our GPUs by name to enjoy immersive fantasy worlds. Our Tegra processors power smartphones, tablets and automobile infotainment systems. Professional designers use our GPUs to create visual effects in movies and design everything from audio headsets to commercial aircraft. And supercomputers take advantage of the massively parallel processing capabilities of our GPUs to accelerate a wide range of important applications, from simulations of viruses at the molecular level, to modern weather forecasting and global oil exploration. NVIDIA's research and development in visual computing has yielded more than 5,000 patents granted or pending worldwide, and including ones covering inventions essential to modern computing. 23 -------------------------------------------------------------------------------- Our businesses are based on two important technologies: the GPU and the Tegra processor. GPUs, each with billions of transistors, are the engine of visual computing and among the world's most complex processors. We have GPU product brands designed for specific users and applications: GeForce for gamers; Quadro for designers; Tesla for researchers; and GRID VGX for cloud-based server graphics modules. We recently announced the NVIDIA GRID visual computing appliance, a fully integrated system with GRID VGX graphics modules that run NVIDIA's proprietary system software. GRID is a first-of-its-kind device, designed to serve graphics-intensive applications from the cloud simultaneously to a large number of concurrent users. The Tegra processor is a system-on-a-chip, or SOC, integrating an entire computer on a single chip. Tegra processors incorporate multi-core GPUs and CPUs together with audio, video and input/output capabilities. They can also be integrated with baseband processors for phone and data communication. Unlike power-inefficient processors built for PCs, our Tegra SOC conserves power while delivering state-of-the-art graphics and multimedia processing. Tegra runs devices like smartphones, tablets and PCs; it can also be embedded into smart devices, such as televisions, monitors, set-top boxes, gaming devices and cars. We recently announced SHIELD, the first Android device designed for gaming. SHIELD features our Tegra 4 processor, contains proprietary NVIDIA-developed software and system technologies and leverages our deep partnerships with game developers all over the world. Headquartered in Santa Clara, California, we were incorporated in California in April 1993 and reincorporated in Delaware in April 1998. Our Internet address is www.nvidia.com. The contents of our website are not a part of this Quarterly Report on Form 10-Q. Recent Developments, Future Objectives and Challenges GPU Business During the first quarter of fiscal year 2014, we launched GRID™ VCA™ - the industry's first visual computing appliance that enables businesses to deploy cloud based, GPU accelerated applications through any Windows, Linux or Mac client on their network. During the first quarter of fiscal year 2014, we shipped GeForce® GTX™ TITAN for gamers which is powered by the same GPU technology that powers the world's fastest supercomputer. During the first quarter of fiscal year 2014, we extended our Kepler technology into the workstation market and shipped four new professional graphics products under our Quadro K Series. Tegra Processor Business During the first quarter of fiscal year 2014, we announced our first fully integrated 4G LTE mobile processor. Stock Repurchase and Cash Dividends In fiscal year 2007, our Board of Directors authorized us, subject to certain specifications, to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2013. In October 2012, the Board extended the program through December 2014. Through April 28, 2013, we have repurchased an aggregate of 107.3 million shares under our stock repurchase program for a total cost of $1.66 billion. As of April 28, 2013, we are authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $1.04 billion. In fiscal year 2014, we plan to return in excess of $1 billion to our shareholders, in the form of share repurchases and quarterly dividend payments. During the first quarter of fiscal year 2014, we made returns to shareholder by repurchasing $100.0 million worth of shares and paying $46.3 million of dividends, at 7.5 cents per share. Additionally, we entered into an accelerated share repurchase agreement on May 14, 2013 to repurchase a total of $750 million of our common stock during fiscal year 2014. Please refer to Note 14 of the Notes to the Condensed Consolidated Financial Statements for further disclosure regarding this repurchase agreement. 24 -------------------------------------------------------------------------------- Financial Information by Business Segment and Geographic Data Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. Our operating segments are equivalent to our reportable segments. During the last several years, we have operated and reported three reporting segments to our CODM: the GPU business, the Professional Solutions business, and the Consumer Products business. However, during the fourth quarter of fiscal year 2013, we began reporting two segments to reflect the way we are now managing our businesses internally which is based on whether the underlying products leverage our GPU or our Tegra Processor technologies. Comparative periods presented reflect this change. Our GPU business leverages our GPU technology across multiple end markets. It now comprises of four primary product lines, including GeForce for desktop and notebook PCs and Macs; Quadro for professional workstations; Tesla for high-performance servers and workstations; and NVIDIA GRID for server graphics solutions. It also includes other related products, licenses and revenue supporting the GPU business, such as memory products. Our Tegra Processor business comprises product lines primarily based on our Tegra SOC and modem processor technologies. This includes Tegra for smartphones and tablets for both Android and Windows RT-based devices; automotive computers, including infotainment and navigation systems; and gaming devices such as SHIELD. It also includes other related products, licenses, and revenue supporting the Tegra Processor business such as Icera baseband processors and RF transceivers, embedded products, and licenses and other revenue associated with game consoles. In addition to the two reporting segments discussed above, the "All Other" category represents unallocated revenue and expenses which primarily includes licensing revenue from our patent cross licensing agreement with Intel Corporation. Revenue related to this agreement is recognized ratably over the term of our agreement and is not actively managed. This category also includes corporate operating expenses that we do not allocate to our other reporting segments as such expenses are not directly related to the function or operations of our reporting segments. These expenses include certain corporate infrastructure and support costs that are deemed to be enterprise in nature. Additionally, we do not allocate stock-based compensation, amortization of acquisition-related intangible assets, other acquisition-related costs, net warranty charge related to a weak die/packaging material set, and non-recurring charges and benefits. The table below presents details of our reportable segments and the "All Other" category. Our CODM does not review any information regarding total assets on a reporting segment basis. Reporting segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for NVIDIA as a whole. Please refer to Note 13 of the Notes to the Condensed Consolidated Financial Statements for further disclosure regarding segment information. Results of Operations The following table sets forth, for the periods indicated, certain items in our condensed consolidated statements of operations expressed as a percentage of revenue. Three Months Ended April 28, April 29, 2013 2012 Revenue 100.0 % 100.0 % Cost of revenue 45.7 49.9 Gross profit 54.3 50.1 Operating expenses Research and development 34.3 30.7Sales, general and administrative 11.4 11.5 Total operating expenses 45.7 42.2 Operating income 8.7 7.9 Interest and other income, net 0.6 0.5 Income before income tax 9.3 8.4 Income tax expense 1.1 1.8 Net income 8.2 % 6.6 % 25-------------------------------------------------------------------------------- Three months ended April 28, 2013 and April 29, 2012 Revenue Revenue was $954.7 million for our first quarter of fiscal year 2014, compared to $924.9 million for our first quarter of fiscal year 2013, which represents an increase of approximately 3.2%. A discussion of our revenue results for each of our operating segments is as follows: GPU Business. GPU business revenue increased by approximately 8.2% to $785.6 million in the first quarter of fiscal year 2014, compared to $726.4 million for the first quarter of fiscal year 2013. GPU revenues increased due to a richer product mix driven by sales of our GeForce high-end desktop Kepler products, offset by a decrease in mainstream desktop sales. GeForce notebook revenues increased as a result of strong design wins based on Intel's Ivy Bridge platform. Tesla compute revenue grew as we ramped sales of our Kepler-based products and continued to gain traction in new market opportunities. Tegra Processor Business. Tegra Processor business revenue decreased by approximately 22.2% to $103.1 million in the first quarter of fiscal year 2014, compared to $132.5 million for the first quarter of fiscal year 2013. This decrease was primarily due to lower sales of our Tegra 2 and Tegra 3 processors as customers began to wind down production of smartphones and tablets based on these processors. The decrease also reflects lower revenue from the sale of embedded products and lower license and royalty revenue associated with game consoles. All Other. We recognized $66.0 million in revenue from the patent cross licensing arrangement we entered into with Intel during the first three months of fiscal years 2014 and 2013. Concentration of Revenue Revenue from sales to customers outside of the United States and Other Americas accounted for 74% and 76% of total revenue for the first quarter of fiscal years 2014 and 2013, respectively. Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if the revenue is attributable to end customers in a different location. Revenue from significant customers, those representing 10% or more of total revenue, was approximately 21% of our total revenue from the same two customers for the three months ended April 28, 2013 and April 29, 2012, respectively. Gross Profit and Gross Margin Gross profit consists of total revenue, net of allowances, less cost of revenue. Cost of revenue consists primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory and warranty provisions and shipping costs. Cost of revenue also includes development costs for license, service arrangements and stock-based compensation related to personnel associated with manufacturing. Gross margin is the percentage of gross profit to revenue. Our gross margin can vary in any period depending on the mix of types of products sold. Our gross margin is significantly impacted by the mix of products we sell. Product mix is often difficult to estimate with accuracy. Therefore, if we experience product transition challenges, if we achieve significant revenue growth in our lower margin product lines, or if we are unable to earn as much revenue as we expect from higher margin product lines, our gross margin may be negatively impacted. Our overall gross margin was 54.3% and 50.1% for the first quarters of fiscal years 2014 and 2013, respectively. We expect our gross margin for the second quarter of fiscal year 2014 to be relatively consistent with the first quarter of fiscal year 2014. A discussion of our gross margin results for each of our operating segments is as follows: GPU Business. The gross margin of our GPU business increased in the first quarter of fiscal year 2014 from the first quarter of fiscal year 2013. GPU margins increased primarily due to an increase in unit volume of our high-end Kepler-based GeForce desktop products which contributed to a richer overall mix of product sales. Additionally, the volume increase of Kepler-based Quadro workstation and Tesla compute products also contributed to a richer mix to GPU sales. 26 -------------------------------------------------------------------------------- Tegra Processor Business. The gross margin of our Tegra Processor business decreased in the first quarter of fiscal year 2014 when compared with the first quarter of fiscal year 2013, primarily due to decreases in license and royalty revenue associated with game consoles when compared to the same periods in the prior year. Operating Expenses Three Months Ended April 28, April 29, $ % 2013 2012 Change Change (In millions)Research and development expenses $ 327.2 $ 283.9 $ 43.3 15.3 % Sales, general and administrative expenses 108.6 106.6 2.0 1.9 % Total operating expenses $ 435.8 $ 390.5 $ 45.3 11.6 % Research and development as a percentage of net revenue 34.3 % 30.7 % Sales, general and administrative as a percentage of net revenue 11.4 % 11.5 % Research and Development Research and development expenses were $327.2 million and $283.9 million during the first quarter of fiscal years 2014 and 2013, respectively, an increase of $43.3 million, or 15.3%. This increase was primarily due to an increase in compensation and benefits of $25.5 million, or 17%, as we continue to hire engineering talent to invest in our business. The increase in compensation, benefits, and other employee-related costs also reflects annual salary increases and a 401(k) match program that we initiated in January 2013. In addition, development expenses increased by $5.2 million, or 32%, primarily related to activities to bring up our next generation Tegra, SHIELD and GRID products. Also contributing to the increase were facility and equipment infrastructure spend to support planned hiring for our strategic growth businesses, including an $8.0 million increase in facilities expense and a $2.9 million increase in depreciation and amortization expense. Sales, General and Administrative Sales, general and administrative expenses were $108.6 million and $106.6 million during the first quarter of fiscal years 2014 and 2013, respectively, an increase of $2.0 million, or 1.9%. This was primarily attributable to increase in compensation and benefits expense as we continue to invest in our business. We expect operating expenses to increase in the second quarter of fiscal year 2014. Interest Income Interest income consists of interest earned on cash, cash equivalents and marketable securities. Interest income was $5.1 million and $5.2 million for the first quarter of fiscal years 2014 and 2013, respectively, a decrease of $0.1 million. Other Income (Expense), net Other income (expense) primarily consists of realized gains and losses on the sale of marketable securities and foreign currency translation. Other income (expense) was $0.2 million in the first quarter of fiscal year 2014 compared to expense of $(0.9) million in the first quarter of fiscal year 2013, an increase in income of $1.1 million. This change was primarily driven by an increase in foreign currency translation gains in the first quarter of fiscal year 2014, when compared to first quarter of fiscal year 2013. Income Taxes We recognized income tax expense of $10.2 million and $16.7 million for the three months ended April 28, 2013 and April 29, 2012, respectively. Income tax expense as a percentage of income before taxes, or our effective tax rate, was 11.6% and 21.6% for the three months ended April 28, 2013 and April 29, 2012, respectively. 27 -------------------------------------------------------------------------------- The decrease in our effective tax rate in fiscal year 2014 as compared to the same period in the prior fiscal year was primarily related to the benefit of the U.S. federal research tax credit which was re-enacted on January 2, 2013 under the American Taxpayer Relief Act, and favorable discrete events that occurred in the first three months of fiscal year 2014 primarily attributable to the expiration of statute of limitation in certain non-U.S. jurisdictions. Our effective tax rate on income before tax for the first three months of fiscal year 2014 of 11.6% and fiscal year 2013 of 21.6% were lower than the United States federal statutory rate of 35% due primarily to income earned in jurisdictions where the tax rate is lower than the United States federal statutory tax, and for fiscal year 2014 due to the benefit of the U.S. federal research tax credit. We expect our effective tax rate to be approximately 16% in the second quarter of fiscal year 2014, excluding any discrete tax events that may occur, which, if realized, may increase or decrease our effective tax rate in such quarter. Please refer to Note 4 of the Notes to Condensed Consolidated Financial Statements for further information regarding the components of our income tax expense. Liquidity and Capital Resources As of April 28, As of January 2013 27, 2013 (In millions) Cash and cash equivalents $ 561.4 $ 732.8 Marketable securities 3,151.9 2,995.1Cash, cash equivalents, and marketable securities $ 3,713.3 $ 3,727.9 Three Months Ended April 28, April 29, 2013 2012 (In millions)Net cash provided by (used in) operating activities $ 175.7 $ (9.2 ) Net cash used in investing activities $ (230.8 ) $ (335.1 ) Net cash provided by (used in) financing activities $ (116.2 ) $ 45.5 As of April 28, 2013, we had $3.71 billion in cash, cash equivalents and marketable securities, a decrease of $14.5 million from $3.73 billion as of January 27, 2013. Our portfolio of cash equivalents and marketable securities is managed on our behalf by several financial institutions that are required to follow our investment policy, which requires the purchase of top-tier investment grade securities and the diversification of asset type and includes certain limits on our portfolio duration. Operating activities Operating activities provided cash of $175.7 million and used cash of $9.2 million during the first quarters of fiscal years 2014 and 2013, respectively. The increase in cash provided by operating activities in the first quarter of fiscal year 2014 was primarily due to an increase in our net income and a decrease in our accounts receivable driven by more linear shipments throughout the quarter as well as strong collections. This was offset by changes in operating liabilities in the first quarter of fiscal year 2014 when compared to the first quarter of fiscal year 2013 primarily due to the timing of payments to vendors. Investing activities Investing activities consisted primarily of purchases and sales of marketable securities and purchases of property and equipment, which include leasehold improvements for our facilities, purchases of test equipment and computer hardware, as well as intangible assets. Investing activities used cash of $230.8 million and $335.1 million during the first quarters of fiscal years 2014 and 2013, respectively. The decrease in cash used for investing activities was primarily due to a reduction in net purchases, sales and maturities of our available for sale investments, offset by cash used to acquire licenses to technology and patents during the first quarter of fiscal year 2014. 28 -------------------------------------------------------------------------------- Financing activities Financing activities used cash of $116.2 million and provided cash of $45.5 million during the first quarters of fiscal years 2014 and 2013, respectively. The shift to net cash used by financing activities from cash provided by financing activities was primarily due to our repurchase in the first quarter of fiscal year 2014 of $100.0 million of common stock and cash dividend payments of $46.3 million as we increase the utilization of our cash for stockholder return initiatives. These uses of cash were offset by cash proceeds from common stock issued under our employee stock plans and a non-cash tax benefit related to employee stock-based compensation. Liquidity Our primary source of liquidity is cash generated by our operations. Our investment portfolio consists of cash and cash equivalents, 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. These investments are denominated in United States dollars. As of April 28, 2013, we did not have any investments in auction-rate preferred securities. All of our cash equivalents and marketable securities are treated as "available-for-sale". Investments in both fixed and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate debt 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 market value due to changes in interest rates. However, because any debt securities we hold are classified as "available-for-sale," no gains or losses are realized in our statement of operations due to changes in interest rates unless such securities are sold prior to maturity or unless declines in market values are determined to be other-than-temporary. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income, a component of stockholders' equity, net of tax. As of April 28, 2013 and January 27, 2013, we had $3.71 billion and $3.73 billion, respectively, in cash, cash equivalents and marketable securities. Our investment policy requires the purchase of top-tier investment grade securities and the diversification of asset types and includes certain limits on our portfolio duration, as specified in our investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. As of April 28, 2013, we were in compliance with our investment policy. As of April 28, 2013, our investments in government agencies and government sponsored enterprises represented approximately 21% of our total investment portfolio, while the financial sector accounted for approximately 60% of our total investment portfolio. All of our investments are with A/A2 or better rated securities. We performed an impairment review of our investment portfolio as of April 28, 2013. Based on our quarterly impairment review, we concluded that our investments were appropriately valued and did not record any impairment during the first quarter of fiscal year 2014. Net realized gains for the first quarter of fiscal years 2014 and 2013 were both $0.1 million. As of April 28, 2013, we had a net unrealized gain of $11.4 million, which was comprised of gross unrealized gains of $12.3 million, offset by gross unrealized losses of $0.9 million. As of January 27, 2013, we had a net unrealized gain of $10.9 million, which was comprised of gross unrealized gains of $11.7 million, offset by $0.8 million of gross unrealized losses. Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers' businesses, and to downturns in the industry and the worldwide economy. Two customers accounted for approximately 38% of our accounts receivable balance at April 28, 2013. While we strive to limit our exposure to uncollectible accounts receivable using a combination of credit insurance and letters of credit, difficulties in collecting accounts receivable could materially and adversely affect our financial condition and results of operations. These difficulties are heightened during periods when economic conditions worsen. We continue to work directly with more foreign customers and it may be difficult to collect accounts receivable from them. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. If the financial condition of our customers were to deteriorate, resulting in an impairment in their ability to make payments, additional allowances may be required, we may be required to defer revenue recognition on sales to affected customers, and we may be required to pay higher credit insurance premiums, any of which could adversely affect our operating results. In the future, we may have to record additional reserves or write-offs and/or defer revenue on certain sales transactions which could negatively impact our financial results. 29 -------------------------------------------------------------------------------- Stock Repurchase Program In fiscal year 2007, our Board of Directors authorized us, subject to certain specifications, to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2013. In October 2012, the Board extended the program through December 2014. The repurchases will be made from time to time in the open market, in privately negotiated transactions, or in structured stock repurchase programs, and may be made in one or more larger repurchases, in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, 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. Through April 28, 2013, we have repurchased an aggregate of 107.3 million shares under our stock repurchase program for a total cost of $1.66 billion. As of April 28, 2013, we are authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $1.04 billion through December 2014. On May 14, 2013, we entered into an accelerated share repurchase agreement to repurchase a total of $750 million of our common stock in fiscal year 2014. Please refer to Note 14 of the Notes to the Condensed Consolidated Financial Statements for further disclosure regarding this repurchase agreement. Cash Dividend Program On November 8, 2012, we announced the initiation of a quarterly cash dividend program. The initial quarterly dividend of 7.5 cents per share is equivalent to 30 cents per share on an annual basis. A subsequent cash dividend of 7.5 cents per share was declared on February 13, 2013 and paid on March 21, 2013 to all common stockholders of record on February 28, 2013. In the first quarter of fiscal year 2014, we paid $46.3 million in dividends to our common stockholders. We declared on May 9, 2013 that we will pay our next quarterly cash dividend of 7.5 cents per share on June 14, 2013 to all stockholders of record on May 23, 2013. Our cash dividend program and the payment of future cash dividends under that program are subject to continued capital availability and our Board's continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our stockholders and are in compliance with all laws and agreements of NVIDIA applicable to the declaration and payment of cash dividends. 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, stock repurchase, cash dividend 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 $195.0 million to $225.0 million for capital expenditures during the remainder of fiscal year 2014, primarily for property development, leasehold improvements, software licenses, emulation equipment, computers and engineering workstations. In fiscal year 2014, we expect to break ground on a new building for our headquarters campus in Santa Clara to provide for our near-term growth needs. This 500,000 square foot building will provide 2,500 seats and be built on land we purchased five years ago. We estimate capital funding of $20.0 million for the campus development project in fiscal year 2014. In addition, we may continue to use cash in connection with the acquisition of new businesses or assets. 30 -------------------------------------------------------------------------------- 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." Contractual Obligations As of April 28, 2013, we had outstanding inventory purchase obligations totaling approximately $538 million. There were no other material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 27, 2013. Please see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in our Annual Report on Form 10-K for a description of our contractual obligations. Off-Balance Sheet Arrangements As of April 28, 2013, we had no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii). Adoption of New and Recently Issued Accounting Pronouncements Please see Note 1 of the Notes to Condensed Consolidated Financial Statements for a discussion of adoption of new and recently issued accounting pronouncements. |