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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended January 31, 2001
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14338
AUTODESK, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2819853
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
111 McInnis Parkway, San Rafael, 94903
California (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (415) 507-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting Common Stock held by non-
affiliates of the Registrant, based upon the closing sale price of the Common
Stock on April 2, 2001 as reported on the NASDAQ National Market, was
approximately $1.4 billion. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common
Stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of April 2, 2001, Registrant had outstanding approximately 53.8 million
shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's Annual Meeting of
Stockholders to be held June 21, 2001 are incorporated by reference in Part
III of this Form 10-K. The Proxy Statement will be filed within 120 days of
the Registrant's fiscal year ended January 31, 2001.
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PART I
FORWARD-LOOKING INFORMATION
The forward-looking statements included in this report, which reflect
management's best judgment based on factors currently known, involve risks and
uncertainties. Actual results could differ materially from those anticipated
in the forward-looking statements included herein as a result of a number of
factors, including but not limited to those discussed in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Risk
Factors Which May Impact Future Operating Results."
ITEM 1. BUSINESS
GENERAL
We were incorporated in California in April 1982 and were reincorporated in
Delaware in May 1994. We are one of the world's leading design software and
digital content companies for architectural design and land development,
manufacturing, utilities, telecommunications and media and entertainment. We
provide design software, Internet portal services, wireless development
platforms and point-of-location applications that empower more than four
million customers in over 150 countries. Our software products are sold
worldwide, both directly to customers and through a network of resellers and
distributors.
We are organized in two reportable segments: the Design Solutions Segment
and the Discreet Segment.
The Design Solutions Segment derives revenues from the sale of design
software products for professionals, occasional users, or consumers who
design, draft and diagram, and from the sale of mapping and geographic
information systems technology to public and private users. The Design
Solutions Segment consists of the following business divisions, all of which
have industry specific focuses: Design Platforms Group; Manufacturing,
previously referred to as Mechanical Computer-Aided Design; Architecture,
Engineering and Construction, or AEC; Location Services; and Geographic
Information Solutions, or GIS.
As part of our effort to transform business design and leverage the
Internet, we launched in April 2000 Point A, a new portal that currently
serves our multiple markets. Accessible either through a direct web connection
or through Autodesk software products with Internet extension plug-ins, the
Point A site provides a centralized online community and resources in four
main areas that include content, community, collaboration and customer care.
The Discreet Segment develops, assembles, markets, sells and supports
nonlinear digital systems and software for creating, editing and compositing
imagery. Revenues are derived from the sale of products to creative
professionals for a variety of applications, including feature films,
television programs, commercials, music and corporate videos, interactive game
production, live broadcasting and Web design.
PRODUCTS
The principal product offerings from the Design Solutions Segment are
described below:
AutoCAD
AutoCAD software is a general-purpose Computer-Aided Design, or CAD, tool
used independently and in conjunction with other specific applications in
fields ranging from construction and manufacturing to process plant design and
mapping. Professionals utilize AutoCAD for design, modeling, drafting,
mapping, rendering and facility management tasks.
AutoCAD 2000i, an Internet-enabled version, was introduced in July 2000 and
is the technology foundation for design solutions serving the building design,
communications, government, utilities, land development and
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manufacturing industries. AutoCAD 2000i takes full advantage of AutoCAD 2000's
enhancements and also includes 3D visualization and geometry creation tools,
as well as in-place reference file editing.
AutoCAD LT
AutoCAD LT is a low-cost 2D CAD application intended for CAD managers,
designers and engineers who need a powerful, stand-alone drafting tool, but
who do not require the advanced feature set in AutoCAD.
Autodesk Inventor
Autodesk Inventor is a 3D mechanical design creation tool that provides
users an assembly-centric solid modeling (3D) and drawing production (2D)
system together with adaptive design functionality. Users benefit from on-
demand large assembly segment loading, adaptive design, layout and assembly
functionality for solving function before form, built-in collaboration and
design management tools, and AutoCAD file compatibility.
AutoCAD Mechanical
AutoCAD Mechanical software offers 2D mechanical design and engineering
tools that are seamlessly compatible with all AutoCAD-based applications.
Mechanical Desktop
Mechanical Desktop is the world's leading midpriced 3D design system and is
the only system that integrates 2D design with parametric, feature-based solid
and surface modeling. It extends the power of the AutoCAD design environment
by uniting 2D and 3D design.
AutoCAD Architectural Desktop
AutoCAD Architectural Desktop software offers architectural design tools.
Supporting the architectural design process from conceptual design to design
development, through construction documentation, AutoCAD Architectural Desktop
features industry-specific 2D production drafting functionality, integrated
and accessible 3D design options and all of AutoCAD's functionality. Users
benefit from simplified mass modeling, intelligent building components, style
definitions and layer management according to industry standards. AutoCAD
Architectural Desktop software's data continuity throughout the entire design
process enables efficiency and productivity by eliminating the need to
recreate design and drafting data.
AutoCAD Map
AutoCAD Map is the Autodesk solution for precision mapping and geographic
information system analysis in the AutoCAD environment. It contains the
complete AutoCAD toolset to enhance productivity, plus it offers specialized
functionality for creating, maintaining and producing maps and geospatial
data.
The principal product offerings from the Discreet Segment are discussed
below:
3ds max
3ds max is a professional 3D modeling, animation and rendering software
package providing advanced tools for character animation, next generation game
development and visual effects production. Users benefit from the unified,
object-oriented platform, customizable real-time interface, multiple-processor
support and 3D graphics acceleration capabilities.
3
flame
flame is an on-line, resolution-independent, non-linear, uncompressed
digital effects and compositing system. The system is used by creative
professionals to create, edit and composite special visual effects in a real-
time workstation environment. Easily integrated into a suite environment and
possessing the power and features necessary to serve as the core of a fully
digital suite, flame is designed to allow the operator to create desired
effects with near instantaneous feedback.
inferno
inferno is an on-line, non-linear, resolution-independent, uncompressed
digital system providing all the features of flame with film tools, and
increased image resolution and color control for digital film work. The system
also features tools for grain management, wire and scratch removal and color
calibration.
PRODUCT DEVELOPMENT AND INTRODUCTION
The majority of our basic research and product development has been
performed in the U.S., while translation and localization of foreign-market
versions, as well as some product development, are performed by development
teams or contractors in our local markets. Our product-related functions in
Europe, including software development, localization, quality assurance and
technical publications, are centralized in Neuchatel, Switzerland. Production
in Europe is centralized in Ireland, and production in Asia Pacific primarily
takes place in Singapore.
The technology industry is characterized by rapid technological change in
computer hardware, operating systems and software, as well as changes in
customer requirements and preferences. To keep pace with these changes, we
maintain an aggressive program of new product development. We dedicate
considerable resources to research and development to further enhance our
existing products and to create new products and technologies.
Our software products are internally complex and, despite extensive testing
and quality control, may contain errors or defects. These defects or errors
could result in corrective releases to our software products, damage to our
reputation, loss of revenues, an increase in product returns or lack of market
acceptance of our products, any of which could harm our business.
We actively recruit and hire experienced software developers and license
and acquire complementary software technologies and businesses. In addition,
we actively collaborate with and support independent software developers who
offer products that enhance and complement our products.
With the prevalence of new Internet technologies and the demand for increased
customer connectivity, new platforms and technologies can be expected to be
developed in the design industries. We are devoting significant resources to the
development of such technologies as well as transitioning to new business
models, requiring a considerable investment of technical and financial
resources. Such investments may not result in sufficient revenue generation to
justify their costs, or competitors may introduce new products and services that
will achieve acceptance among our current customers, adversely affecting our
competitive position.
Independent firms and contractors perform some of our product development
activities, while other technologies are licensed from third parties. We
generally either own or license the software developed by third parties.
Because talented development personnel are in high demand, independent
developers, including those who currently develop products for us, may not be
able to provide development support in the future. Similarly, we may not be
able to obtain and renew existing license agreements on favorable terms, or at
all, which could harm our business.
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Our business strategy has historically depended in part on our
relationships with third-party developers, who provide products that expand
the functionality of our design software. Some developers may elect to support
other products or may experience disruption in product development and
delivery cycles. In particular markets, this disruption could negatively
impact these third-party developers and end users, which could harm our
business.
MARKETING AND SALES
Our customer-related operations are divided into three geographic regions,
the Americas, Europe and Asia/Pacific, and are supported by global marketing
and sales organizations. These organizations develop and manage overall
marketing and sales programs and work closely with a network of domestic and
foreign offices. We sell our software products both directly to customers,
which include large corporations, and also through distributors and value-
added resellers, or VARs.
In addition, we work directly with reseller and distributor sales
organizations, computer manufacturers, other software developers and
peripheral manufacturers in cooperative advertising, promotions and trade-show
presentations. We employ mass-marketing techniques such as webcasts, seminars,
telemarketing, direct mailings and advertising in business and trade journals.
We have a worldwide user group organization dedicated to the exchange of
information related to the use of our products.
Our ability to effectively distribute our products depends in part upon the
financial and business condition of our VAR network. Although we are not
currently experiencing any material problems with the financial viability of our
VAR network, computer software dealers and distributors are typically not highly
capitalized, have previously experienced difficulties during times of economic
contraction and may do so in the future. In addition, the changing distribution
models resulting from the Internet, from increased focus on direct sales to
major accounts or from two-tiered distribution may impact our VAR network in the
future. While no single customer accounted for more than 10 percent of our
consolidated revenues in any of the past three fiscal years, the loss of, or a
significant reduction in, business with any one of our major international
distributors or large U.S. resellers could harm our business.
We intend to continue to make our products available in foreign languages
and expect that foreign sales will continue to contribute a significant
portion of our consolidated revenues.
CUSTOMER AND RESELLER SUPPORT
We provide technical support and training to customers through a leveraged
model, augmented by programs designed to address specific direct needs. We
expect that end users rely primarily on their resellers and distributors for
technical support. We support the resellers and distributors through technical
product training, sales training classes, the Internet and direct telephone
support. Support content is also available on the Product Support portion of
our Internet site. There are also a number of user group forums in which
customers are able to share information.
While we expect the resellers and distributors to provide the majority of
technical support to our customers, we have developed programs to deliver
direct support to some customers.
DEVELOPER PROGRAMS
One of our key strategies is to maintain an open-architecture design of our
software products to facilitate third-party development of complementary
products and industry-specific software solutions. This approach enables
customers and third parties to customize our products for a wide variety of
highly specific uses. We offer several programs that provide marketing, sales,
technical support and programming tools to developers who develop add-on
applications for our products.
5
BACKLOG
We typically ship products shortly after receipt of an order, which is
common in the computer software industry. Accordingly, we do not maintain a
significant backlog. Also, the backlog as of any particular date gives no
indication of actual sales for any succeeding period.
COMPETITION
We compete with different companies in each of our product groups.
The software industry has limited barriers to entry, and the availability
of desktop computers with continually expanding capabilities at progressively
lower prices contributes to the ease of market entry. Since customers
increasingly rely on the Internet, new platforms and technologies can be
expected to be developed in the design industries. The design software market
in particular is characterized by vigorous competition in each of the vertical
markets in which we compete, both by entry of competitors with innovative
technologies and by consolidation of companies with complementary products and
technologies. In addition, the availability of third-party application
software is a competitive factor within the CAD market. Because of these and
other factors, competitive conditions in the industry are likely to intensify
in the future. Increased competition could result in price reductions, reduced
net revenues and profit margins and loss of market share, any of which could
harm our business. Furthermore, some of our competitors have greater
financial, technical, sales and marketing and other resources.
We believe that our future results depend largely upon our ability to offer
new products, and to continue to provide existing product offerings, that
compete favorably with respect to reliability, performance, ease of use, range
of useful features, continuing product enhancements, reputation, price and
training.
INTELLECTUAL PROPERTY AND LICENSES
We protect our intellectual property through copyright, trade secret,
patent and trademark laws, confidentiality procedures and contractual
provisions. Nonetheless, our intellectual property rights may not be
successfully asserted in the future or may be invalidated, circumvented or
challenged. In addition, the laws of various foreign countries where our
products are distributed do not protect our intellectual property rights to
the same extent as U.S. laws. Our inability to protect our proprietary
information could harm our business.
From time to time, we receive claims alleging infringement of a third party's
intellectual property rights, including patents. Any disputes involving our
intellectual property rights or those of another party could lead to costly
litigation and possibly result in our loss of significant rights, which could
harm our business.
We retain ownership of software we develop. All software is licensed to
users and provided in object code pursuant to either shrink-wrap, embedded or
on-line licenses, or executed license agreements. These agreements contain
restrictions on duplication, disclosure and transfer.
We believe that because of the limitations of laws protecting our
intellectual property and the rapid, ongoing technological changes in both the
computer hardware and software industries, we must rely principally upon
software engineering and marketing skills to maintain and enhance our
competitive market position.
While we have recovered some revenues resulting from the unauthorized use
of our software products, we are unable to measure the extent to which piracy
of our software products exists. Software piracy can be expected to be a
persistent problem.
PRODUCTION AND SUPPLIERS
Production of our software products involves duplication of the software
media and the printing of user manuals. The purchase of media and the transfer
of the software programs onto media for distribution to
6
customers are performed by us and by licensed subcontractors. Media for our
products include CD-ROMs and diskettes, which are available from multiple
sources. User manuals for our products and packaging materials are produced to
our specifications by outside sources. Domestic production is performed in
leased facilities operated by us. Some product assembly is also performed by
independent third-party contractors. International production is performed by
independent third-party contractors in Ireland and Singapore. To date, we have
not experienced any material difficulties or delays in the production of our
software and documentation.
The Discreet Division has historically relied on third-party vendors to
manufacture and supply all of the hardware components used in its systems.
Manufacturing consists of assembly (including disk array assembly), testing,
and value added systems integration. Many of the Discreet Division's software
products currently run on workstations manufactured by Silicon Graphics.
Additionally, the Discreet Division is dependent on Silicon Graphics as the
main source for video input/output cards used in the systems. There are
significant risks associated with this reliance on Silicon Graphics and the
Discreet Division may be impacted by unforeseen difficulties associated with
adapting their products to future Silicon Graphics products and the timing of
the development and release of Silicon Graphics products.
EMPLOYEES
As of January 31, 2001, we had 3,484 full-time employees. Our future
success is highly dependent on the ability to attract, retain and motivate
highly skilled employees.
ITEM 2. PROPERTIES
Our executive offices and the principal offices for product development,
domestic marketing and sales and production are located in leased office space
in northern California. We also lease office space in various locations
throughout the U.S. for local sales, development and technical support
personnel. Our foreign subsidiaries lease office space for their operations.
We believe that our existing facilities and offices are adequate to meet
our requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various legal proceedings arising from the normal course
of business activities. In addition, in March and April 2000, three class
action complaints were filed against us and certain of our officers and
directors, alleging violations of the Securities Exchange Act of 1934. The
United States District Court for the Northern District of California
consolidated these complaints into one lawsuit in August 2000. The plaintiffs
seek to act on behalf of purchasers of Autodesk common stock during the period
between September 14, 1998 and May 4, 1999 and are seeking unspecified
damages. On November 14, 2000 the Court granted our motion to dismiss the
lawsuit, allowing the plaintiffs to amend their complaint. The plaintiffs
filed an amended complaint and we have filed a motion to dismiss the amended
complaint. The motion is not yet scheduled for a hearing. We believe we have
meritorious defenses to the amended complaint and we intend to vigorously
defend the action.
In our opinion, resolution of these matters is not expected to have a
material adverse impact on our consolidated results of operations or our
financial position. However, depending on the amount and timing, an
unfavorable resolution of a matter could materially affect our future results
of operations or cash flows in a particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 2001.
7
Executive Officers of the Registrant
The following sets forth certain information as of January 31, 2001
regarding our executive officers:
Name Age Position
---- --- --------
Carol A. Bartz............. 52 Chairman of the Board, Chief Executive Officer
and President
Joseph H. Astroth, Ph.D. .. 45 Executive Vice President, Location Services
Division
Jan Becker................. 47 Senior Vice President, Human Resources and
Corporate Real Estate
Steve Cakebread............ 49 Senior Vice President and Chief Financial
Officer
Paul Lypaczewski........... 43 Executive Vice President, Discreet Division
John G. Sanders............ 48 Executive Vice President, Design Solutions
Division
Marcia K. Sterling......... 57 Senior Vice President, Business Development,
General Counsel, and Secretary
Michael E. Sutton.......... 55 Executive Vice President, Worldwide Field
Organization
Carol A. Bartz joined Autodesk in April 1992 and serves as Chairman of the
Board, Chief Executive Officer and President. Ms. Bartz is a director of
Network Appliance, Inc., BEA Systems, Inc., Cisco Systems, Inc. and VA Linux.
Dr. Joseph H. Astroth joined Autodesk in January 1996 and serves as
Executive Vice President, Location Services Division. Previously, he was
Executive Vice President, GIS Solutions Division from January 1996 to December
2000.
Jan Becker joined Autodesk in September 1992 and has served as Senior Vice
President, Human Resources and Corporate Real Estate since June 2000.
Steve Cakebread joined Autodesk in April 1997 and serves as Senior Vice
President and Chief Financial Officer. From April 1993 through March 1997 he
served as Vice President, Finance, World Trade Corporation at Silicon
Graphics.
Paul Lypaczewski joined Autodesk in August 2000 as Executive Vice
President, Discreet Division. Prior to joining Autodesk, Mr. Lypaczewski was
Chief Operating Officer for Cyberwold, Inc. from October 1999 to August 2000
and from 1998 to October 1999 he served as President and CEO of TrueSpectra
Inc. From 1995 to 1998 he held various positions with Alias/Wavefront.
John G. Sanders joined Autodesk in October 1993 and serves as Executive
Vice President, Design Solutions Division. From October 1999 to December 2000
he was Vice President, Internet and from March 1996 to October 1999 he served
as Vice President of Worldwide Support & Services.
Marcia K. Sterling joined Autodesk in October 1995 and serves as Senior
Vice President, Business Development, General Counsel, and Secretary.
Michael E. Sutton joined Autodesk in May 1993 and serves as Executive Vice
President, Worldwide Field Organization. Previously, Mr. Sutton served as Vice
President, Europe/Middle East/Africa from June 1993 through September 1998.
There is no family relationship among any of our directors or executive
officers.
8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
ADSK. The following table lists the high and low sales prices for each quarter
in the last two fiscal years:
Fiscal 2001 High Low
----------- ------ ------
First Quarter.................................................. $54.88 $31.69
Second Quarter................................................. $41.19 $19.94
Third Quarter.................................................. $29.69 $20.00
Fourth Quarter................................................. $39.63 $20.38
Fiscal 2000 High Low
----------- ------ ------
First Quarter.................................................. $43.88 $24.94
Second Quarter................................................. $30.19 $23.56
Third Quarter.................................................. $26.63 $17.13
Fourth Quarter................................................. $33.94 $18.00
Dividends
We paid quarterly dividends of $0.06 per share in fiscal 2001 and 2000 to
Autodesk shareholders. We intend to continue paying regular cash dividends on
a quarterly basis.
Issuance of Unregistered Securities
On January 12, 2001, we issued approximately 78,000 unregistered shares of
Autodesk common stock, which were valued at $2.8 million, to effect an
acquisition. The unregistered shares are subject to Rule 144.
Stockholders
As of January 31, 2001 the number of common stockholders of record was
1,023. Because many of our shares of common stock are held by brokers or other
institutions on behalf of stockholders, we are unable to estimate the total
number of stockholders represented by the record holders.
ITEM 6. SELECTED FINANCIAL DATA
Fiscal year ended January 31,
--------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(In thousands, except per share data)
For the Fiscal Year
Net revenues/1/................. $936,324 $848,051 $893,832 $786,121 $613,273
Income from operations/2/....... 140,014 763 142,087 94,994 65,296
Net income/2/................... 93,233 9,808 97,132 56,215 42,247
At Year End
Total assets.................... 807,759 902,946 819,927 697,191 591,923
Long-term liabilities........... 1,208 1,255 3,486 30,583 30,974
Common stock data
Basic net income per share...... $ 1.63 $ 0.16 $ 1.72 $ 1.00 $ 0.77
Diluted net income per share.... 1.59 0.16 1.64 0.94 0.74
Proforma net income per
share/3/....................... 1.87 0.99 2.11 1.68 0.92
Dividends paid per share........ 0.24 0.24 0.20 0.20 0.20
9
- --------
/1/ During the fourth quarter of fiscal 2001, Autodesk adopted two new
accounting pronouncements that had the effect of increasing net revenues and
equally increasing costs and expenses. Historical net revenue amounts were
reclassified to conform with the new presentation. The adoption of these
pronouncements did not impact current or previously reported net income.
The changes, which involved the classification of dealer commissions and
shipping and handling fees billed, are described more fully in Note 1 to the
Consolidated Financial Statements. Historical amounts are as follows: dealer
commissions totaling $24.7 million in fiscal 2001, $25.4 million in fiscal
2000, $19.4 million in fiscal 1999, $15.2 million in fiscal 1998 and $12.9
million in fiscal 1997; and shipping and handling fees billed totaling $2.1
million in fiscal 2001, $2.4 million in fiscal 2000, $2.5 million in fiscal
1999, $2.2 million in fiscal 1998 and $1.7 million in fiscal 1997.
/2/ Fiscal 2000 results were impacted by nonrecurring charges primarily related
to acquisitions and a work force reduction.
/3/ Proforma net income per share is an alternative measure of performance and
is not in accordance with U.S. generally accepted accounting principles.
Proforma net income per share excludes the effect of amortization of
goodwill and purchased intangibles, nonrecurring (credits) charges and
litigation accrual reversals.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains trend analyses and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
statements, trend analyses and other information contained herein relative to
markets for our products and trends in revenues, as well as other statements
including such words as "anticipate," "believe," "plan," "estimate," "expect,"
"goal," and "intend" and other similar expressions involving future trends or
uncertainties, constitute forward-looking statements. These forward-looking
statements are subject to business and economic risks, and our actual results
could differ materially from those set forth in the forward-looking statements
as a result of the factors set forth elsewhere herein, including "Risk Factors
Which May Impact Future Operating Results."
Basis of Presentation
As a result of two new accounting pronouncements that were effective during
the fourth quarter of fiscal 2001, we reclassified dealer commissions to
marketing and sales expenses and customer-paid shipping and handling fees to
net revenues (see Notes 1 and 16 of our consolidated financial statements for
further discussion). Previously, dealer commission costs were reflected as a
direct reduction of net revenues and customer-paid shipping and handling
amounts were reflected as a reduction of cost of revenues. Historical amounts
have been reclassified to conform to the current year presentation. The
adoption of these accounting pronouncements did not impact our current or
previously reported net income.
Results of Operations
Net Revenues. Our net revenues for fiscal 2001 were $936.3 million, as
compared to $848.1 million in fiscal 2000. The 10 percent growth reflected
increased net revenues in the Americas of 14 percent and in Asia/Pacific of 22
percent as compared to the prior fiscal year. Despite unfavorable exchange
rate movements, net revenues in Europe remained flat compared to the prior
fiscal year. Net revenues for the Discreet Segment increased 11 percent
compared to the prior fiscal year. The net revenues for the Design Solutions
Segment increased 10 percent compared to the prior fiscal year. Sales of
AutoCAD and AutoCAD upgrades, which are reflected in the net revenues for the
Design Solutions Segment, accounted for approximately 33 percent of our
consolidated net revenues in fiscal 2001 and 37 percent of our consolidated
net revenues in fiscal 2000.
The stronger value of the U.S. dollar, relative to international
currencies, had a negative impact on net revenues in fiscal 2001. Had exchange
rates from the prior year been in effect in fiscal 2001, translated
international revenue billed in local currencies would have been $32.5 million
higher. Unfavorable exchange rates may have a negative impact on net revenues
in fiscal 2002. International sales, including exports from the U.S.,
accounted for approximately 64 percent of our net revenues in fiscal 2001 as
compared to 65 percent in the prior fiscal year.
Our net revenues for fiscal 2000 were $848.1 million, as compared to $893.8
million in fiscal 1999. Increases in Asia/Pacific's net revenues of 32 percent
were more than offset by decreases of 13 percent in the Americas and 10
percent in Europe. The overall decrease in net revenues was primarily due to a
decline in sales of AutoCAD and AutoCAD LT. On a stand-alone basis, sales of
AutoCAD and AutoCAD upgrades, which are reflected in net revenues for the
Design Solutions Segment, accounted for approximately 37 percent of our
consolidated net revenues in fiscal 2000 and 45 percent of our consolidated
net revenues in fiscal 1999.
The value of the U.S. dollar, relative to international currencies, did not
have a significant impact on net revenues in fiscal 2000 compared to fiscal
1999. International sales, including exports from the U.S., accounted for
approximately 65 percent of our net revenues in fiscal 2000 as compared to 59
percent in fiscal 1999.
Product returns, consisting principally of stock rotation, are recorded as
a reduction of revenues. Over the past three years, product returns as a
percentage of revenues have ranged from 3 to 5 percent annually. We
11
anticipate that the level of product returns in future periods will continue
to be impacted by the timing of new product releases, as well as the quality
and market acceptance of new products.
Cost of Revenues. Cost of revenues includes the cost of diskettes and
compact discs, cost of hardware sold (mainly workstations manufactured by
Silicon Graphics), costs associated with transferring Autodesk's software to
electronic media, printing of user manuals and packaging materials, shipping
and handling costs, royalties, amortization of purchased technology and
capitalized software, software protection locks in certain foreign markets,
and cost of service contracts.
When expressed as a percentage of net revenues, cost of revenues were 16
percent in fiscal 2001 compared to 17 percent of net revenues in fiscal 2000.
This difference was primarily due to reduced royalty costs of $4.1 million
that resulted from the expiration of some of our royalty arrangements in
fiscal 2000 and reduced software amortization costs, offset in part by higher
employee-related expenses and professional fees.
Cost of revenues were 17 percent of net revenues in fiscal 2000 as compared
to 15 percent of net revenues in fiscal 1999. This difference was primarily
due to (1) increases in royalties; (2) amortization of capitalized software
for AutoCAD 2000, which was introduced in fiscal 2000; and (3) the April 1999
acquisition of VISION* Solutions, or VISION, which has relatively higher cost
of revenues as a percentage of net revenues than our other products.
In the future, cost of revenues as a percentage of net revenues will
continue to be impacted by the mix of product sales, software amortization
costs, royalty rates for licensed technology embedded in our products and the
geographic distribution of sales.
Marketing and Sales. Marketing and sales expenses include salaries, dealer
and sales commissions, travel and facility costs for our marketing, sales,
dealer training and support personnel. These expenses also include programs
aimed at increasing revenues, such as advertising, trade shows and
expositions, as well as various sales and promotional programs designed for
specific sales channels and end users.
Marketing and sales expenses were 34 percent of net revenues in fiscal 2001
compared to 40 percent of net revenues in the prior fiscal year. This difference
was due to lower employee-related expenses of approximately $2.8 million and
some $16.0 million less in advertising and promotion costs related to fewer
launches of new or enhanced products.
Marketing and sales expenses were 40 percent of net revenues in fiscal 2000
compared to 35 percent in fiscal 1999. The increase was largely due to (1)
increased advertising and promotional costs associated with the launch of
several new and enhanced products introduced during fiscal 2000; (2) higher
employee costs; and (3) incremental costs due to the acquisition of VISION.
We expect to continue to invest in marketing and sales of our products, to
develop market opportunities and to promote our competitive position.
Accordingly, we expect marketing and sales expenses to continue to be
significant, both in absolute dollars and as a percentage of net revenues.
Research and Development. Research and development expenses consist
primarily of salaries and benefits for software engineers, contract
development fees and costs of computer equipment used in software development.
Research and development expenses were $170.5 million in fiscal 2001 compared
to $164.0 million in the prior fiscal year. Lower facilities costs were offset
by additional spending by acquired businesses.
Research and development costs were $164.0 million in fiscal 2000 compared
to $157.1 million in fiscal 1999. The difference was primarily due to higher
employee-related costs; higher costs related primarily to the Design 2000
family of products and incremental costs due to the acquisition of VISION.
We expect that research and development spending will continue to be
significant in fiscal 2002 as we continue to support product development
efforts by our market groups.
12
General and Administrative. General and administrative expenses include our
information systems, finance, human resources, legal and other administrative
operations. General and administrative expenses were 14 percent of net
revenues in fiscal 2001 as compared to 16 percent of net revenues in the prior
fiscal year. This difference was primarily due to lower employee-related
spending and lower spending related to information systems.
General and administrative expenses were 16 percent of net revenues in
fiscal 2000 compared to 13 percent in fiscal 1999. The difference was
primarily due to higher (1) employee-related expenses; (2) costs incurred to
ensure that our infrastructure was year 2000 compliant; (3) consulting fees
related to enhancing the information systems infrastructure; and (4)
incremental costs related to acquisitions. We currently expect that in the
coming year general and administrative expenses, as a percentage of net
revenues, will remain consistent with the level experienced in fiscal 2001.
Amortization of Goodwill and Purchased Intangibles. Amortization of
goodwill and purchased intangibles was $26.5 million in fiscal 2001, $30.6
million in fiscal 2000 and $28.7 million in fiscal 1999. The difference
between fiscal 2001 and fiscal 2000 is due to some intangibles becoming fully
amortized. The difference between fiscal 2000 and fiscal 1999 was due to
increased amortization expense arising from the April 1999 acquisition of
VISION. We expect amortization of goodwill and purchased intangibles to
continue to decline in future periods as asset balances reach the end of their
respective amortization periods.
Nonrecurring (Credits) Charges. During fiscal 2001 we reversed $1.2 million
related to one-time accruals, $1.0 million of which related to a restructuring
reserve, established in fiscal 2000. The accruals were settled for less than
originally estimated. During fiscal 2001, the restructuring program was
substantially completed.
Nonrecurring charges in fiscal 2000 ($34.7 million) consisted primarily of
Discreet Logic Inc., or Discreet, and VISION acquisition-related charges and a
corporate restructuring that occurred during the third quarter.
Nonrecurring charges in fiscal 1999 ($19.7 million) consisted primarily of
acquisition-related charges resulting from our purchase of Genius CAD Software
GmbH ("Genius") and other charges that involved the consolidation of various
development centers, write-off of purchased technologies associated with these
development centers and the elimination of 87 positions in Asia Pacific.
For additional information regarding the nonrecurring charges recorded over
the past three fiscal years, see Note 12. Nonrecurring Charges in the Notes to
Consolidated Financial Statements.
Litigation Accrual Reversal. In fiscal 1999, we reversed $18.6 million of
accruals associated with litigation matters. Of the amount, $18.2 million
related to final adjudication of a claim involving a trade-secret
misappropriation brought by Vermont Microsystems, Inc.
Interest and Other Income. Interest and other income, net was $21.0 million
in fiscal 2001, $23.2 million in fiscal 2000 and $17.1 million in fiscal 1999.
The difference between fiscal 2001 and 2000 was related to lower investment
balances resulting from cash used for share repurchase activity. The fiscal
1999 balance includes our $2.7 million reversal of an interest accrual
resulting from the closure of the Vermont Microsystems litigation matter, and
a $1.3 million gain associated with the sale of various technical programs and
intangible assets. Excluding these fiscal 1999 amounts, the difference in
interest and other income, net between fiscal 2000 and 1999 was largely due to
increases in average cash and marketable securities balances resulting from
cash provided by operating activities and common stock issuances.
Provision for Income Taxes. Our effective income tax rate was 32.0 percent
in fiscal 2001, 32.0 percent in fiscal 2000 and 36.6 percent in fiscal 1999.
Consistent with fiscal 2000, the effective tax rate for fiscal 2001 is less
than the federal statutory rate of 35 percent due to the benefits associated
with our foreign earnings which are taxed at rates different from the federal
statutory rate, research credits and tax-exempt interest, partially offset by
non-deductible goodwill amortization. The fiscal 2001 and fiscal 2000 rates
are lower than the fiscal 1999 rate due to a relatively higher impact of these
permanent items. Our future effective tax rate may be impacted by the amount of
benefits associated with our foreign earnings, which are taxed at rates
different from the federal statutory rate, research credits, tax exempt interest
and the amount of non-deductible goodwill amortization.
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At January 31, 2001, we had gross deferred tax assets of $64.0 million. A
portion of the assets recognized is realizable based on our ability to offset
existing deferred tax liabilities. Realization of the remaining portion of
these assets is dependent on our ability to generate significant future
taxable income. We believe that sufficient income will be earned in the future
to realize these assets. We will evaluate the realizablility of the deferred
tax assets quarterly and assess the need for valuation allowances.
Equity in Net Loss of Affiliate. The $16.3 million equity in net loss of
affiliate represents our proportionate share of Buzzsaw.com's April 2000
through January 2001 losses. In April 2000, we invested an additional $17.5
million in Buzzsaw.com, which we formed during the third quarter of fiscal
2000. We expect our equity in net losses of Buzzsaw.com to continue to be
significant in future periods if additional investments are made. For
additional information regarding our investment in Buzzsaw.com, see Note 5.
Investment in Affiliate--Buzzsaw.com, Inc. in the Notes to Consolidated
Financial Statements.
RedSpark, Inc. During the second quarter of fiscal 2001, we formed
RedSpark, Inc. Autodesk currently maintains a majority interest in RedSpark,
and as such the financial position and results of operations of RedSpark are
consolidated and included within the operating expense categories of our
statement of operations. We expect to continue to consolidate RedSpark through
most of fiscal 2002. The extent of our exposure to RedSpark's results of
operations is dependent upon our future level of ownership interest, which will
depend in part on the amount of RedSpark equity issued to other investors in the
future. For additional information regarding RedSpark, see Note 6. Minority
Interest--RedSpark, Inc. in the Notes to Consolidated Financial Statements.
Business Combinations
Discreet
In March 1999, we acquired Discreet in a business combination accounted for
as a pooling of interests. The transaction resulted in the issuance of an
aggregate of approximately 10.0 million shares of Autodesk common stock in
exchange for Discreet's outstanding common stock. Accordingly, all prior
period consolidated financial statements presented were restated to include
the combined results of operations of Discreet as though it had always been a
part of Autodesk.
Prior to the acquisition, Discreet's fiscal year ended on June 30. As a
result of differing year-ends, our consolidated statements of operations,
stockholders' equity and cash flows for the fiscal years ended January 31,
1999 were combined with Discreet's financial statements for the twelve months
ended December 31, 1998.
In addition, Discreet's January 1999 results have been excluded from the
consolidated statement of operations as a result of changing Discreet's year-
end to January 31. In January 1999, Discreet recognized net revenues of $3.8
million and incurred a net loss of $5.0 million. This loss was recorded as an
adjustment to retained earnings during fiscal 2000.
VISION
On April 22, 1999, we acquired VISION, a vendor of enterprise automated
mapping/facilities management/geographic information systems (AM/FM/GIS)
solutions. At the time, Autodesk viewed the acquisition as a unique
opportunity to obtain server technology and an implementation service business
that would allow Autodesk to enter the enterprise market and market both
VISION's and Autodesk's products to all levels within an organization. Of the
$26.0 million purchase price, which was paid in cash, $3.3 million represented
the value of in-process research and development ("IPR&D") that had not yet
reached technological feasibility and had no alternative future use, and as
such, was expensed during fiscal 2000. Of the remaining purchase price, $17.6
million was allocated to goodwill and $2.1 million was allocated to other
intangibles.
As of the acquisition date, the IPR&D consisted of the development of two
products, VISION 5.3, which was 60 percent complete at the time, and VISION
Electric 2.3, which was 39 percent complete. Both projects,
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which were originally expected to be completed in late fiscal 2000, have
already been released. The projects were completed at an amount approximately
equal to the original estimate of $1.4 million.
In valuing the developed and in-process technologies at the acquisition
date, we used a discounted cash flow analysis based on projected net revenues,
cost of revenues, operating expenses and income taxes resulting from such
technologies over a 4-year period. The projected financial results, which were
discounted using a 20 percent rate for the developed technology and a 25
percent rate for the in-process technology, were based on expectations for
VISION on a stand-alone basis and excluded any synergistic benefits that we
expected to achieve after the acquisition.
The revenue projections for the developed technologies, which considered
the release dates of new products, assumed a gradual decline. We based the
revenue projections for the IPR&D on expected trends in technology and the
timing of our new product introductions.
Although actual financial results to date have been lower than originally
forecasted, Autodesk has successfully integrated the VISION technology with
new applications and products that are expected to be released in fiscal 2002.
Genius
On May 4, 1998, we entered into an agreement with Genius, a German limited
liability company, to purchase various mechanical CAD software applications
and technologies. We accounted for this acquisition under the purchase method
of accounting. Of the total purchase price of $68.9 million, which was paid in
cash, $13.1 million was allocated to IPR&D and was expensed; $12.7 million was
allocated to an intangible asset, purchased technology; and $41.6 million was
allocated to goodwill.
As of the acquisition date, Genius had initiated the research and
development effort related to product features and functionality that
currently resides in mechanical products such as AutoCAD Mechanical, Autodesk
Inventor and to a lesser degree Mechanical Desktop. The research and
development projects were in varying stages of completion, ranging from 20
percent to 45 percent complete as of the acquisition date, with total
estimated costs of $1.5 million to reach technological feasibility at the
time. The in-process projects were completed in fiscal 2000, at an aggregate
amount approximately equal to the original estimated costs to complete.
In valuing the developed and in-process technologies, we used a discounted
cash flow analysis based on projected net revenues, cost of revenues,
operating expenses and income taxes resulting from such technologies over a 5-
year period. The projected financial results were discounted using a 15
percent rate for the developed technology and a 20 percent rate for the in-
process technology.
The revenue projections for the developed technology, which considered
historical product life cycles and anticipated product release dates, assumed
a gradual decline over the 5-year period. The revenue projections for the
IPR&D assumed higher than historical average sales due to the integration and
expansion of Genius products into our worldwide sales channels, particularly
in North America and Asia Pacific, which historically had not contributed
significant revenues to Genius.
Actual results in fiscal 2001 were consistent with the major assumptions
used in the original valuation made at the time of the acquisition, such as
the revenue growth rate between years.
Recently Issued Accounting Standards
Effective November 1, 2000 we adopted Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). The adoption of SAB
101 did not have a material impact on our financial statements.
15
Effective February 1, 2001 we adopted the provisions of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This Statement requires Autodesk to
recognize all derivatives on the balance sheet at fair value. Had we adopted
SFAS 133 during fiscal 2001, the impact would not have been material. The
adoption of SFAS 133 on February 1, 2001 did not have a material impact on our
financial position.
Liquidity and Capital Resources
Cash, cash equivalents, and marketable securities totaled $422.5 million at
January 31, 2001 compared to $540.9 million at January 31, 2000. The primary
uses of cash during fiscal 2001 were: the repurchase of 9.2 million shares of
our common stock for $359.3 million, capital and other expenditures of $32.4
million, dividend payments totaling $13.6 million and an additional investment
in Buzzsaw.com of $17.5 million. The primary sources of cash were cash
provided by operating activities of $196.1 million, stock issuances resulting
from our employee stock plans of $114.0 million, and $14.0 million of third
party venture funding for RedSpark.
Between November 1999 and March 2001, the Board of Directors approved plans
to repurchase up to 22.0 million shares of our common stock. Of these 22.0
million shares, 12.1 million have been repurchased as of January 31, 2001. The
primary purpose of the stock repurchase programs is to help offset the
dilution to earnings per share caused by the issuance of stock under our
employee stock plans.
We have a U.S. line of credit permitting short-term, unsecured borrowings
of up to $75.0 million, which may be used from time to time for working
capital or other business needs. At January 31, 2001, there were no borrowings
outstanding under this agreement, which expires in January 2002.
Principal commitments at January 31, 2001, consisted of obligations under
operating leases for facilities and some computer equipment.
We believe that our existing cash, cash equivalents, marketable securities,
available line of credit and cash generated from operations will be sufficient
to satisfy our currently anticipated short-term and long-term cash
requirements. Long-term cash requirements, other than normal operating
expenses, are anticipated for the development of new software products and
incremental product offerings resulting from the enhancement of existing
products; financing anticipated growth; dividend payments; the share
repurchase programs; investments in related entities; and the acquisition of
businesses, software products, or technologies complementary to our business.
Our international operations are subject to currency fluctuations. To
minimize the impact of these fluctuations, we use foreign currency option
contracts to hedge our exposure on anticipated transactions and forward
contracts to hedge our exposure on firm commitments, primarily certain
payables and receivables denominated in foreign currencies. Our foreign
currency instruments generally have maturities of less than three months, and
the option contracts settle before the end of each quarterly period. The
principal currencies hedged during fiscal 2001 were the Euro, British pound
and Japanese yen. We monitor our foreign exchange exposures to ensure the
overall effectiveness of our foreign currency hedge positions.
Risk Factors Which May Impact Future Operating Results
We operate in a rapidly changing environment that involves a number of
risks, many of which are beyond our control. The following discussion
highlights some of these risks and the possible impact of these factors on
future results of operations.
You should carefully consider these risks before making an investment
decision. If any of the following risks actually occur, our business,
financial condition or results of operations may be adversely impacted. In
that case, the trading price of our common stock could decline, and you could
lose all or part of your investment.
16
Our operating results fluctuate within each quarter and from quarter to quarter
making our future revenues and operating results difficult to predict.
Our quarterly operating results have fluctuated in the past and are likely to do
so in the future. These fluctuations could cause our stock price to
significantly fluctuate or experience declines. Some of the factors that could
cause our operating results to fluctuate include, among other things the timing
of the introduction of new products by us or our competitors, changes in
marketing or operating expenses, changes in product pricing or product mix,
platform changes, delays in product releases, competitive factors, distribution
channel management, changes in compensation practices, the timing of systems
sales and general economic conditions.
We have also experienced fluctuations in operating results in interim periods
in certain geographic regions due to seasonality or regional economic
conditions. In particular, our operating results in Europe during the third
quarter are usually impacted by a slow summer period, and the Asia Pacific
operations typically experience seasonal slowing in the third and fourth
quarters.
Additionally, our operating expenses are based in part on our expectations
for future revenues and are relatively fixed in the short term. Accordingly,
any revenue shortfall below expectations could have an immediate and
significant adverse effect on our business. Further, gross margins may be
adversely affected if our sales of low-end CAD products and AutoCAD upgrades,
which historically have had lower margins, grow at a faster rate than sales of
our higher-margin products.
Because we derive a substantial portion of our net revenues from a limited
number of products, if these products are not successful our net revenues will
be adversely affected.
We derive a substantial portion of our net revenues from sales of AutoCAD
software, AutoCAD upgrades, and products that are interoperable with AutoCAD. As
such, any factor adversely affecting sales of AutoCAD and AutoCAD upgrades,
including product life cycle, market acceptance, product performance and
reliability, reputation, price competition and the availability of third-party
applications, would likely harm our operating results.
Existing and increased competition in the design software market may reduce
our net revenues, profits and market share.
The software industry has limited barriers to entry, and the availability of
desktop computers with continually expanding capabilities at progressively lower
prices contributes to the ease of market entry. Since customers increasingly
rely on the Internet, new platforms and technologies can be expected to be
developed in the design industries. The design software market in particular is
characterized by vigorous competition in each of the vertical markets in which
we compete, both by entry of competitors with innovative technologies and by
consolidation of companies with complementary products and technologies. In
addition, the availability of third-party application software is a competitive
factor within the CAD market. Because of these and other factors, competitive
conditions in the industry are likely to intensify in the future. Increased
competition could result in price reductions, reduced net revenues and profit
margins and loss of market share, any of which could harm our business.
Furthermore, some of our competitors have greater financial, technical, sales
and marketing and other resources.
We believe that our future results depend largely upon our ability to offer
new products, and to continue to provide existing product offerings, that
compete favorably with respect to reliability, performance, ease of use, range
of useful features, continuing product enhancements, reputation, price and
training.
Our efforts to develop and introduce new products expose us to risks such as
costs related to product defects, large expenditures that may not result in
additional net revenues and dependence on third party developers.
Rapid technological change as well as changes in customer requirements and
preferences characterize the software industry. The software products we offer
are internally complex, and despite extensive testing and quality control, may
contain errors or defects. These defects or errors could result in corrective
releases to our software products, damage to our reputation, loss of revenues,
an increase in product returns or lack of market acceptance of our products, any
of which could harm our business.
With the prevalence of new Internet technologies and the demand for increased
customer connectivity, new platforms and technologies can be expected to be
developed in the design industries. We are devoting significant resources to the
development of such technologies as well as transitioning to new business
models, requiring a considerable investment of technical and financial
resources. Such investments may not result in sufficient revenue generation to
justify their costs, or competitors may introduce new products and services that
will achieve acceptance among our current customers, adversely affecting our
competitive position.
17
Independent firms and contractors perform some of our product development
activities, while other technologies are licensed from third parties. We
generally either own or license the software developed by third parties.
Because talented development personnel are in high demand, independent
developers, including those who currently develop products for us, may not be
able to provide development support to us in the future. Similarly, we may not
be able to obtain and renew license agreements on favorable terms, if at all,
and any failure to do so could harm our business.
Our business strategy has historically depended in part on our
relationships with third-party developers, who provide products that expand
the functionality of our design software. Some developers may elect to support
other products or may experience disruption in product development and
delivery cycles. In particular markets, this disruption could negatively
impact these third-party developers and end users, which could harm our
business.
Our international operations expose us to significant regulatory, intellectual
property, collections, exchange fluctuations and other risks, which could
adversely impact our future net revenues.
We anticipate that international operations will continue to account for a
significant portion of our consolidated net revenues. Risks inherent in our
international operations include the following: unexpected changes in regulatory
practices and tariffs, difficulties in staffing and managing foreign operations,
longer collection cycles for accounts receivable, potential changes in tax laws,
greater difficulty in protecting intellectual property and the impact of
fluctuating exchange rates between the U.S. dollar and foreign currencies in
markets where we do business.
Our risk management strategy uses derivative financial instruments in the
form of foreign currency option contracts and forward contracts for the
purpose of hedging foreign currency market exposures, which exist as a part of
our ongoing business operations. Our international results may also be
impacted by general economic and political conditions in these foreign
markets. These and other factors may adversely impact our future international
operations and consequently our business as a whole.
If we do not maintain our relationship with the members of our distribution
channel, our ability to generate net revenues will be adversely affected.
We sell our software products primarily to distributors and value-added
resellers, or VARs. Our ability to effectively distribute our products depends
in part upon the financial and business condition of our VAR network. Although
we have not recently experienced any material problems with the financial
viability of our VAR network, computer software dealers and distributors are
typically not highly capitalized, have previously experienced difficulties
during times of economic contraction and may do so in the future. In addition,
the changing distribution models resulting from the Internet, from increased
focus on direct sales to major accounts or from two-tiered distribution may
impact our VAR network in the future. While no single customer accounted for
more than 10 percent of our consolidated net revenues in fiscal 2001, the loss
of or a significant reduction in business with any one of our major
international distributors or large U.S. resellers could harm our business.
Product returns by VARs could exceed our estimates and harm our net revenues.
With the exception of some distributors, agreements with our VARs do not contain
specific product-return privileges. However, we permit our VARs to return
product in certain instances, generally during periods of product transition and
during update cycles. We anticipate that product returns in future periods will
continue to be impacted by product update cycles, new product releases and
software quality.
We establish reserves, including reserves for stock balancing and product
rotation. These reserves are based on estimated future returns of product and,
after taking into account channel inventory levels, the timing of new product
introductions and other factors. While we maintain strict measures to monitor
channel inventories and to provide appropriate reserves, actual product
returns may differ from our reserve estimates, and such differences could harm
our business.
If we are not able to adequately protect our proprietary rights, our business
could be harmed.
We rely on a combination of patents, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. Despite such efforts to protect our proprietary rights,
unauthorized parties from time to time have copied aspects of our software
products or have obtained and used information that we regard as proprietary.
Policing unauthorized use of our software products is time-consuming and costly.
While we have recovered some revenues resulting from the unauthorized use of our
software products, we are unable to measure the extent to which piracy of our
software
18
products exists, and software piracy can be expected to be a persistent problem.
Furthermore, our means of protecting our proprietary rights may not be adequate,
and our competitors may independently develop similar technology.
We may face intellectual property infringement claims that could be costly to
defend and result in our loss of significant rights.
We expect that software product developers will be increasingly subject to
infringement claims as the number of products and competitors in our industry
segments grows and as the functionality of products in different industry
segments overlaps. Infringement, invalidity claims, or misappropriation claims
may be asserted against us, and any such assertions could harm our business. Any
such claims, whether with or without merit, could be time-consuming, result in
costly litigation and diversion of resources, cause product shipment delays, or
require us to enter into royalty or licensing agreements. In addition, such
royalty or license agreements, if required, may not be available on acceptable
terms, if at all, which would likely harm our business.
We rely on third party technologies and if we are unable to use or integrate
these technologies, our product and service development may be delayed.
We rely on certain software that we license from third parties, including
software that is integrated with internally developed software and used in our
products to perform key functions. These third-party software licenses may not
continue to be available on commercially reasonable terms, and the software may
not be appropriately supported, maintained or enhanced by the licensors. The
loss of licenses to, or inability to support, maintain and enhance any such
software could result in increased costs, or in delays or reductions in product
shipments until equivalent software could be developed, identified, licensed and
integrated, which could harm our business.
The loss of key personnel or the inability to attract and retain additional
personnel, particularly in Northern California where we are headquartered, could
harm our business.
Our continued growth and success depends significantly on the continued service
of highly skilled employees. Competition for these employees in today's
marketplace, especially in the technology industries, is intense. Our ability to
attract and retain employees is dependent on a number of factors, including our
continued ability to grant stock incentive awards. The loss of key employees or
inability to recruit new employees would negatively impact our business. In
addition, we may experience increased compensation costs to attract and retain
skilled personnel.
The transition to a single European currency could negatively impact our
international operations.
As a result of the introduction of the Euro and during the transition period,
which will end on January 1, 2002, we will continue to modify the internal
systems that will be affected by this conversion. We may not be able to complete
such modifications to comply with Euro requirements, which could harm our
business. We are currently evaluating the impact of the introduction of the Euro
on our foreign exchange activities, functional currency designations, and
pricing strategies in the new economic environment. In addition, we face risks
to the extent that banks and vendors upon whom we rely and their suppliers are
unable to make appropriate modifications to support our operations with respect
to Euro transactions.
Our business could suffer as a result of risks associated with strategic
acquisitions and investments.
We periodically acquire or invest in businesses, software products and
technologies that are complementary to our business through strategic alliances,
debt and equity investments, and the like. The risks associated with such
acquisitions or investments include, among others, the difficulty of
assimilating the operations and personnel of the companies, the failure to
realize anticipated synergies, and the diversion of management's time and
attention. In addition, such investments and acquisitions may involve
significant transaction-related costs. We may not be successful in overcoming
such risks and such investments and acquisitions may negatively impact our
business. In addition, such investments and acquisitions may contribute to
potential fluctuations in quarterly results of operations. The fluctuations
could arise from merger-related costs and charges associated with eliminating
redundant expenses or write-offs of impaired assets recorded in connection with
acquisitions. These costs or charges could negatively impact results of
operations for a given period or cause lack of a consistent increase quarter to
quarter in our operating results and financial condition.
We periodically make investments in related entities, such as Buzzsaw.com
and RedSpark, which typically do not expect to earn significant revenues in
the initial period of operations and which incur considerable start-up costs.
Such investments may negatively impact our results of operations and financial
condition.
Fluctuations in the price of our common stock due to net revenues or earnings
shortfalls or the volatility of the market generally may cause the market price
of our stock to decline, which could harm our business. The market price for our
common stock has experienced significant fluctuations and
19
may continue to fluctuate significantly.
The market price for our common stock may be affected by a number of factors,
including the following: net revenues or earnings shortfalls and changes in
estimates or recommendations by securities analysts; the announcement of new
products or product enhancements by us or our competitors; quarterly variations
in our or our competitors' results of operations; developments in our industry;
and general market conditions and other factors, including factors unrelated to
our operating performance or the operating performance of our competitors.
In addition, stock prices for many companies in the technology sector have
experienced wide fluctuations that have often been unrelated to the operating
performance of such companies. After periods of volatility in the market price
of a particular company's securities, securities class action litigation has
often been brought against that company. We are currently involved in this
type of litigation, and may become involved in this type of litigation in the
future. This type of litigation is often expensive and diverts management's
attention and resources, which could adversely affect our financial condition
or results of operations. Such factors and fluctuations, as well as general
economic, political and market conditions, may cause the market price of our
common stock to decline, which could harm our business.
General economic conditions may reduce our net revenues and harm our
business.
As our business has grown, we have become increasingly subject to the risks
arising from adverse changes in domestic and global economic conditions. Because
of the recent economic slowdown in the U.S., many industries are delaying or
reducing technology purchases. The impact of this slowdown on us is difficult to
predict, but it may result in reductions in sales of our products, longer sales
cycles and increased price competition. As a result, if the current economic
slowdown continues or worsens, we may fall short of our revenue expectations for
any given quarter in fiscal 2002 or for the entire year. These conditions would
negatively affect our business and results of operations. In addition, weakness
in the end-user market could negatively affect the cash flow of our distributors
and VARs who could, in turn, delay paying their obligations to us. This would
increase our credit risk exposure, which could harm our profitability and
financial condition.
Business interruptions could adversely affect our business.
Our operations are vulnerable to interruption by fire, earthquake, power loss,
telecommunications failure and other events beyond our control. Our facilities
in Northern California are currently subject to electrical blackouts as a
consequence of a shortage of available electrical power. In the event these
blackouts continue or increase in severity, they could disrupt the operations of
our affected facilities. In connection with the shortage of available power,
prices for electricity have risen dramatically, and will likely continue to
increase for the foreseeable future. Such price changes will increase our
operating costs, which could in turn hurt our profitability.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Foreign currency exchange risk
Our earnings and cash flows are subject to fluctuations due to changes in
foreign currency exchange rates. Our risk management strategy utilizes foreign
currency forward and option contracts to manage our exposures of underlying
assets, liabilities and other obligations, which exist as part of our ongoing
business operations. Contracts are primarily denominated in Euro, Swiss
francs, Canadian dollars, British pounds and Japanese yen. We do not enter
into any foreign exchange derivative instruments for trading or speculative
purposes.
A sensitivity analysis was performed on our hedging portfolio as of January
31, 2001. This analysis indicated that a hypothetical 10 percent appreciation
of the U.S. dollar from January 31, 2001 would increase the fair value of our
forward exchange/option contracts by $7.0 million. Conversely, a hypothetical
10 percent depreciation of the dollar from January 31, 2001 would decrease the
fair value of our forward exchange/option contracts by $6.1 million. We do not
anticipate any material adverse impact to our consolidated financial position,
results of operations or cash flows as a result of these foreign currency
forward and option contracts.
20
Interest rate sensitivity
We had an investment portfolio of fixed income securities, including those
classified as security deposits, of $306.1 million at January 31, 2001. These
securities are subject to interest rate fluctuations and will decrease in
market value if interest rates increase.
A sensitivity analysis was performed on our investment portfolio as of
January 31, 2001. This sensitivity analysis is based on a modeling technique
that measures the hypothetical market value changes that would result from a
parallel shift in the yield curve of plus 50, plus 100 or plus 150 basis
points over 6-month and 12-month time horizons. For the 6-month time horizon
the market value changes for a 50, 100, or 150 basis point increase were
($1.7) million, ($3.4) million and ($5.1) million, respectively. For the 12-
month time horizon the market value changes for a 50, 100 or 150 basis point
increase were ($1.4) million, ($2.8) million and ($4.1) million, respectively.
We do not use derivative financial instruments in our investment portfolio
to manage interest rate risk. We place our investments in instruments that
meet high credit quality standards, as specified in our investment policy
guidelines, which limits the amount of credit exposure to any one issue,
issuer or type of instrument.
Investments in privately-held businesses
We have an investment portfolio with a net book value of approximately $7.0
million as of January 31, 2001 that includes minority equity investments in
several privately-held technology companies, many of which are in the start-up
or development stage. With the exception of our investments in Buzzsaw and
RedSpark, we account for these minority equity investments using the cost method
of accounting. These investments are inherently risky because the markets for
the technologies or products they have under development are typically in the
early stages and may never develop into commercially viable businesses. We may
incur losses related to our investments in these companies.
21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Fiscal year ended January
31,
----------------------------
2001 2000 1999
-------- -------- --------
Net revenues.................................... $936,324 $848,051 $893,832
-------- -------- --------
Costs and expenses:
Cost of revenues.............................. 150,198 146,315 136,722
Marketing and sales........................... 317,806 337,549 315,368
Research and development...................... 170,487 163,985 157,080
General and administrative.................... 132,524 134,066 112,770
Amortization of goodwill and purchased
intangibles.................................. 26,529 30,625 28,716
Nonrecurring (credits) charges................ (1,234) 34,748 19,694
Litigation accrual reversal................... -- -- (18,605)
-------- -------- --------
796,310 847,288 751,745
-------- -------- --------
Income from operations.......................... 140,014 763 142,087
Interest and other income, net.................. 21,048 23,157 17,134
-------- -------- --------
Income before income taxes...................... 161,062 23,920 159,221
Provision for income taxes...................... (51,540) (14,112) (62,089)
Equity in net loss of affiliate................. (16,289) -- --
-------- -------- --------
Net income...................................... $ 93,233 $ 9,808 $ 97,132
======== ======== ========
Basic net income per share...................... $ 1.63 $ 0.16 $ 1.72
======== ======== ========
Diluted net income per share.................... $ 1.59 $ 0.16 $ 1.64
======== ======== ========
Shares used in computing basic net income per
share.......................................... 57,188 60,328 56,394
======== ======== ========
Shares used in computing diluted net income per
share.......................................... 58,514 61,406 59,141
======== ======== ========
See accompanying notes.
22
AUTODESK, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(in thousands, except per share data)
January 31, 2001 January 31, 2000
---------------- ----------------
Current assets:
Cash and cash equivalents.................. $116,391 $108,641
Marketable securities...................... 142,961 250,290
Accounts receivable, net of allowance for
doubtful accounts of $11,611 ($10,652 in
2000)..................................... 157,422 110,839
Inventories................................ 17,255 19,264
Deferred income taxes...................... 26,696 27,670
Prepaid expenses and other current assets.. 30,596 28,555
-------- --------
Total current assets..................... 491,321 545,259
-------- --------
Marketable securities........................ 163,148 181,992
Computer equipment, furniture and leasehold
improvements, at cost:
Computer equipment and furniture........... 171,176 142,528
Leasehold improvements..................... 27,145 22,723
Less accumulated depreciation.............. (144,325) (123,367)
-------- --------
Net computer equipment, furniture and
leasehold improvements.................. 53,996 41,884
Purchased technologies and capitalized
software, net of accumulated amortization of
$84,747 ($68,620 in 2000)................... 16,403 29,029
Goodwill, net................................ 54,273 75,489
Deferred income taxes........................ 18,242 23,438
Other assets................................. 10,376 5,855
-------- --------
$807,759 $902,946
======== ========
See accompanying notes.
23
AUTODESK, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
(in thousands, except per share data)
January 31, 2001 January 31, 2000
---------------- ----------------
Current liabilities:
Accounts payable........................... $ 47,962 $ 45,310
Accrued compensation....................... 55,907 50,448
Accrued income taxes....................... 97,109 88,006
Deferred revenues.......................... 50,993 33,604
Other accrued liabilities.................. 81,942 82,024
-------- --------
Total current liabilities................ 333,913 299,392
-------- --------
Other liabilities............................ 1,208 1,255
Commitments and contingencies
Minority interest............................ 12,964 --
Stockholders' equity:
Common stock and additional paid-in
capital, $0.01 par value; 250,000 shares
authorized; 54,714 shares outstanding at
January 31, 2001 (59,241 shares in 2000).. 424,652 561,814
Accumulated other comprehensive loss....... (16,104) (14,822)
Deferred compensation...................... (1,172) (1,338)
Retained earnings.......................... 52,298 56,645
-------- --------
Total stockholders' equity............... 459,674 602,299
-------- --------
$807,759 $902,946
======== ========
See accompanying notes.
24
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal year ended
January 31,
-------------------------
2001 2000 1999
------- ------- -------
Operating activities
Net income......................................... $93,233 $ 9,808 $97,132
Adjustments to reconcile net income to net cash
provided by operating activities:
Charge for acquired in-process research and
development..................................... -- 4,170 13,100
Depreciation and amortization.................... 68,844 79,748 80,782
Litigation and related interest accrual
reversal........................................ -- -- (20,900)
Reversal of restructuring reserve, net........... (1,034) (1,630) (1,504)
Net gain on disposition of business unit......... -- -- (1,307)
Net gain on sale of investment................... -- -- (2,500)
Equity in net loss of affiliate.................. 16,289 -- --
Loss on investment............................... -- 4,776 --
Net loss on fixed asset disposals................ 2,553 5,894 4,032
Tax benefits from employee stock plans.......... 21,055 4,642 15,469
Changes in operating assets and liabilities, net of
business combinations:
Accounts receivable.............................. (46,583) 4,985 (24,486)
Inventories...................................... 2,009 1,980 (872)
Deferred income taxes............................ 6,170 (21,264) 11,940
Prepaid expenses and other current assets........ (725) (4,167) (4,604)
Accounts payable and accrued liabilities......... 25,205 27,403 7,181
Accrued income taxes............................. 9,103 (8,418) 14,559
------- ------- -------
Net cash provided by operating activities...... 196,119 107,927 188,022
------- ------- -------
25
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
2001 2000 1999
---------- ---------- --------
Investing activities
Investments in unconsolidated companies...... (25,799) -- --
Purchases of available-for-sale marketable
securities.................................. (2,578,504) (3,791,568) (838,591)
Maturities of available-for-sale marketable
securities.................................. 2,708,404 3,528,305 874,800
Business combinations, net of cash acquired.. -- (26,596) (69,279)
Capital and other expenditures............... (32,412) (14,932) (42,809)
Proceeds from disposition of fixed assets.... -- 5,587 2,719
Proceeds from disposition of business unit... -- -- 5,137
Proceeds from sale of investment............. -- -- 2,500
Purchases of software technologies and
capitalization of software development
costs....................................... (3,094) (5,150) (5,979)
Acquisition of other assets.................. -- -- (7,537)
---------- ---------- --------
Net cash provided by (used in) investing
activities................................ 68,595 (304,354) (79,039)
---------- ---------- --------
Financing activities
Proceeds from issuance of common stock, net
of issuance costs........................... 114,036 160,580 90,962
Repurchase of common stock................... (359,293) (90,072) (48,866)
Dividends paid............................... (13,580) (14,581) (11,722)
(Decrease) increase in credit line........... -- (1,921) 2,643
(Repayments) notes payable borrowings........ (427) (704) 1,828
Minority interest............................ 13,957 -- --
---------- ---------- --------
Net cash (used in) provided by financing
activities................................ (245,307) 53,302 34,845
---------- ---------- --------
Effect of exchange rate changes on cash and
cash equivalents............................ (11,657) (7,495) 6,375
Adjustment to conform fiscal year of Discreet
Logic....................................... -- 320 (33,810)
---------- ---------- --------
Net increase (decrease) in cash and cash
equivalents................................. 7,750 (150,300) 116,393
Cash and cash equivalents at beginning of
year........................................ 108,641 258,941 142,548
---------- ---------- --------
Cash and cash equivalents at end of year..... $ 116,391 $ 108,641 $258,941
========== ========== ========
Supplemental noncash information:
Common stock received in relation to the
equity collar............................... $ -- $ -- $ 4,265
========== ========== ========
Shares issued in connection with an
acquisition................................. $ 2,780 $ -- $ --
========== ========== ========
See accompanying notes.
26
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common stock
and additional Accumulated
paid-in capital other Total
---------------- Comprehensive comprehensive Deferred Retained stockholders'
Shares Amount income income (loss) compensation earnings equity
------ -------- ------------- ------------- ------------ -------- -------------
Balances, January 31,
1998................... 55,239 $407,064 $(20,102) $ (907) $25,539 $411,594
Common shares issued
under stock option and
stock purchase plans... 3,224 76,550 76,550
Tax effect of stock
options................ 15,469 15,469
Cancellation of
compensatory stock
options................ (25) 25
Compensation expense
related to stock
options................ 331 331
Comprehensive income:
Net income.............. $ 97,132 97,132 97,132
Other comprehensive
income, net of tax:
Unrealized gains on
available-for-sale
securities, net of
reclassification
adjustments........... 198
Foreign currency
translation
adjustment............ 5,772
--------
Other comprehensive
income................ 5,970 5,970 5,970
--------
Comprehensive income... $103,102
========
Adjustment to conform
fiscal year of Discreet
Logic.................. (9,131) (9,131)
Dividends paid.......... (11,722) (11,722)
Repurchase of common
shares................. (1,242) (28,257) (20,609) (48,866)
------ -------- -------- ------- ------- --------
Balances, January 31,
1999................... 57,221 470,801 (14,132) (551) 81,209 537,327
Common shares issued
under stock option and
stock purchase plans... 1,915 42,819 42,819
Tax effect of stock
options................ 4,642 4,642
Shares issued........... 3,000 117,467 117,467
Compensation expense
related to stock
options................ 1,400 (787) 613
Comprehensive income:
Net income.............. $ 9,808 9,808 9,808
Other comprehensive
income, net of tax:
Unrealized losses on
available-for-sale
securities, net of
reclassification
adjustments........... (2,145)
Foreign currency
translation
adjustment............ 1,455
--------
Other comprehensive
income................ (690) (690) (690)
--------
Comprehensive income... $ 9,118
========
Adjustment to conform
fiscal year of Discreet
Logic.................. (5,034) (5,034)
Dividends paid.......... (14,581) (14,581)
Repurchase of common
shares................. (2,895) (75,315) (14,757) (90,072)
------ -------- -------- ------- ------- --------
Balances, January 31,
2000................... 59,241 $561,814 $(14,822) $(1,338) $56,645 $602,299
(continued on next page)
27
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
(In thousands)
Common Stock
and Additional Accumulated
Paid-in Capital Other Total
---------------- Comprehensive Comprehensive Deferred Retained Stockholders'
Shares Amount Income Income (Loss) Compensation Earnings Equity
------ -------- ------------- ------------- ------------- -------- -------------
Balances, January 31,
2000................... 59,241 $561,814 $(14,822) $(1,338) $56,645 $602,299
Common shares issued
under stock option and
stock purchase plans... 4,618 114,036 114,036
Tax effect of stock
options................ 21,055 21,055
Shares issued in
connection with an
acquisition............ 78 2,780 2,780
Compensation expense
related to stock
options................ 260 166 426
Comprehensive income:
Net income.............. $93,233 93,233 93,233
Other comprehensive
income, net of tax:
Unrealized gains on
available-for-sale
securities, net of
reclassification
adjustments........... 3,727
Foreign currency
translation
adjustment............ (5,009)
-------
Other comprehensive
income................ (1,282) (1,282) (1,282)
-------
Comprehensive income... $91,951
=======
Dividends paid.......... (2,053) (11,527) (13,580)
Repurchase of common
shares................. (9,223) (273,240) (86,053) (359,293)
------ -------- -------- ------- ------- --------
Balances, January 31,
2001................... 54,714 $424,652 $(16,104) $(1,172) $52,298 $459,674
====== ======== ======== ======= ======= ========
See accompanying notes.
28
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2001
Note 1. Autodesk and Summary of Significant Accounting Policies
About Autodesk
Autodesk, Inc. ("Autodesk") is one of the world's leading design software
and digital content companies for architectural design and land development,
manufacturing, utilities, telecommunications, and media and entertainment.
Founded in April 1982, Autodesk provides design software, Internet portal
services, wireless development platforms and point-of-location applications.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Autodesk and its wholly and majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The equity method
of accounting is used for investments in companies in which Autodesk has
significant influence, which is generally represented by stock ownership of at
least 20 percent but not more than 50 percent.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in Autodesk's consolidated
financial statements and notes thereto. Actual results could differ materially
from those estimates.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated from
their respective functional currencies into U.S. dollars at the rates in
effect at the balance sheet date, and revenue and expense amounts are
translated at weighted average rates during the period. Foreign currency
translation adjustments are recorded as other comprehensive income.
Gains and losses realized from foreign currency transactions, those
transactions denominated in currencies other than the subsidiary's functional
currency, are included in interest and other income.
Forward Foreign Exchange Contracts ("Forwards") and Option Contracts
("Options")
Autodesk hedges a portion of its exposure in certain receivables and
payables as well as certain anticipated cash flows denominated in foreign
currencies using forwards and options in European and Asian currencies. Gains
and losses associated with exchange rate fluctuations on forwards and options
are recorded in interest and other income and offset corresponding gains and
losses on the assets, liabilities, and anticipated cash flows being hedged.
The costs of forwards are amortized on a straight-line basis over the life of
the contract as interest and other income, while option premiums are expensed
entirely on the date of purchase because of the short-term life of the
options.
Cash and Cash Equivalents
Autodesk considers all highly liquid investments with insignificant
interest rate risk and original maturities of three months or less to be cash
equivalents. Cash equivalents are recorded at cost, which approximates fair
value.
29
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Marketable Securities
Marketable securities are stated at fair value. Marketable securities
maturing within one year that are not restricted are classified as current
assets.
Autodesk determines the appropriate classification of its marketable
securities at the time of purchase and reevaluates such classification as of
each balance sheet date. Autodesk has classified all of its marketable
securities as available-for-sale and carries such securities at fair value,
with unrealized gains and losses, net of tax, reported in stockholders' equity
until disposition.
Concentration of Credit Risk
Autodesk places its cash, cash equivalents and marketable securities with
and in the custody of financial institutions with high credit standing and, by
policy, limits the amounts invested with any one institution, type of security
and issuer.
Autodesk's accounts receivable are derived from sales to a large number of
direct customers, resellers and distributors in the Americas, Europe and the
Asia Pacific region. Autodesk performs ongoing evaluations of its customers'
financial condition and limits the amount of credit extended when deemed
necessary, but generally requires no collateral. No single customer accounted
for more than 10 percent of consolidated net revenues in fiscal 2001, 2000 or
1999.
Inventories
Inventories, consisting principally of diskettes, compact discs (CDs), user
manuals and hardware purchased for resale are stated at the lower of cost
(determined on the first-in, first-out method) or market.
Computer Equipment, Furniture and Leasehold Improvements
Computer equipment and furniture are depreciated using the straight-line
method over the estimated useful lives of the assets, which range from two to
five years. Leasehold improvements are amortized on a straight-line basis over
the shorter of the estimated useful life or the lease term. Depreciation
expense was $26.2 million in fiscal 2001, $30.2 million in fiscal 2000 and
$33.0 million in fiscal 1999.
Purchased Technologies and Capitalized Software
Costs incurred in the initial design phase of software development are
expensed as incurred. Once the point of technological feasibility is reached,
production costs (programming and testing) are capitalized. Certain acquired
software-technology rights are also capitalized. Capitalized software costs
are amortized ratably, as revenues are recognized, but not less than on a
straight-line basis over 18-month to five-year periods. Amortization expense,
which is included as a component of cost of revenues, was $16.1 million in
fiscal 2001, $18.9 million in fiscal 2000 and $19.1 million in 1999. The
actual lives of Autodesk's purchased technologies or capitalized software may
differ from management's estimates, and such differences could cause carrying
amounts of these assets to be reduced materially.
Other Intangible Assets
Amortization of purchased intangibles and goodwill is provided on a
straight-line basis over the respective useful lives of the assets, which
range from three to seven years. Accumulated amortization was $118.5 million
as of January 31, 2001 and $91.9 million at January 31, 2000.
30
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
As circumstances dictate, Autodesk assesses the recoverability of its other
intangible assets by comparing the undiscounted net cash flows associated with
such assets against their respective carrying values. Impairment, if any, is
based on the excess of the carrying value over the fair value.
Web Site Development Costs
During the third quarter of fiscal 2001, Autodesk adopted the provisions of
the Emerging Issues Task Force ("EITF") consensus No. 00-2, "Accounting for
Web Site Development Costs." This consensus provides guidance on what types of
costs associated with Web site development should be capitalized or expensed.
Through January 31, 2001, Autodesk capitalized $1.7 million of Web site
development costs. Such capitalized amounts are being amortized over a two-
year period.
Investments in Privately-held Businesses
Autodesk has several minority investments in privately-held technology
companies, many of which are in the start-up or development stage. With the
exception of investments in Buzzsaw.com, Inc. and RedSpark, Inc., these
investments are accounted for using the cost method of accounting. These
investments are carried at cost and are included in other assets in the
accompanying consolidated balance sheets. Autodesk monitors these investments
for impairment and makes appropriate reductions in carrying values when
declines in their fair value are determined to be other-than-temporary.
Employee Stock Compensation
As permitted by Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), Autodesk measures
compensation expense for its stock-based employee compensation plans using the
intrinsic method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). In accordance with SFAS
123, Autodesk has provided in Note 10 the pro forma disclosures of the effect
on net income and earnings per share if SFAS 123 had been applied in measuring
compensation expense for all periods presented.
Revenue Recognition
Autodesk recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the price is
fixed or determinable, and collectibility is probable. Autodesk's revenue
recognition policies are in compliance with the provisions of the American
Institute of Certified Public Accountants' Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"), as amended by Statement of
Position 98-9.
Net revenues primarily consist of product sales, which include software
licenses and the related hardware and peripherals. Product sales are
recognized at the time of shipment. In addition to product sales, Autodesk
recognizes subscription revenues ratably over the contract period, customer
consulting and training revenues as the services are performed, and revenues
from post contract customer support and other related services ratably as the
obligations are fulfilled, or when the related services are performed.
With the exception of certain distributors, agreements with Autodesk's
value-added resellers ("VARs") do not contain specific product-return
privileges. However, Autodesk permits its VARs to return product in certain
instances, generally during periods of product transition and during update
cycles.
31
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Autodesk establishes allowances for product returns, including allowances
for stock balancing and product rotation, based on estimated future returns of
product and after taking into consideration channel inventory levels at its
resellers, the timing of new product introductions and other factors. These
allowances are recorded as direct reductions of revenue and accounts
receivable at the time the related revenue is recognized.
Reclassifications
During the fourth quarter of fiscal 2001, Autodesk adopted EITF consensus
No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" and
EITF consensus No. 00-10, "Accounting for Shipping and Handling Fees and
Costs". As a result, dealer commissions totaling $24.7 million in fiscal 2001,
$25.4 million in fiscal 2000 and $19.4 million in fiscal 1999, which
previously were recorded as a direct reduction of net revenues, were
reclassified to sales and marketing expenses. Additionally, shipping and
handling amounts billed totaling $2.1 million in fiscal 2001, $2.4 million in
fiscal 2000, and $2.5 million in fiscal 1999, which previously were recorded
as a reduction of cost of sales, were reclassified to net revenues. The
adoption of these EITF issues did not impact Autodesk's current or previously
reported net income or loss.
In addition, certain other reclassifications have been made to the fiscal
2000 and 1999 consolidated financial statements to conform to the fiscal 2001
presentation.
Advertising Expenses
Advertising costs are expensed the first time the advertising takes place.
Total advertising expenses incurred were $15.3 million in fiscal 2001, $18.3
million in fiscal 2000 and $13.1 million in fiscal 1999.
Recently Issued Accounting Standards
Effective November 1, 2000 Autodesk adopted Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" ("SAB 101"). The adoption
of SAB 101 did not have a material impact on Autodesk's financial statements.
On February 1, 2001 Autodesk adopted the provisions of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This Statement requires Autodesk to
recognize all derivatives on the balance sheet at fair value. Had Autodesk
adopted SFAS 133 during fiscal 2001, the impact would not have been material.
The adoption of SFAS 133 on February 1, 2001 did not have a material impact on
Autodesk's financial position.
32
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Note 2. Net Income Per Share
Basic net income per share is calculated using the weighted average number
of common shares outstanding. Diluted net income per share is computed using
the weighted average number of common shares outstanding plus the dilutive
effect of stock options outstanding. A reconciliation of the numerators and
denominators used in the basic and diluted net income per share amounts
follows:
Year ended January 31,
----------------------
2001 2000 1999
------- ------ -------
(In thousands)
Numerator:
Numerator for basic and diluted net income per
share--net income................................ $93,233 $9,808 $97,132
======= ====== =======
Denominator:
Denominator for basic net income per share--
weighted average shares.......................... 57,188 60,328 56,394
Effect of dilutive common stock options........... 1,326 1,078 2,747
------- ------ -------
Denominator for diluted net income per share...... 58,514 61,406 59,141
======= ====== =======
The computation of diluted net income per share does not include 6.0
million options for fiscal 2001, 8.3 million options for fiscal 2000 and 3.2
million options for fiscal 1999. Such options were excluded because the
options had exercise prices greater than the average market prices of common
stock during the respective periods, and, therefore were anti-dilutive.
Note 3. Financial Instruments
Fair Values of Financial Instruments
Estimated fair values of financial instruments are based on quoted market
prices. The carrying amounts and fair value of Autodesk's financial
instruments are as follows:
January 31, 2001 January 31, 2000
----------------- -----------------
Fair Fair
Cost value Cost value
-------- -------- -------- --------
(In thousands)
Cash and cash equivalents............... $116,391 $116,391 $108,641 $108,641
Marketable securities................... 302,761 306,109 434,296 432,282
Forward foreign currency contracts...... 8 8 8 8
Foreign currency option contracts....... 218 218 -- --
Forwards
Autodesk utilizes forwards to reduce its foreign exchange rate risk. The
forwards, which have average maturities of 60 days or less, are used to hedge
material foreign currency denominated assets and liabilities, principally
receivables and payables. They are not used for trading or speculative
purposes. Forwards are marked-to-market at the end of each period, with gains
and losses recognized as other income or expense to offset the gains or losses
resulting from the settlement of the underlying foreign currency denominated
receivables and payables.
33
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
The notional amounts of foreign currency contracts were $36.6 million at
January 31, 2001 and $37.6 million at January 31, 2000. While the contract or
notional amount is often used to express the volume of foreign exchange
contracts, the amounts potentially subject to credit risk are generally
limited to the amounts, if any, by which the counterparties' obligations under
the agreements exceed the obligations of Autodesk to the counterparties. Gains
resulting from foreign currency transactions were not material in fiscal 2001,
2000 and 1999.
Options
In addition to the forward contracts, Autodesk utilizes foreign currency
option contracts to reduce the exchange rate impact on anticipated net revenue
transactions. These option contracts have maturities of less than three months
and settle before the end of each fiscal quarter. They are not used for
trading or speculative purposes. Autodesk's financial exposure is limited to
the amount paid for the options and any resulting gains from these option
contracts are deferred until the underlying hedged transaction is recorded.
The notional amounts of foreign currency option contracts at January 31,
2001 was $2.3 million. Autodesk did not use option contracts prior to fiscal
2001. Gains resulting from foreign currency transactions were not material in
fiscal 2001.
Marketable Securities
Marketable securities include the following available-for-sale securities
at January 31, 2001 and 2000:
January 31, 2001
---------------------------------------------------------
Gross unrealized Gross unrealized Estimated fair
Cost gains losses value
-------- ---------------- ---------------- --------------
(In thousands)
Short-term:
Municipal Bonds....... $ 57,296 $ 38 $-- $ 57,334
Preferred Stock....... 10,500 5 -- 10,505
Money Market.......... 43,737 84 -- 43,821
Commercial Paper and
Corporate Bonds...... 4,498 19 -- 4,517
Agency Securities..... 26,686 98 -- 26,784
-------- ------ --- --------
142,717 244 -- 142,961
-------- ------ --- --------
Long-term:
Municipal Bonds....... $144,411 $2,791 $-- $147,202
Corporate Bonds....... 2,993 98 -- 3,091
Asset Backed
Securities........... 4,002 72 -- 4,074
Agency Securities..... 8,638 143 -- 8,781
-------- ------ --- --------
160,044 3,104 -- 163,148
-------- ------ --- --------
$302,761 $3,348 $-- $306,109
======== ====== === ========
34
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
January 31, 2000
---------------------------------------------------------
Gross unrealized Gross unrealized Estimated fair
Cost gains losses value
-------- ---------------- ---------------- --------------
(In thousands)
Short-term:
Municipal Bonds....... $138,084 $87 $ (3) $138,168
Preferred Stock....... 37,200 -- -- 37,200
Money Market.......... 60,945 -- -- 60,945
Agency Securities..... 13,996 -- (19) 13,977
-------- --- ------- --------
250,225 87 (22) 250,290
-------- --- ------- --------
Long-term:
Municipal Bonds....... 165,663 -- (1,997) 163,666
Treasury Notes........ 7,991 -- -- 7,991
Corporate Bonds....... 1,500 -- -- 1,500
Asset Backed
Securities........... 2,003 -- -- 2,003
Agency Securities..... 6,914 -- (82) 6,832
-------- --- ------- --------
184,071 -- (2,079) 181,992
-------- --- ------- --------
$434,296 $87 $(2,101) $432,282
======== === ======= ========
The contractual maturities of Autodesk's long-term marketable securities at
January 31, 2001 were as follows: $76.1 million between one and two years;
$44.9 million maturing in three years; $33.1 million maturing in four to five
years; and $9.0 million beyond five years. Expected maturities may differ from
contractual maturities because the issuers of the securities may have the
right to prepay or call obligations without prepayment penalties. Realized
gains and losses on available-for-sale securities were immaterial in fiscal
2001, 2000 and 1999. The cost of securities sold is based on the specific
identification method.
Note 4. Income Taxes
The provision for income taxes consists of the following:
Fiscal year ended
January 31,
--------------------------
2001 2000 1999
-------- ------- -------
(In thousands)
Federal:
Current........................................ $ 26,350 $17,059 $30,708
Deferred....................................... 289 (13,027) 7,773
State:
Current........................................ 4,914 2,068 3,627
Deferred....................................... (452) (1,393) 1,229
Foreign:
Current........................................ 15,657 14,946 17,029
Deferred....................................... 4,782 (5,541) 1,723
-------- ------- -------
$ 51,540 $14,112 $62,089
======== ======= =======
35
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
The tax benefit associated with dispositions from employee stock plans
reduced taxes currently payable by $21.0 million for fiscal 2001, $4.6 million
for fiscal 2000 and $15.5 million for fiscal 1999. Foreign pretax income was
$86.4 million in fiscal 2001, $16.6 million in fiscal 2000 and $110.1 million
in fiscal 1999. The valuation allowance decreased by $3.1 million in fiscal
2001 and $1.2 million in fiscal 2000, and increased by $2.8 million in fiscal
1999.
The principal reasons that the aggregate income tax provisions differ from
the U.S. statutory rate are as follows:
Fiscal year ended
January 31,
-------------------------
2001 2000 1999
------- ------- -------
(In thousands)
Income tax provision at statutory rate....... $56,372 $ 8,372 $55,727
Foreign income taxed at rates different from
the U.S. statutory rate..................... (5,058) (2,679) (1,994)
State income taxes, net of federal benefit... 2,436 576 3,041
Tax-exempt interest.......................... (3,526) (3,165) (2,087)
Acquired in-process research and
development................................. -- 645 3,973
Goodwill amortization........................ 4,711 5,945 7,478
Effect of not benefiting foreign subsidiaries
tax losses.................................. -- -- 2,304
Utilization of net operating losses not
previously benefited........................ (3,473) -- (3,786)
Research and development tax credit benefit.. (1,162) (2,438) (2,521)
Non-deductible acquisition costs............. -- 6,473 --
Other........................................ 1,240 383 (46)
------- ------- -------
$51,540 $14,112 $62,089
======= ======= =======
36
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Significant components of Autodesk's deferred tax assets and liabilities
are as follows:
January 31,
-----------------
2001 2000
-------- -------
(In thousands)
Purchased technology and capitalized software............. $ 17,661 $10,880
Reserves for product returns and bad debts................ 10,281 9,359
Tax loss carryforwards.................................... 6,512 3,671
Accrued compensation and benefits......................... 5,546 4,966
Fixed assets.............................................. 8,522 9,371
Accrued state income taxes................................ 563 331
Research and development credit carryforwards............. 4,746 11,325
Inventory reserves........................................ 1,473 1,319
Other accruals not currently deductible for tax........... 8,686 8,947
Other..................................................... -- 4,945
-------- -------
Total deferred tax assets................................. 63,990 65,114
Less: valuation allowance................................. (4,849) (7,988)
-------- -------
Net deferred tax assets................................... 59,141 57,126
-------- -------
Unremitted earnings of foreign subsidiaries............... (13,108) (6,018)
Other..................................................... (1,095) --
-------- -------
Total deferred tax liability.............................. (14,203) (6,018)
-------- -------
Net deferred tax assets................................... $ 44,938 $51,108
======== =======
No provision has been made for federal income taxes on unremitted earnings
of certain of Autodesk's foreign subsidiaries (cumulative $318.0 million at
January 31, 2001) because Autodesk plans to reinvest such earnings for the
foreseeable future. At January 31, 2001, the unrecognized deferred tax
liability for these earnings was approximately $87.0 million.
Realization of the Company's net deferred tax assets is dependent upon the
Company generating sufficient taxable income in future years in appropriate
tax jurisdictions to obtain benefit from the reversal of temporary differences
and from tax credit carryforwards. The amount of deferred tax assets
considered realizable is subject to adjustment in future periods if estimates
of future taxable income are reduced.
Cash payments for income taxes were approximately $14.0 million in fiscal
2001, $37.6 million in fiscal 2000 and $20.9 million in fiscal 1999.
Autodesk has $18.6 million of cumulative tax loss carryforwards, which may
be available to reduce future income tax liabilities in certain jurisdictions.
The tax loss carryforwards will expire beginning January 31, 2007. Autodesk
has recorded a valuation allowance against some deferred tax assets including
the tax benefit of these tax loss carryforwards due to the uncertainty of
their realizability.
Autodesk has $4.7 million of cumulative research tax credit carryforwards,
which may be available to reduce future income tax liabilities in California
indefinitely.
37
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Note 5. Investment in Affiliate--Buzzsaw.com, Inc. ("Buzzsaw")
In October 1999, Autodesk formed Buzzsaw. Between October and December
1999, Autodesk owned a majority interest in Buzzsaw, and as such, Autodesk
consolidated Buzzsaw's results of operations, which were included within
Autodesk's fiscal 2000 cost and expense categories. After December 1999,
Autodesk owned a less than majority interest in Buzzsaw.
In April 2000, Autodesk invested an additional $17.5 million in Buzzsaw.
Autodesk currently maintains approximately a 40 percent interest in Buzzsaw
and is accounting for this investment under the equity method of accounting.
During fiscal 2001, Autodesk recognized $16.3 million of losses, which
represents Autodesk's proportionate share of Buzzsaw's losses from April 2000
through January 2001.
Summarized financial information for Buzzsaw, which ended their fiscal year
on December 31, 2000, is as follows:
As of
December 31,
2000
-----------------
(In thousands)
Current assets............................................. $30,791
Non-current assets......................................... 19,123
Current liabilities........................................ 9,141
Non-current liabilities.................................... 2,268
Redeemable convertible preferred stock..................... 98,560
Net assets................................................. 38,505
Fiscal year ended
December 31, 2000
-----------------
Net revenues............................................... $ 5,354
Cost of sales.............................................. 14,461
Loss from operations....................................... 50,898
Net loss attributable to common stockholders............... 54,455
Note 6. Minority Interest--RedSpark, Inc. ("RedSpark")
In April 2000, Autodesk formed RedSpark. In October 2000, RedSpark received
$14.0 million of third party venture funding. Autodesk currently maintains a
majority interest in RedSpark, and consolidates RedSpark's financial position
and results of operations.
The minority interest at January 31, 2001 represents equity funding
received by RedSpark from third party investors, net of allocated losses for
the period October 2000 through January 2001.
Note 7. Borrowing Arrangements
Autodesk has a U.S. line of credit permitting short-term, unsecured
borrowings of up to $75.0 million, which may be used from time to time for
working capital or other business needs. At January 31, 2001, there were no
borrowings outstanding under this agreement, which expires in January 2002.
38
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Note 8. Commitments and Contingencies
Autodesk leases office space and computer equipment under noncancelable
operating lease agreements. The leases generally provide that Autodesk pay
taxes, insurance and maintenance expenses related to the leased assets. Future
minimum lease payments for fiscal years ended January 31 are as follows: $29.3
million in 2002; $27.2 million in 2003; $21.7 million in 2004; $19.0 million
in 2005; $16.9 million in 2006; and $18.9 million thereafter.
Rent expense was $31.8 million in fiscal 2001, $30.2 million in fiscal 2000
and $25.7 million in fiscal 1999.
Autodesk is a party to various legal proceedings arising from the normal
course of business activities. In management's opinion, resolution of these
matters is not expected to have a material adverse impact on Autodesk's
consolidated results of operations or its financial position. However,
depending on the amount and timing, an unfavorable resolution of a matter
could materially affect Autodesk's future results of operations or cash flows
in a particular period.
Note 9. Stockholders' Equity
Preferred Stock
Under Autodesk's Certificate of Incorporation, 2.0 million shares of
preferred stock are authorized. At January 31, 2001, there were no preferred
shares issued or outstanding. The Board of Directors has the authority to
issue the preferred stock in one or more series and to fix rights,
preferences, privileges and restrictions, including dividends, and the number
of shares constituting any series or the designation of such series, without
any further vote or action by the stockholders.
Common Stock Repurchase Programs
Autodesk repurchased and retired 9.2 million shares in fiscal 2001 at an
average repurchase price of $38.96 per share, 2.9 million shares in fiscal
2000 at an average price of $31.11, and 1.2 million shares in fiscal 1999 at
an average price of $39.34. The primary purpose of the stock repurchase
programs was to help offset the dilution to earnings per share caused by the
issuance of stock under Autodesk's employee stock plans.
Between November 1999 and March 2001, the Board of Directors approved plans
to repurchase a total of 22.0 million common shares. Of these 22.0 million
shares, 12.1 million shares were repurchased and retired as of January 31,
2001 through a combination of open market purchases and settlement of equity
collar contracts. The number of shares acquired and the timing of the
purchases are based on several factors, including general market conditions
and the trading price of Autodesk common stock.
In fiscal 2000 Autodesk repurchased its common stock through open market
purchases, and in fiscal 1999 Autodesk used a combination of open market
purchases and equity collar contracts to repurchase Autodesk's common stock.
These fiscal 1999 share repurchases were part of an on-going and systematic
repurchase plan that was approved by Autodesk's Board of Directors.
Dividends
During fiscal 2001 and 2000 Autodesk paid annual dividends of $0.24 per
share. During fiscal 1999 Autodesk paid annual dividends of $0.20 per share.
Fiscal year 2001 dividends were paid at a rate of $0.06 each quarter.
39
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Note 10. Stock Compensation and Employee Benefit Plans
Stock Option Plans
Incentive and nonqualified stock options may be granted to officers,
employees, directors and consultants. Autodesk, however, does not have a
practice of awarding stock options to consultants. Options vest over periods
of one to five years and generally have terms of up to ten years. The exercise
price of the stock options is generally at least equal to the fair market
value of the stock on the grant date.
A summary of stock option activity is as follows:
Weighted
Number of average price
shares per share
--------- -------------
(Shares in thousands)
Options outstanding at January 31, 1998............. 14,217 $30.10
Granted........................................... 3,320 36.49
Exercised......................................... (2,595) 24.74
Canceled.......................................... (1,020) 34.96
------
Options outstanding at January 31, 1999............. 13,922 $32.27
Granted........................................... 5,984 26.70
Exercised......................................... (1,087) 21.06
Canceled.......................................... (2,902) 34.65
------
Options outstanding at January 31, 2000............. 15,917 $30.47
Granted........................................... 4,455 32.00
Exercised......................................... (3,696) 26.09
Canceled.......................................... (3,177) 33.74
------
Options outstanding at January 31, 2001............. 13,499 $31.43
Options exercisable at January 31, 2001............. 5,782 $32.59
Options available for grant at January 31, 2001..... 2,922 --
The following table summarizes information about options outstanding and
exercisable at January 31, 2001:
Options Exercisable Options Outstanding
----------------------------- ----------------------------------------------
Weighted Weighted
Number of average Number of Weighted average average
shares exercise price shares contractual life exercise price
-------------- -------------- -------------- ---------------- --------------
(in thousands) (in thousands) (in years)
Range of per share
exercise prices:
$0.01--24.13 1,210 $20.46 3,453 7.7 $21.27
$24.25--30.25 1,316 27.22 3,596 8.1 26.91
$30.38--38.06 1,922 34.33 3,509 7.5 34.50
$38.25--73.49 1,334 46.37 2,941 7.5 45.23
----- ------ ------ --- ------
5,782 $32.59 13,499 7.7 $31.43
These options will expire if not exercised at specific dates ranging
through January 2011.
40
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
A total of 16.4 million shares of Autodesk's common stock have been
reserved for future issuance under existing stock option programs.
Employee Stock Purchase Plan
Under Autodesk's employee stock purchase plan, eligible employees may
purchase shares of Autodesk's common stock, at their discretion using up to 15
percent of their compensation subject to certain limitations, at not less than
85 percent of fair market value as defined in the plan agreement. Autodesk
issued 0.9 million shares at an average price of $18.27 per share in fiscal
2001, 0.8 million shares at an average price of $20.25 in fiscal 2000, and 0.6
million shares at an average price of $23.21 in fiscal 1999. At January 31,
2001, a total of 3.3 million shares were available for future issuance under
the plan.
Pro Forma Net Income (Loss) Information
Autodesk applies APB 25 in accounting for its employee stock plans.
Accordingly, no compensation expense is recognized in Autodesk's consolidated
statement of operations, other than for stock awards that have exercise prices
less than the fair market value of Autodesk's common stock at the date of
grant.
Had compensation expense been determined in accordance with the fair value
method prescribed by SFAS 123, Autodesk's pro forma net income for fiscal 2001
was $39.1 million, loss for fiscal 2000 was $44.7 million and net income for
fiscal 1999 was $52.2 million. Pro forma basic net income (loss) per share was
$0.68 in fiscal 2001, $(0.74) in fiscal 2000, and $0.93 in fiscal 1999. Pro
forma diluted net income (loss) per share was $0.67 in fiscal 2001, $(0.74) in
fiscal 2000, and $0.88 in fiscal 1999.
The weighted average estimated fair value of stock options granted was
$17.50 per share during fiscal 2001, $14.38 during fiscal 2000 and $14.14
during fiscal 1999. These were estimated using the Black-Scholes option-
pricing model, based on the following assumptions: expected volatility of 0.6
for fiscal 2001, 2000 and 1999; the weighted average estimated life was 5
years for fiscal 2001 and 2000 and 3 years for 1999; the weighted average
risk-free rate was 5.7% for fiscal 2001, 5.8% for fiscal 2000 and 5.6% for
fiscal 1999; and the dividend yield was 0.8% for fiscal 2001, 0.9% for fiscal
2000 and 0.7% for fiscal 1999.
The weighted average estimated fair value of shares granted under the
employee stock purchase plan was $8.58 per share during fiscal 2001, $7.64
during fiscal 2000, and $9.07 during fiscal 1999. These were estimated using
the Black-Scholes option-pricing model, based on the following assumptions:
expected volatility of 0.7 for fiscal 2001, 0.6 for fiscal 2000 and 1999; the
weighted average estimated life was 0.5 years for fiscal 2001, 2000 and 1999;
the weighted average risk-free rate was 5.3% for fiscal 2001, 4.2% for fiscal
2000 and 5.1% for fiscal 1999; and the dividend yield was 0.8% for fiscal
2001, 0.9% for fiscal 2000 and 0.7% for fiscal 1999.
Pretax Savings Plan
Autodesk has a 401(k) plan that covers nearly all U.S. employees. Eligible
employees may contribute up to 20 percent of their pretax salary, subject to
limitations mandated by the Internal Revenue Service. Autodesk makes voluntary
contributions and matches a portion of employee contributions. Autodesk's
contributions were $5.0 million in fiscal 2001, $5.0 million in fiscal 2000
and $4.6 million in fiscal 1999.
Autodesk provides defined-contribution plans in certain foreign countries
where required by statute. Autodesk's funding policy for foreign defined-
contribution plans is consistent with the local requirements in each country.
Autodesk's contributions to these plans were $2.8 million in fiscal 2001, $2.4
million in fiscal 2000 and $1.7 million in fiscal 1999.
41
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Note 11. Business Combinations
Discreet Logic Inc. ("Discreet")
On March 16, 1999, Autodesk acquired Discreet by issuing approximately 10.0
million shares of Autodesk common stock in exchange for Discreet's outstanding
common stock. Discreet develops, assembles, markets, sells and supports
nonlinear digital systems and software for creating, editing and compositing
imagery.
Autodesk accounted for this acquisition under the pooling of interests
method. Accordingly, all prior period consolidated financial statements
presented were restated to include the combined results of operations,
financial position and cash flows as though Discreet had always been part of
Autodesk. Separate results of the combined entities for the three months ended
April 30, 1999 and the fiscal year ended January 31, 1999 are as follows:
Three months
ended Year ended
April 30, 1999 January 31, 1999
-------------- ----------------
(unaudited)
(In millions)
Net revenues:
Autodesk................................... $177.7 $761.7
Discreet................................... 25.0 132.1
------ ------
$202.7 $893.8
====== ======
Net income (loss):
Autodesk................................... $ (7.3) $ 90.6
Discreet................................... (9.8) 6.5
------ ------
$(17.1) $ 97.1
====== ======
Prior to the acquisition, Discreet's fiscal year ended on June 30. As a
result of differing year-ends, Autodesk's consolidated statements of
operations, stockholders' equity and cash flows for the fiscal year ended
January 31, 1999 were combined with Discreet's financial statements for the
twelve months ended December 31, 1998.
Additionally, Discreet's January 1999 results have been excluded from the
accompanying statements of operations as a result of changing Discreet's year-
end to January 31. In January 1999, Discreet recognized net revenues of $3.8
million and incurred a net loss of $5.0 million. The loss was recorded as an
adjustment to retained earnings during fiscal 2000.
In addition to the acquisition of Discreet, the following acquisitions
occurred over the past three years.
VISION* Solutions ("VISION")
On April 22, 1999, Autodesk acquired VISION, a vendor of enterprise
automated mapping/facilities management/geographic information systems
(AM/FM/GIS) solutions. This acquisition was accounted for under the purchase
method of accounting. Of the $26.0 million purchase price, which was paid in
cash, $3.3 million represented the value of in-process research and
development ("IPR&D") that had not yet reached technological feasibility and
had no alternative future use, and as such, was expensed during fiscal 2000.
Of the remaining purchase price, $17.6 million was allocated to goodwill and
$2.1 million was allocated to other intangibles.
42
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Proforma financial results, as defined by Accounting Principles Board
Opinion No. 16, "Business Combinations," have not been provided since this
acquisition was not material.
Genius CAD Software GmbH ("Genius")
On May 4, 1998, Autodesk entered into an agreement with Genius, a German
limited liability company, to purchase various mechanical CAD software
applications and technologies. Autodesk accounted for this acquisition under
the purchase method of accounting. Of the total purchase price of $68.9
million, which was paid in cash, $13.1 million was allocated to IPR&D and was
expensed since the technology had not reached technological feasibility and
had no alternative future use; $12.7 million was allocated to an intangible
asset, purchased technology; and $41.6 million was allocated to goodwill.
The value assigned to the IPR&D ($13.1 million) was determined by
identifying research projects in areas for which technological feasibility had
not been achieved. The calculations of value were adjusted to reflect the
value creation efforts of Genius prior to the close of the acquisition. The
value was determined by estimating the costs remaining to develop the
purchased in-process technology into commercially viable products, estimating
the resulting net cash flows from such projects, and discounting the net cash
flows back to their present value. The discount rate included a factor that
took into account the uncertainty surrounding the successful development of
the purchased in-process technology projects.
The value assigned to purchased technology ($12.7 million) was determined
based on the expected future cash flows of the existing developed
technologies, discounted for the characteristics and applications of the
product, the size of existing markets, growth rates of existing and future
markets, as well as an evaluation of past and anticipated product-life cycles.
Proforma financial results, as defined by Accounting Principles Board
Opinion No. 16, "Business Combinations," have not been provided since this
acquisition was not material.
Note 12. Nonrecurring Charges
During fiscal 2001, Autodesk recorded nonrecurring credits totaling $1.2
million, which resulted from accrual reversals. The underlying liabilities,
which were originally established in fiscal 2000, were settled for less than
originally estimated.
During fiscal 2000, Autodesk recorded nonrecurring charges totaling $34.7
million, which primarily resulted from the acquisition of Discreet ($17.1
million), acquisition of VISION ($3.3 million) and a corporate restructuring
that occurred during the third quarter ($15.5 million). These nonrecurring
charges were offset by a $1.0 million reversal of a litigation reserve
established in fiscal 1999. The litigation matter was settled for less than
originally estimated.
Of the $17.1 million of charges resulting from the acquisition of Discreet,
$14.1 million related to transaction costs, $2.6 million related to
restructuring costs and $0.4 million related to one-time costs.
Of the $15.5 million of corporate restructuring charges, which resulted
from Autodesk's efforts to reduce operating expenses, $11.7 million related to
termination and other employee costs associated with the elimination of 350
positions, most of which occurred in the U.S.; $3.2 million related to office
closure costs; and $0.6 million related to one-time costs. Employee
termination costs included wage continuation, advance notice pay and
43
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
medical and other benefits. Office closure costs included losses on operating
lease payments ($1.1 million) and the write-off of leasehold improvements and
equipment ($2.1 million). During fiscal 2001, the restructuring was
substantially completed. The following table sets forth the restructuring
activity during fiscal 2001:
Balance at Balance at
February 1, Charges January 31,
2000 Additions Utilized Reversals 2001
----------- --------- -------- --------- -----------
(In millions)
Employee termination
costs................... $1.0 $-- $(0.4) $(0.4) $0.2
Office closure costs..... 0.7 -- (0.3) (0.3) 0.1
Legal entity
liquidations............ 0.5 -- (0.1) (0.3) 0.1
---- --- ----- ----- ----
Total.................. $2.2 $-- $(0.8) $(1.0) $0.4
==== === ===== ===== ====
During fiscal 1999, Autodesk recorded nonrecurring charges totaling $19.7
million, which resulted from the acquisition of Genius ($13.1 million) and
certain other charges ($8.9 million). These nonrecurring charges were offset
by $2.3 million of excess lease-related reserves, which were associated with a
fiscal 1996 restructuring, that Discreet reversed.
Of the $8.9 million of other charges, $1.5 million related to the
consolidation of certain development centers, $2.2 million related to the
write-off of purchased technologies associated with these operations, $1.7
million related to staff reductions in Asia Pacific, $2.5 million related to
costs involving a certain litigation matter, and $1.0 million related to the
write-down to fair market value of older computer equipment. At January 31,
2000, there were no remaining liabilities associated with these nonrecurring
charges.
Note 13. Litigation Accrual Reversal
In fiscal 1995, Autodesk recorded a significant reserve as a result of a
judgment against Autodesk on a claim involving a trade-secret
misappropriation. Autodesk appealed the judgment and as a result of the appeal
decision, which was finalized in May 1998, the amount levied against Autodesk
was significantly reduced. During fiscal 1999, Autodesk reversed the remaining
unutilized litigation accrual of $18.2 million and interest accrual of $2.7
million.
Note 14. Segments
Autodesk's operating results have been aggregated into two reportable
segments: the Discreet Segment and the Design Solutions Segment.
The Discreet Segment derives revenues from the sale of its products to
creative professionals for a variety of applications, including feature films,
television programs, commercials, music and corporate videos, interactive game
production, live broadcasting and Web design.
The Design Solutions Segment derives revenues from the sale of design
software products for professionals, occasional users, or consumers who
design, draft and diagram, and from the sale of mapping and geographic
information systems technology to public and private users.
Both segments primarily distribute their respective products through
authorized dealers and distributors, and, in some cases, they also sell their
products directly to end-users.
44
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
The accounting policies of the reportable segments are the same as those
described in Note 1 to Notes of Consolidated Financial Statements. Autodesk
evaluates each segment's performance on the basis of income from operations
before income taxes. Autodesk currently does not separately accumulate and
report asset information by segment. Information concerning the operations of
Autodesk's reportable segments was as follows:
Fiscal year ended
January 31,
-----------------------
2001 2000 1999
------- ------ ------
(In millions)
Net revenues:
Design Solutions.................................. $ 743.1 $674.4 $720.7
Discreet.......................................... 193.2 173.7 173.1
------- ------ ------
$ 936.3 $848.1 $893.8
======= ====== ======
Income (loss) from operations:
Design Solutions.................................. $ 509.0 $323.4 $394.4
Discreet.......................................... 23.1 (13.2) 19.5
Unallocated amounts/1/............................ (392.1) (309.4) (271.8)
------- ------ ------
$ 140.0 $ 0.8 $142.1
======= ====== ======
Depreciation and amortization:
Design Solutions.................................. $ 34.0 $ 43.4 $ 39.4
Discreet.......................................... 16.6 20.6 22.1
Unallocated amounts............................... 18.2 15.7 19.3
------- ------ ------
$ 68.8 $ 79.7 $ 80.8
======= ====== ======
- --------
/1/Unallocated amounts are attributed primarily to corporate expenses and
other geographic costs and expenses managed outside the reportable segments.
Unallocated amounts in fiscal 2001 also include nonrecurring credits of $1.2
million, which consisted of fiscal 2000 corporate restructuring charge
reversals. Unallocated amounts in fiscal 2000 also include nonrecurring
charges of $13.8 million, a significant portion of which consisted of the
corporate restructuring charges. Unallocated amounts in fiscal 1999 also
include nonrecurring income of $12.7 million.
Information regarding Autodesk's operations by geographic area is as
follows:
Fiscal year ended January 31,
-----------------------------
2001 2000 1999
--------- --------- ---------
(In millions)
Net revenues:
United States customers..................... $ 374.9 $ 317.7 $ 375.4
Other Americas.............................. 57.8 63.3 60.2
--------- --------- ---------
Total Americas............................ 432.7 381.0 435.6
Europe...................................... 296.0 296.4 329.6
Asia Pacific................................ 207.6 170.7 128.6
--------- --------- ---------
Total net revenues........................ $ 936.3 $ 848.1 $ 893.8
========= ========= =========
45
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
January 31,
--------------
2001 2000
------ ------
(In millions)
Long-lived assets:/1/
United States operations................................... $282.9 $347.0
Other Americas............................................. 15.8 15.1
------ ------
Total Americas........................................... 298.7 362.1
Neuchatel, Switzerland/2/.................................. 251.9 195.1
Other Europe............................................... 227.0 228.4
------ ------
Total Europe............................................. 478.9 423.5
Asia Pacific............................................... 6.8 6.6
------ ------
Consolidating eliminations................................. (649.4) (639.9)
------ ------
Total long-lived assets.................................. $135.0 $152.3
====== ======
- --------
/1/Long-lived assets exclude financial instruments and deferred tax assets. As
such, marketable securities and deferred taxes have been excluded above.
/2/Investment in Discreet held by Neuchatel. This investment eliminates upon
consolidation.
Note 15. Comprehensive Income
The components of total accumulated other comprehensive loss in the balance
sheet are as follows:
January 31,
-----------------------
2001 2000
-------- --------
(In thousands)
Unrealized gains (losses) on available-for-sale
securities, net of tax........................... $ 2,357 $ (1,370)
Foreign currency translation adjustment........... (18,461) (13,452)
-------- --------
Total accumulated other comprehensive loss...... $(16,104) $(14,822)
======== ========
46
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
The related income tax effects allocated to each component of other
comprehensive income (loss) are as follows:
Income
Amount tax Amount
before (expense) net of
taxes benefit taxes
------- --------- -------
(In thousands)
Fiscal 2001:
Unrealized gains on available-for-sale
securities.................................. $ 5,405 $(1,730) $ 3,675
Less: reclassification for amounts realized
in net income............................... 76 (24) 52
------- ------- -------
Net unrealized gains......................... 5,481 (1,754) 3,727
Foreign currency translation adjustments..... (5,009) -- (5,009)
------- ------- -------
Total other comprehensive income (loss).... $ 472 $(1,754) $(1,282)
======= ======= =======
Fiscal 2000:
Unrealized losses on available-for-sale
securities.................................. $(2,869) $ 918 $(1,951)
Less: reclassification for amounts realized
in net income............................... (285) 91 (194)
------- ------- -------
Net unrealized losses........................ (3,154) 1,009 (2,145)
Foreign currency translation adjustments..... 1,455 -- 1,455
------- ------- -------
Total other comprehensive loss............. $(1,699) $ 1,009 $ (690)
======= ======= =======
Fiscal 1999:
Unrealized gains on available-for-sale
securities.................................. $ 18 $ (6) $ 12
Less: reclassification for amounts realized
in net income............................... (269) 83 (186)
------- ------- -------
Net unrealized gains......................... 287 (89) 198
Foreign currency translation adjustments..... 5,772 -- 5,772
------- ------- -------
Total other comprehensive income........... $ 6,059 $ (89) $ 5,970
======= ======= =======
47
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Note 16. Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for fiscal 2001 and 2000 is as
follows:
Fiscal
1st quarter 2nd quarter 3rd quarter 4th quarter year
----------- ----------- ----------- ----------- --------
(In thousands, except per share data)
Fiscal 2001
Net revenues.......... $231,259 $232,841 $229,177 $243,047 $936,324
Gross margin.......... 194,533 193,632 191,221 206,740 786,126
Income from
operations........... 37,983 34,000 29,520 38,511 140,014
Net income............ 25,606 20,753 18,511 28,363 93,233
Basic net income per
share................ 0.43 0.36 0.33 0.51 1.63
Diluted net income per
share................ 0.41 0.35 0.32 0.51 1.59
Fiscal 2000
Net revenues.......... $202,661 $210,582 $208,131 $226,677 $848,051
Gross margin.......... 169,649 170,310 172,310 189,467 701,736
Income (loss) from
operations........... (20,209) (5,248) (4,435) 30,655 763
Net income (loss)..... (17,144) 389 1,393 25,170 9,808
Basic net income
(loss) per share..... (0.29) 0.01 0.02 0.42 0.16
Diluted net income
(loss) per share..... (0.29) 0.01 0.02 0.41 0.16
As a result of two new accounting pronouncements that were effective during
the fourth quarter of fiscal 2001, Autodesk reclassified dealer commissions to
marketing and sales expenses and customer-paid shipping and handling fees to
net revenues (see Note 1 for further discussion). Previously, dealer
commission costs were reflected as a direct reduction of net revenues and
customer-paid shipping and handling amounts were reflected as a reduction of
cost of revenues.
During fiscal 2001, dealer commission costs were $7.4 million (Qtr 1), $6.0
million (Qtr 2), $7.2 million (Qtr 3), $4.1 million (Qtr 4), and $24.7 million
(total). Shipping and handling amounts during fiscal 2001 were as follows:
$0.6 million (Qtr 1), $0.5 million (Qtr 2), $0.5 million (Qtr 3), $0.5 million
(Qtr 4), and $2.1 million (total).
During fiscal 2000, dealer commission costs were $7.1 million (Qtr 1), $7.0
million (Qtr 2), $5.4 million (Qtr 3), $5.9 million (Qtr 4), and $25.4 million
(total). Shipping and handling amounts during fiscal 2000 were as follows:
$0.6 million (Qtr 1), $0.6 million (Qtr 2), $0.6 million (Qtr 3), $0.6 million
(Qtr 4), and $2.4 million (total).
48
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
January 31, 2001
Results for the first quarter and third quarter of fiscal 2001 included
nonrecurring credits totaling $0.8 million and $0.4 million, respectively,
$1.0 million of which related to the reversal of fiscal 2000 restructuring
charges.
Results for the first quarter of fiscal 2000 included nonrecurring charges
totaling $21.8 million, which resulted from the acquisition of Discreet and
VISION. Results for the third quarter of fiscal 2000 included nonrecurring
charges totaling $14.7 million, which primarily related to a corporate
restructuring. Results for the fourth quarter of fiscal 2000 included
nonrecurring credits totaling $1.8 million, primarily related to the reversal
of a litigation reserve established in fiscal 1999.
49
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders of Autodesk, Inc.
We have audited the accompanying consolidated balance sheets of Autodesk,
Inc., as of January 31, 2001 and 2000 and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended January 31, 2001. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of Autodesk's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the financial statements of
Discreet Logic Inc., a wholly-owned subsidiary acquired in March, 1999, which
statements reflect net income constituting approximately 9% of the related
consolidated financial statement totals for the year ended January 31, 1999.
Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Discreet Logic Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits and the
report of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Autodesk, Inc. at
January 31, 2001 and 2000, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended January 31,
2001, in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 9, 2001
50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in
that the Registrant will file a definitive proxy statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end
of the fiscal year covered by this Report and certain information included
therein is incorporated herein by reference. Only those sections of the Proxy
Statement that specifically address the items set forth herein are
incorporated by reference. Such incorporation does not include the
Compensation Committee Report or the Performance Graph included in the Proxy
Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning Autodesk's directors and compliance with Section
16 of the Securities and Exchange Act of 1934 required by this Item are
incorporated by reference to Autodesk's Proxy Statement.
The information concerning Autodesk's executive officers required by this
Item is incorporated by reference herein to the section of this Report in Part
I, Item 4, entitled "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
Autodesk's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
Autodesk's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
Autodesk's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements: The information concerning Autodesk's financial
statements, and Report of Ernst & Young LLP, Independent Auditors required
by this Item is incorporated by reference herein to the section of this
Report in Item 8, entitled "Financial Statements and Supplementary Data."
2. Financial Statement Schedule: The following financial statement
schedule of Autodesk, Inc., for the fiscal years ended January 31, 2001,
2000 and 1999, is filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements of Autodesk, Inc.
Schedule II Valuation and Qualifying Accounts................. S-1
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or Notes
thereto.
51
3. Exhibits: The Exhibits listed below are filed as part of, or
incorporated by reference into, this Report.
Exhibit
No. Description
------- -----------
2.1(3) Second Amended and Restated Agreement and Plan of Acquisition and
Amalgamation by and among Autodesk, Inc., Autodesk Development BV,
9066-9771 Quebec Inc., Autodesk Canada Inc., 9066-9854 Quebec Inc.
and Discreet Logic Inc., dated as of November 18, 1998, as amended
on December 18, 1998 and January 18, 1999
2.2(3) Second Amended and Restated Amalgamation Agreement by and among
Discreet Logic Inc., 9066-9854 Quebec Inc. and Autodesk, Inc. dated
as of January 18, 1999
3.1(4) Certificate of Incorporation of Registrant
3.2(7) Certificate of Designation of Rights, Preferences and Privileges of
Series A Participating Preferred Stock of Autodesk, Inc.
3.3(4) Certificate of the Powers, Designations, Preferences and Rights of
Series B Preferred Stock of Autodesk, Inc.
3.4(6) Bylaws of Registrant, as amended
4.1(8) Preferred Shares Right Agreement dated December 14, 1995
4.2(8) Amendment No. 1 to Preferred Shares Rights Agreement
9.1(4) Voting and Exchange Trust Agreement dated March 16, 1999 among
Autodesk, Inc., Discreet Logic Inc., Autodesk Development B.V., and
Montreal Trust Company of Canada
10.2(5)* Registrant's 1998 Employee Qualified Stock Purchase Plan and form of
Subscription Agreement, as amended
10.3(2)* Registrant's 2000 Directors' Option Plan
10.4(5)* Registrant's 1996 Stock Plan, as amended
10.5(9)* Form of Indemnification Agreement executed by Autodesk and each of
its officers and directors
10.6(10)* Agreement between Registrant and Carol A. Bartz dated April 7, 1992
10.7(4) Support Agreement dated March 16, 1999 among Autodesk, Inc.,
Autodesk Development B.V. and Discreet Logic Inc.
10.8(1)* Form of Restricted Stock Purchase Agreement of Buzzsaw.com, Inc.
10.9* Form of Restricted Stock Purchase Agreement of RedSpark, Inc.
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (see page 54)
- --------
(1) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 2000.
(2) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-8 as filed on September 15, 2000.
(3) Incorporated by reference to the exhibit filed with the Registrant's
Report on Form 8-K filed on March 16, 1999.
(4) Incorporated by reference to the exhibits filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1999.
(5) Incorporated by reference to the exhibit filed with the Registrant's
Registration Statement on Form S-8 as filed on June 21, 1999.
(6) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1998.
(7) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1997.
52
(8) Incorporated by reference to the Registrant's Report on Form 8-A filed on
January 5, 1996, as amended on January 8, 1996 and January 15, 1998.
(9) Incorporated by reference to the exhibit filed with the Registrant's
Annual Report on Form 10-K for the fiscal year ended January 31, 1995.
(10) Incorporated by reference to the exhibit filed with the Registrant's
Report on Form 10-Q for the fiscal quarter ended April 30, 1992.
* Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AUTODESK, INC.
/s/ Carol A. Bartz
By: _________________________________
Carol A. Bartz
Chairman of the Board
Dated: April 27, 2001
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Carol A. Bartz as his or her attorney-
in-fact, each with the power of substitution, for him or her in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes, may
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Carol A. Bartz Chairman, Chief Executive April 27, 2001
______________________________________ Officer and President
Carol A. Bartz (Principal Executive
Officer)
/s/ Steve Cakebread Senior Vice President and April 27, 2001
______________________________________ Chief Financial Officer
Steve Cakebread (Principal Financial
Officer and Principal
Accounting Officer)
/s/ Mark A. Bertelsen Director April 27, 2001
______________________________________
Mark A. Bertelsen
/s/ Crawford W. Beveridge Director April 27, 2001
______________________________________
Crawford W. Beveridge
/s/ J. Hallam Dawson Director April 27, 2001
______________________________________
J. Hallam Dawson
/s/ Per-Kristian Halvorsen Director April 27, 2001
______________________________________
Per-Kristian Halvorsen
/s/ Paul S. Otellini Director April 27, 2001
______________________________________
Paul S. Otellini
/s/ Mary Alice Taylor Director April 27, 2001
______________________________________
Mary Alice Taylor
/s/ Larry Wangberg Director April 27, 2001
______________________________________
Larry Wangberg
54
ITEM 14(a)(2) FINANCIAL STATEMENT SCHEDULE II
AUTODESK, INC.
Valuation and Qualifying Accounts
Additions
Balance at Charged to
Beginning Costs and Deductions Balance at
Description of Year Expenses Write-Offs End of Year
----------- ----------- ---------- ---------- -----------
Fiscal year ended January 31,
2001
Allowance for doubtful
accounts...................... $10,652,000 $3,565,000 $2,606,000 $11,611,000
Allowance for stock balancing
and product rotation.......... 19,370,000 30,721,000 32,330,000 17,761,000
Restructuring.................. 2,200,000 0 1,809,000 391,000
Fiscal year ended January 31,
2000
Allowance for doubtful
accounts...................... $10,642,000 $1,515,000 $1,505,000 $10,652,000
Allowance for stock balancing
and product rotation.......... 14,777,000 47,255,000 42,662,000 19,370,000
Restructuring.................. 723,000 18,500,000 17,023,000 2,200,000
Fiscal year ended January 31,
1999
Allowance for doubtful
accounts...................... $10,830,000 $1,930,000 $2,118,000 $10,642,000
Allowance for stock balancing
and product rotation.......... 20,219,000 25,484,000 30,926,000 14,777,000
Restructuring.................. 825,000 0 102,000 723,000
S-1