Nvidia Stock Errors Placed at $127M

By Suzanne Deffree -- Electronic News, 11/29/2006

Nvidia Corp. is back in stock option hot water.

The company today filed an amended Form 10-K for its fiscal year 2006 ended Jan. 29, 2006, an amended Form 10-Q for Q1 fiscal 2007 ended April 30, 2006, and a Form 10-Q for Q2 fiscal 2007 ended July 30, 2006, with the Securities and Exchange Commission (SEC), stating that a review of its historical option grant practices by its audit committee found “use of incorrect measurement dates for certain option grants.”

The errors for the period from fiscal 2000 through 2006 resulted in an aggregate non-cash charge of approximately $127 million for stock-based compensation and associated payroll tax expense, net of related income tax effects, Nvidia said, adding that the restatement did not have a material impact on its operating results for any period in the current fiscal year 2007.

“In accordance with APB 25, with respect to periods through January 29, 2006, we should have recorded stock-based compensation expense to the extent that the fair market value of our common stock on the correct measurement date exceeded the exercise price of each option granted. For periods commencing January 30, 2006 (the beginning of our fiscal year 2007), we record stock-based compensation expense in accordance with Statement of Financial Accounting Standards No. 123(R) (revised), or SFAS No. 123(R), Share-Based Payment. Changes in measurement dates have also contributed to incremental fair value of options under SFAS No. 123. As of the end of our fiscal year 2006, the unamortized incremental fair value charges resulting from the Audit Committee’s review were approximately $13.0 million, of which approximately $9.0 million are expected to be amortized in our fiscal year 2007,” Nvidia said in its SEC filing.

Nvidia fist announced stock option backdating in August and is far from alone in having to restate earnings as the industry-wide stock options saga continues to play out. Broadcom, Brooks Automation and Rambus are among the other companies forced to restate earnings due to option granting questions.

Nvidia pointed out that it voluntarily contacted the SEC regarding this review and has cooperated and expects to continue to cooperate with the SEC in connection with its continuing inquiry regarding the matter.