NVIDIA CORP - Annual Report: 2020 (Form 10-K)

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•	suppliers and licensors designing discrete and integrated GPUs and other accelerated computing solutions, including chipsets that incorporate 3D graphics, or HPC, such as Advanced Micro Devices, or AMD, Intel Corporation, or Intel, and Xilinx, Inc.;

•	large internet services companies with internal teams designing chips that incorporates HPC or accelerated computing functionality as part of their internal solutions or platforms, such as Alphabet Inc.; and

•	suppliers of SoC products that are embedded into automobiles, autonomous machines, and gaming devices, such as Ambarella, Inc., AMD, Broadcom Inc., Intel, Qualcomm Incorporated, Renesas Electronics Corporation, Samsung, and Xilinx, Inc. or companies with internal teams designing SoC products for internal use, such as Tesla Motors.

•	the location in which our products are manufactured;

•	our strategic technology or product directions in different countries;

•	the degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions; and

•	the commercial significance of our operations and our competitors' operations in particular countries and regions.

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•	a lack of guaranteed supply of wafers and other components and potential higher wafer and component prices due to supply constraints;

•	a failure by our foundries to procure raw materials or to provide or allocate adequate or any manufacturing or test capacity for our products;

•	a failure to develop, obtain or successfully implement high quality, leading-edge process technologies, including transitions to smaller geometry process technologies such as advanced process node technologies and memory designs needed to manufacture our products profitably or on a timely basis;

•	a limited number of suppliers, including foundries, assembly and test providers, and memory manufacturers;

•	loss of a supplier and additional expense and/or production delays as a result of qualifying a new foundry or subcontractor and commencing volume production or testing in the event of a loss of or a decision to add or change a supplier;

•	a lack of direct control over delivery schedules or product quantity and quality; and

•	delays in product shipments, shortages, a decrease in product quality and/or higher expenses in the event our subcontractors or foundries prioritize our competitors’ orders over our orders or otherwise.

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•	changes in business and economic conditions, including downturns in our target markets and/or overall economy;

•	changes in consumer confidence caused by changes in market conditions, including changes in the credit market;

•	a sudden and significant decrease in demand for our products;

•	a higher incidence of inventory obsolescence because of rapidly changing technology or customer requirements;

•	our introduction of new products resulting in lower demand for older products;

•	less demand than expected for newly-introduced products; or

•	increased competition, including competitive pricing actions.

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•	most of our sales are made on a purchase order basis, which permits our customers to cancel, change or delay product purchase commitments with little or no notice to us and without penalty;

•	our partners may develop their own solutions;

•	our customers may purchase products from our competitors; or

•	our partners may discontinue sales or lose market share in the markets for which they purchase our products.

•	international economic and political conditions, including as a result of the United Kingdom's vote to withdraw from the European Union, and other political tensions between countries in which we do business;

•	unexpected changes in, or impositions of, legislative or regulatory requirements, including changes in tax laws;

•	differing legal standards with respect to protection of intellectual property and employment practices;

•	local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the Foreign Corrupt Practices Act and other anticorruption laws and regulations;

•	exporting or importing issues related to export or import restrictions, including deemed export restrictions, tariffs, quotas and other trade barriers and restrictions;

•	disruptions of capital and trading markets and currency fluctuations; and

•	increased costs due to imposition of climate change regulations, such as carbon taxes, fuel or energy taxes, and pollution limits.

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•	difficulty in combining the technology, products, operations or workforce of the acquired business with our business;

•	diversion of capital and other resources, including management’s attention;

•	assumption of liabilities and incurring amortization expenses, impairment charges to goodwill or write-downs of acquired assets;

•	integrating financial forecasting and controls, procedures and reporting cycles;

•	coordinating and integrating operations in countries in which we have not previously operated;

•	difficulty in realizing a satisfactory return, if at all;

•	difficulty in obtaining regulatory, other approvals or financing;

•	failure and costs associated with the failure to consummate a proposed acquisition or other strategic investment;

•	legal proceedings initiated as a result of an acquisition or investment;

•	uncertainties and time needed to realize the benefits of an acquisition or strategic investment, if at all;

•	negative changes in general economic conditions in the regions or the industries in which we or our target operate;

•	the need to later divest acquired assets if an acquisition does not meet our expectations;

•	potential failure of our due diligence processes to identify significant issues with the acquired assets or company; and

•	impairment of relationships with, or loss of our or our target’s, employees, vendors and customers, as a result of our acquisition or investment.

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•	our ability to achieve volume production of our next-generation products;

•	our inability to adjust spending to offset revenue shortfalls due to the multi-year development cycle for some of our products and services;

•	fluctuations in the demand for our products related to cryptocurrencies;

•	changes in the timing of product orders due to unexpected delays in the introduction of our partners’ products;

•	our ability to cover the manufacturing and design costs of our products through competitive pricing;

•	our ability to comply and continue to comply with our customers’ contractual obligations;

•	product rates of return in excess of that forecasted or expected due to quality issues;

•	our ability to secure appropriate safety certifications and meet industry safety standards;

•	supply constraints for and changes in the cost of the other components incorporated into our products

•	inventory write-downs;

•	our ability to continue generating revenue from our partner network, including by generating sales within our partner network and ensuring our products are incorporated into our partners product ecosystems, and our partner network’s ability to sell products that incorporate our GPUs and Tegra processors;

•	the inability of certain of our customers to make required payments to us, and our ability to obtain credit insurance over the purchasing credit extended to these customers;

•	customer bad debt write-offs;

•	any unanticipated costs associated with environmental liabilities;

•	unexpected costs related to our ownership of real property;

•	changes in financial accounting standards or interpretations of existing standards; and

•	general macroeconomic or industry events and factors affecting the overall market and our target markets.

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•	the ability of our Board of Directors to create and issue preferred stock without prior shareholder approval;

•	the prohibition of shareholder action by written consent;

•	advance notice requirements for director nominations and shareholder proposals;

•	the ability of our Board of Directors to increase or decrease the number of directors without shareholder approval;

•	a super-majority voting requirement to amend some provisions in our certificate of incorporation and bylaws;

•	the inability of our shareholders to call special meetings of shareholders; and

•	the ability of our Board of Directors to make, amend or repeal our bylaws.

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(A)	In fiscal year 2016, we began the wind down of our Icera modem operations. As a result, our income from operations for fiscal year 2016 included $131 million of restructuring and other charges.

(B)	In fiscal year 2014, we issued Convertible Notes in the aggregate principal amount of $1.50 billion. The Convertible Notes first became convertible as of February 1, 2016 and matured on December 1, 2018.

(C)	In fiscal year 2017, we issued $1.00 billion of the Notes Due 2021, and $1.00 billion of the Notes Due 2026. Interest on the Notes is payable on March 16 and September 16 of each year, beginning on March 16, 2017. Refer to Note 12 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.

(D)	In fiscal year 2020, we adopted the accounting standards update regarding the accounting for leases under which lease assets and liabilities are recognized on the balance sheet. Refer to Note 3 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.

(E)

In May 2015, we increased the quarterly cash dividend from $0.085 per share, or $0.34 per share on an annual basis, to $0.0975 per share, or $0.39 per share on an annual basis. In November 2015, we increased the quarterly cash dividend to $0.115 per share, or $0.46 per share on an annual basis. In November 2016, we increased the quarterly cash dividend to $0.14 per share, or $0.56 per share on an annual basis. In November 2017, we increased the quarterly cash dividend to $0.15 per share, or $0.60 per share on an annual basis. In November 2018, we increased the quarterly cash dividend to $0.16 per share, or $0.64 per share on an annual basis.

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(1)	Represents the aggregate principal amount of $2.00 billion and anticipated interest payments of $248 million for the Notes. Refer to Note 12 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K.

(2)

Represents our remaining tax payable of the one-time transition tax that resulted from enactment of the TCJA in fiscal year 2018. As of January 26, 2020, we have paid the first two installments totaling $67 million. The remaining will be payable in six annual installments. The next installment of $33 million is classified as a current income tax payable. The installment amounts are equal to 8% of the total liability, payable in fiscal years 2019 through 2023, 15% in fiscal year 2024, 20% in fiscal year 2025 and 25% in fiscal year 2026. Refer to Note 14 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K.

(3)	For further information, refer to Note 3 of the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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(1)	Includes the number of PSUs that will be issued and eligible to vest based on the corporate financial performance level achieved for fiscal year 2020.

(2)	Includes the number of market-based PSUs granted that will be issued and eligible to vest if the maximum goal for total shareholder return, or TSR, over the 3-year measurement period is achieved. Depending on the ranking of our TSR compared to those companies comprising the Standard & Poor’s 500 Index during that period, the market-based PSUs issued could be up to 60 thousand shares.

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(1)	Calculated as net income divided by basic weighted average shares.

(2)	Calculated as net income divided by diluted weighted average shares.

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(1)	These liabilities are carried on our Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount and issuance costs, and are not marked to fair value each period. Refer to Note 12 of these Notes to the Consolidated Financial Statements for additional information.

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(A)	Land is a non-depreciable asset.

(B)	Leasehold improvements and capital leases are amortized based on the lesser of either the asset’s estimated useful life or the expected lease term.

(C)	Construction in process represents assets that are not available for their intended use as of the balance sheet date.

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(1)	Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements and PCS.

(1)	As of January 26, 2020, income tax payable represents the long-term portion of the one-time transition tax payable of $317 million, as well as unrecognized tax benefits of $180 million and related interest and penalties of $31 million.

(2)	Deferred revenue primarily includes deferrals related to PCS.

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(1)	In the third and fourth quarters of fiscal year 2019, we recorded U.S. tax reform benefits of $138 million and $230 million, respectively, associated with the completion of our accounting for the enactment-date income tax effects of the TCJA.

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(1)	Additions represent allowance for doubtful accounts charged to expense and deductions represent amounts recorded as reduction to expense upon reassessment of allowance for doubtful accounts at period end.

(2)	Represents allowance for sales returns estimated at the time revenue is recognized primarily based on historical return rates and is charged as a reduction to revenue.

(3)

Represents change in valuation allowance primarily related to state and certain foreign deferred tax assets that management has determined not likely to be realized due, in part, to projections of future taxable income of the respective jurisdictions. Refer to Note 14 of the Notes to the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K for additional information.

(4)	Represents sales returns.

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