UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended January 31, 20032004

Commission File Number: 0-14338

AUTODESK, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (415) 507-5000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 Par Value

Preferred Share Rights (currently attached to and trading only with Common Stock)

(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. Yesx 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.x¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yesx No¨

As of July 31, 2002,2003, the last business day of the Registrant’s most recently completed second fiscal quarter, there were approximately 112.5110.6 million shares of the Registrant’s common stock outstanding, and the aggregate market value of such shares held by non-affiliates of the Registrant (based on the closing sale price of such shares on the Nasdaq National Market on July 31, 2002)2003) was approximately $1.5$1.6 billion. Shares of the Registrant’s common stock held by each executive officer and director and by each entity that owns 5% or more of the Registrant’s 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 1, 2003,2004, Registrant had outstanding approximately 113.5117.5 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 19, 200317, 2004 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, 2003.2004.

PART I

FORWARD-LOOKING INFORMATION

This Annual Report contains forward-looking statements that are subject to assumptions, risks and uncertainties, many of which are discussed in this Annual Report, includingincluded under “Risk Factors Which May Impact Future Operating Results.” Actual results may vary from those projected in the forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. If our assumptions about the future do not materialize or prove to be incorrect, the results could differ materially from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements. A forward-looking statement is any statement that looks to future events, including any statements regarding the markets for our products in the future or the success of our products in these markets, as well as any statements of expectation, plans, strategies and objectives of management for the future and any statement of assumptions underlying any of the foregoing. We assume no obligation to update these forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made.

ITEM 1.    BUSINESS

GENERAL

Autodesk is one of the world’s leading design software and digital content companies, foroffering customers involvedprogressive business solutions through powerful technology products and services. We help customers in the building, manufacturing, infrastructure and digital media sectors increase the value of their digital design civil engineering, manufacturing, utilities, telecommunicationsdata and media and entertainment.improve efficiencies across their entire project lifecycle management processes. We provide a broad range of integrated and interoperable design software, Internet services, wireless development platforms and point-of-location applications that empower more than five millionmillions of users. Our software products are sold in over 160 countries, both directly to customers and through a network of resellers and distributors.

Our strategy is to deliver advanced solutions that address our customers’ needs to leverage the digital design data created with Autodesk design tools, so as to improve their productivity throughout the creation, building, manufacture and management of the customers’ projects. To execute against this strategy, we are focused on delivering strong products on a more frequent release cycle, strengthening our desktop position, migrating our customers to more advanced technologies, expanding in emerging geographies and capturing the lifecycle management market opportunity.

We are organized ininto two reportable operating segments: the Design Solutions Segment, which accounted for 84%85% of revenue in fiscal 2003,2004, and the Discreet Segment, which accounted for 16%15% of revenue in fiscal 2003.2004. A summary of our net revenues, and condensed results of operations for our business segments is found in Note 13, “Segments,” in the Notes to Consolidated Financial Statements.

The Design Solutions Segment derives revenues from the sale of design software products and services tofor professionals orand consumers who design, build, manage and own building projects or manufactured goods and from the sale of mapping and infrastructure management technologiesgeographic information systems technology to public and private users. The principal products sold by the Design Solutions Segment include AutoCAD and AutoCAD LT products, which accounted for 43%45% of our consolidated net revenues for fiscal 2003.2004. In addition to software products, the Design Solutions Segment offers a range of services including consulting, support and training. To date, revenues generated from these services have been insignificant. Approximately 75% of Design Solutions Segment revenue is derived from several countries including the United States (“U.S.”), Japan, Germany, United Kingdom, Italy, France, Canada and China. Additionally, sales of new seat licenses accounted for 72% of fiscal 2003 revenues and upgrades accounted for 18% of fiscal 2003 Design Solutions Segment revenues. In years when major new products are released, revenue from customers upgrading and from new seat licenses has increased.

The Design Solutions Segment consists of the following industry specific business divisions: Manufacturing Solutions Division; Infrastructure Solutions Division (formerly Geographic Information Services);Division; Building Solutions Division; and Platform Technology Division and Other, which includes revenue from our LocationAutodesk Collaboration Services Division and Autodesk Professional Services Division.Consulting. Autodesk Professional Services, a newly created separate division,Consulting provides integrated consulting, training and support for customers seeking maximum benefit and performance from our products. Our Location Services Division offers a technology platform designed to deliver location-based applications to wired, mobile and wireless users. We market our product, LocationLogic, to wireless carriers and network operators around the world.

The Discreet Segment develops, integrates, markets, sells and supports film and television compositing systems, High Definition (HD) and Standard Definition (SD) broadcast editorial and finishing systems, Digital Cinema production systems for color grading and film finishing, and animation, visualization and streaming media products. Revenues are derived from the sale of products to broadcasters, post production facilities, film studios, broadcasters and creative professionals for a variety of applications, including feature films, television programs, commercials, music and corporate videos, interactive game production, design visualization, Web design and interactive Web streaming. Similar

In addition to the Design Solutions Segment, in years when newcustomers served by our operating segments, our Location Services Division offers a technology platform designed to deliver location-based applications to wired, mobile and wireless users. We market our product, cycles occur, revenue from customers upgradingLocationLogic, to wireless carriers and new customer sales has resulted in increased revenue.network operators around the world.

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To support our business strategy, during the last three years, we completed the following significant acquisitions:acquisitions, among others: CAiCE Software Corporation (“CAiCE”) in September 2002, Revit Technology Corporation (“Revit”) in April 2002, the software division of Media 100, Inc. (“Media 100”) in October 2001 and Buzzsaw.com, Inc. (“Buzzsaw”) in JulyAugust 2001. For more information about the strategic importance of these acquisitions, refer to Item 7, Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations”.

We were incorporated in California in April 1982 and were reincorporated in Delaware in May 1994. Our principal executive office is located at 111 McInnis Parkway, San Rafael, California 94903. Our telephone number is (415) 507-5000, and our Internet home page is located at www.autodesk.com; however, the information in, or that can be accessed through, our home page is not part of this Annual Report. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports are available, free of charge, on our Internet home page shortly after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.Commission (“SEC”). Investors may also obtain copies of our SEC filings from the SEC Website at www.sec.gov.

PRODUCTS

Design Solutions Segment

The principal product offerings from the different divisions of the Design Solutions Segment are described below:

Platform Technology Division and Other

The Platform Technology Division and Other accounted for 58%59% of the Design Solutions Segment revenues and 50% of overall net revenues in fiscal 2003.2004. The division’s principal product offerings include:

AutoCAD

AutoCAD, which is our flagship product, is a design and drafting platform that automates design tasks and provides digital tools that can be used independently and in conjunction with other specific applications in fields ranging from construction and manufacturing to process plant design and mapping. Architects, engineers, drafters and design-related professionals use AutoCAD to create, view, manage, plot, share, and reuse accurate, information-richinformation–rich drawings.

In March 2003,2004, we introduced a new release of AutoCAD. AutoCAD 2004 includes new features such as productivity tools2005 provides enhanced capabilities that allow users to better manage and presentation graphics, CAD standards toolspublish sheet sets and electronic documentation using DWF (Design Web Format) filescommunicate project information for easier data sharingmarkup and licensing tools for more efficient software management.review. Among other improvements, this release enhances the creation and management of entire sets of related drawings directly inside the application. This release follows the successful launch of AutoCAD 20022004 in June 2001,March 2003, which took advantage of previous product enhancements and also included streamlined standards management using a suite of new, intranet/Internet-enabledproductivity tools and presentation graphics, CAD standards management tools and enhanced team collaboration features.licensing tools for more efficient software management.

AutoCAD LT

AutoCAD LT is used for 2D drafting and detailing by design professionals in allmultiple industries who require full DWG file format compatibility and do not need to customize their software. Users can share, with security, all design data with team members who use AutoCAD or Autodesk products built on AutoCAD.

Autodesk Buzzsaw

Autodesk Buzzsaw, (formerly known asoffered by Autodesk ProjectPoint)Collaboration Services, is an online collaboration service that allows users to store, manage, and share project documents from any Internet connection. The Autodesk Buzzsaw online work environment integrates a secure project hosting service with CAD-related software, tools, and services. Users benefit from the ability to connect with their project team anytime, regardless of organizational or geographical boundaries. Autodesk Buzzsaw has recently become part of the Building Solutions Division, but for fiscal year 2003 was reported in the Platform Technology Division and Other.

Autodesk LocationLogic

LocationLogic provides wireless carriers with location services, including the ability to handle high location services transaction volume, support for real-time data communication, and support for a variety of end-user devices, including mobile phones, PDAs and laptop computers. LocationLogic aggregates, integrates and manages all information relevant to a user’s location and preferences and makes that information useful for real-life applications, such as “Find me the nearest...” or “Provide the fastest route...”

Manufacturing Solutions Division

The Manufacturing Solutions Division accounted for 17% of Design Solutions Segment revenues in fiscal 2003.2004. The division’s solutions enable our manufacturing customers to rapidly adopt 3D design, create designs in a simple 2D/3D

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environment, manage design data for additional business processes, and share design data across the enterprise and with the supply chain. The division’s principal product offerings include:

Autodesk Inventor Series

Autodesk Inventor Series, which accounts for a significant portion of the Manufacturing Solution Division’s revenues, delivers Autodesk Mechanical Desktop, based on AutoCAD software, and Autodesk Inventor software, in one solution. Autodesk Inventor software 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.

Building Solutions Division

The Building Solutions Division accounted for 10% of Design Solutions Segment revenues in fiscal 2003.2004. The division’s solutions enable our building industry customers to create high quality designs and documentation, securely distribute digital design data, accurately estimate project costs, manage project workflow, and securely collaborate with project team and others who require access to design data. The division’s principal product offerings include:

Autodesk Architectural Desktop

Autodesk Architectural Desktop software supports the architectural design process from conceptual design to design development, through construction documentation. Autodesk Architectural Desktop features industry-

specificindustry-specific 2D production drafting functionality and integrated and accessible 3D design options and all the functionality from AutoCAD. Users benefit from simplified mass modeling, intelligent building components, style definitions and layer management according to industry standards.

Autodesk Revit

The Autodesk Revit platform a new product offering since our acquisition of Revit in April 2002, provides architects, design-build teams and other building industry professionals a complete architectural design and documentation system supporting all phases of design and all the architectural drawings and schedules required for a building project. Autodesk Revit collects information about the building project and coordinates this information across all other representations of the project so that every drawing sheet, 2D and 3D view, and schedule is based on information from the same underlying building database. The Autodesk Revit parametric change engine automatically coordinates changes made anywhere—in model views or drawing sheets, schedules, sections or plans.

Infrastructure Solutions Division

The Infrastructure Solutions Division accounted for 15%14% of Design Solutions Segment revenues in fiscal 2003.2004. The division’s solutions enable our infrastructure customers to compile, analyze, and maintain digital design information, manage physical infrastructure projects, and securely distribute information to remote locations. The division’s principal product offerings include:

Autodesk Map

Autodesk 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 itand also offers specialized functionality for creating, maintaining and producing maps and geospatial data.

Autodesk Land Desktop

Autodesk Land Desktop is our GIS (geographic information system) land development design tool for the AutoCAD environment built around a centralized product structure that stores critical data—points, terrain models and alignments—in a

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central location where they can be shared by team members. Users benefit from tools that create and label survey points, define and edit parcels and roadway alignments, automate drafting procedures, create terrain models and calculate volumes and contours.

Discreet Segment

The Discreet Segment’s solutions enable our digital media customers to extend digital content across the value chain, increase productivity and creativity, and distribute content across multiple mediums and formats. 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, design visualization and visual effects production. Animators, designers and game developers benefit from the unified, object-oriented platform, customizable real-time interface, multiple-processor support and 3D graphics acceleration capabilities, as well as support for a wide range of plug-ins and specialized products such as Discreet’s character studio.

flame

flame, Discreet’s flagship on-line visual effects system, is a creative solution that allows artists to craft visual effects for feature films, television commercials, music videos and broadcast promos and IDs at the highest resolutions from film to HDhigh definition (HD) television. It offers the ability to interactively create, composite and edit the mosthighly challenging sequences that merge live action with computer-generated imagery, including new support in

version 8 for editing, 3D graphics and mixed resolutions. Post-production facilities and broadcasters integrate flame within dedicated suites and networked environments.

inferno

inferno, an on-line visual effects system, is a creative solution that builds on the featuresfeature set of flame with film tools, and increased image resolution and color control for digital film work, including film specific tools for grain management, wire and scratch removal and color calibration. It is tuned to provide the highesthigh levels of feedback on large format imagery and is designed specifically for film and HD content.

smoke

smoke is an on-line, non-linear creative editing and finishing solution that enables editors to edit, conform and finish television commercials, broadcast programming and other content. Editors benefit from support for HD and standard definition resolutions, which offers a provensecure investment for HD mastering, as well as the ability to work in a 3D environment, and compatibility with Discreet’s visual effects systems flame and inferno.

cleaner XLOther Products

cleaner XL is Discreet’s media mastering tool used to prepare digital media for delivery to DVD, CD-Rom, websites, PDAs and mobile phones. As mobile devices and DVD production proliferates, compressionists and editors benefit from a rich set of video and audio filters and encoding support for a wide range of popular formats including Windows Media, Quick Time, Real and MPEG 2 and 4.

combustion

combustion is a powerful, resolution-independent, vector paint, animation and compositing solution for multi-format work from the web to video and HDTV to feature film. combustion is available for both Apple^® Mac OS^® (OS 9.x, OS X v10.x) and Windows^® (XP, NT, 2000) systems and features an advanced object-oriented architecture with extensive caching, multiple views and real-time loop playback. combustion is setting a new standard for interactive performance on the desktop.

Autodesk Subscription Program

In addition to sales of new software licenses and upgrades, we offer customers a subscription option. The Autodesk Subscription Program is available for a majority of our Design Solution products as well as Discreet’s 3ds max.max product. Under the program, members who own the most recent version of the underlying product participate in a simplified upgrade process, feature-enhancing extensions, downloadable e-Learning courses and optional on-line support. Users benefit from incremental and new releases of the underlying product releases and extensions.extensions over one year and multi-year contract periods.

Subscription program revenues are reported separately on our Consolidated Statements of Income as Maintenance revenue.

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Autodesk LocationLogic

LocationLogic provides wireless carriers with location services, including the ability to handle high location services transaction volume, support for real-time data communication, and support for a variety of end-user devices, including mobile phones, PDAs and portable computers. LocationLogic aggregates, integrates and manages all information relevant to a user’s location and preferences and makes that information useful for real-life applications, such as “Find me the nearest...” or “Provide the fastest route...”

PRODUCT DEVELOPMENT AND INTRODUCTION

We continue to enhance our product offerings and develop new products to meet changing customer demands. Research and development expenditures amounted to 21%represented 22% of fiscal 2004 net revenues, 23% of fiscal 2003 net revenues and 20% of fiscal 2002 net revenues. Our software is primarily developed internally, with occasional use of independent software developers. Additionally, we acquire products or technology developed by others by purchasing some or all of the assets or stock of the entity that held ownership rights to the technology.

The majority of our basic research and product development is performed in the U.S., and Canada, while translation and localization of foreign-market versions, as well as some product development, is performed by development teams or contractors in our local markets. We generally translate and localize our products into French, Italian, German, Spanish, Japanese and various Chinese dialects. Various aspectsPortions of our product-related functions,product development, including some software development, localization, quality assurance and technical publications, are performed in Canada, Europe and Asia.

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 to address demands in the marketplace for increased connectivity and use of digital data created by our products. We dedicate considerable technical and financial resources to research and development to further enhance our existing products and to create new products and technologies. TheseHowever, these investments may not result in sufficient revenue generation to justify their costs or our competitors may introduce new products and services that achieve acceptance among our current customers, either of which would likely adversely affect our competitive position.

Our software products are 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 would likely 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.

Independent firms and contractors perform some of our product development activities, while other technologies are licensed from third parties. Licenses may restrict use of such technology in ways that negatively affect our business. 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 or willing to provide development support to us in the future. Similarly, we may not be able to obtain and renew existing license agreements on favorable terms, if at all, and any failure to do so would likely 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 software. Some developers may elect to support other products or may experience disruption in product development and delivery cycles or financial pressure during periods of economic downturn. In particular markets, this disruptionThese disruptions could negatively impact these third-party developers and, in turn, end users, which could harm our business.

MARKETING AND SALES

We sell our products and services both through authorized distributors and resellers and directly to customers, which includeprimarily large corporations, and through established distributors and resellers.corporations. Our customer-related operations are divided into three geographic regions, the Americas, EuropeEurope/Middle East/Africa 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.

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We also 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 web casts, 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 distributor and reseller network.networks. Computer software dealers and distributors are typically not highly capitalized and have previously experienced difficulties during times of economic contraction such as current worldwide economic conditions, and may do so in the future. In addition,While we have processes to ensure that we assess the changing distribution models resulting from the Internet, from increased focus on directcreditworthiness of dealers and distributors prior to sales to major accounts or from two-tiered distribution may impact our reseller network in the future.them, if their financial condition were to deteriorate, they might not be able to make repeat purchases. While no single customer, distributor or reseller accounted for more than 10 percent10% of our consolidated net revenues in any of the past three fiscal years, the loss of, or a significant reduction in, business or failure to achieve anticipated levels of sell-through 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. We believe that international sales will continue to becomprise a significant portion of our consolidated net revenues. We are in a time of significant political unrest and economic troubles. Continued economicEconomic weakness in any of the countries which contribute a significant portion of our net revenues would likely have a material adverse effect on our business. A summary of our financial information by geographic location is found in Note 13, “Segments” in the Notes to Consolidated Financial Statements.

CUSTOMER AND RESELLER SUPPORT

Through our Autodesk Professional Services Division for Design Solutions products and through Discreet for its products, weWe provide technical support and training to customers through a leveraged model, augmented by programs designed to address specific direct needs. We expect that endEnd users rely primarily on their resellers and distributors for technical support.support; however, we do provide certain direct support for our high-end Discreet hardware systems. We support the resellers and distributors through technical product training, sales training classes, the Internet and direct telephone support. SupportWe also provide optional online support through our subscription program and 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.

BACKLOG

We typically ship products shortly after receipt of an order, which is common in the computer software industry. Accordingly,Our backlog is primarily comprised of deferred revenue from our subscription program, but also includes current software license product orders which have not yet shipped. The category of current software license product orders which we have not yet shipped consists of orders from customers with approved credit status for currently available license software products and may include both orders with current ship dates and orders with ship dates beyond the current fiscal period. We typically experience temporarily higher levels of this component of backlog for quarters in which we retire a release of AutoCAD, as we did in the fourth quarter of fiscal 2004. Aggregate backlog at January 31, 2004 and January 31, 2003 was approximately $159.2 million and $97.5 million, respectively. Although the backlog at the end of fiscal 2004 was higher than normal, we do not maintain a significant backlog. Moreover, thebelieve that backlog as of any particular date gives no indicationis indicative of actual sales for any succeeding period.future results.

COMPETITION

We compete with a variety of companies in different aspects of our business.

In our Design Solutions Segment, our primary global competitors include Dassault Systems and its SolidWorks subsidiary, Parametric Technology Corporation, UGS PLM Solutions, Bentley Systems and ESRI. In our Discreet Segment, our primary competitors include Avid Technology, Alias Systems (a division of Silicon Graphics, Inc.) and Apple Computer.

In addition, in each of our markets, there are numerous regional and specialized software and services companies, with which we compete.

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The software industry has limited barriers to entry, and the availability of desktop computers with continually expanding performance capacity at progressively lower prices contributes to the ease of market entry. The marketsdesign software market in which we compete areparticular is fairly mature and characterized by vigorous competition;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. all of our markets.

Because of these and other factors, competitive conditions in these industries are likely to continue 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 a combination of patents, copyright and trademark laws, trade secrets, 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. Litigation often becomes more likely in times of economic downturn.uncertainty. Disputes involving our intellectual property rights or those of another party have in the past and may in the future lead to, among other things, costly litigation or product shipment delays, 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 executedsigned 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. We believe, however, that software piracy is and can be expected to be a persistent problem.

PRODUCTION AND SUPPLIERS

Production of our Design Solutions Segment and certain Discreet Segment 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 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. Production is generally performed in leased facilities operated by us. Some product assembly is also performed by independent third-party contractors. To date, we have not experienced any material difficulties or delays in the production of our software and documentation.

In addition, the Discreet segment has historically relied on third-party vendors for the supply of hardware components used in its systems. Many of the Discreet’s software products currently run on workstations manufactured by Silicon Graphics, Inc. (“SGI”). There are significant risks associated with this reliance on SGI and Discreet may be impacted by unforeseen difficulties associated with adapting theirits products to future SGI products and the timing of the development and release of SGI products.

EMPLOYEES

As of January 31, 2003,2004, we had 3,498 full-time equivalent employees.employed 3,493 people. None of our employees in the U.S.United States are represented by a labor union; however, in certain foreign countries, our employees are represented by worker councils. We have never experienced any work stoppages.stoppages and believe our employee relations are good.

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Competition in recruiting personnel in the software industry, especially highly skilled engineers, is intense. We believe our continued growth and future success is highly dependent on theour continued ability to attract, retain and motivate highly skilled employees.

ITEM 2.    PROPERTIES

We lease approximately 1,234,000 square feet of office space in 89 locations in the United States and internationally through our foreign subsidiaries. Our executive offices and the principal offices for domestic marketing, and sales and production are located in leased office space in northernSan Rafael California. Our San Rafael facilities consist of approximately 270,000 square feet under leases that have expiration dates ranging from 2004 to 2007. We alsoand our foreign subsidiaries lease additional space in various locations throughout the U.S.world for local sales, development and technical support personnel. Our foreign subsidiaries lease office space for their operations including local sales, product development and technical support personnel. During fiscal 20032005, as part of our restructuring plan, we closedexpect to consolidate several domestic and international offices in an effort to further reduce operating expense levels.

All facilities are in good condition and are operating at capacities averaging 75% occupancy worldwide. We believe that our existing facilities and offices are adequate to meet our requirements for the foreseeable future. See Note 7, “Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements for more information about our lease commitments.

ITEM 3.    LEGAL PROCEEDINGS

On December 27, 2001, Spatial Corp. (“Spatial”) filed suit in Marin County Superior Court against Autodesk and one of our consultants, D-Cubed Ltd. (“D-Cubed”), seeking (1)among other things, termination of a declaration that (a) Autodesk had breached the ten year old development and license agreement between Spatial and Autodesk (“Development Agreement”) and (b) that Autodesk and D-Cubed had misappropriated the trade secrets of Spatial (2) an injunction preventing Autodesk from disclosing ACIS source code to D-Cubed and (3) an injunction preventing Autodesk from working with individuals who had previously workedcontractors under the agreement. On October 2, 2003, a jury found that Autodesk did not breach the agreement. The court ordered Spatial to pay Autodesh approximately $2.4 million for reimbursement of attorneys’ fees and costs of trial. Spatial filed a notice of appeal on ACIS source code for Spatial. ACIS is a geometric solid modeler upon which Autodesk ShapeManager is derived. Autodesk ShapeManager is incorporated into a number of Autodesk products, including Autodesk Inventor Series, AutoCAD based products and 3ds max.

After a hearing on January 23, 2002,December 2, 2003 appealing the Superior Court denied Spatial’s motion for a preliminary injunction, finding that Spatial had failed to establish that it was likely to prevail on the merits at trial. On August 1, 2002, Spatial amended its complaint to seek the following additional remedies: (1) a declaration regarding the appropriate locationdecision of the ACIS source codejury. The notice does not specify the basis on which Spatial intends to challenge the jury’s finding. We do not know of any basis on which an appeal would be successful, and (2) termination of Development Agreement, including our right to work with third party contractors on the ACIS source code and the perpetual right to incorporate and distribute ACIS with our products. On October 16, 2002, Spatial dismissed all of its claims for misappropriation of trade secrets against Autodesk and D-Cubed. On February 13, 2003, the Court granted D-Cubed Ltd.’s motion for summary judgment and denied our motion for summary adjudication of issues. We filed a motion for reconsideration of the court’s ruling to be argued in May 2003. The case is now scheduled for trial in June 2003.

Weaccordingly, believe that Spatial’s claims are without merit, and we are contesting them vigorously. Although the results of litigation are inherently uncertain, we believe that the ultimate resolution of this matter will not have material effect on our consolidated statements of financial condition, results of operations or cash flows. However, if Spatial were to prevail at trial on its request to terminate the perpetual license to ACIS, and we could not obtain a license on acceptable terms or license or develop a substitute technology, our business and operating results could be materially adversely affected. During the fourth quarter of fiscal 2003 we recorded a $2.5 million reserve related to this matter.

On October 7, 2002, Digimation Inc. filed a demand for arbitration against Autodesk with the American Arbitration Association alleging breach of contract and interference with prospective economic advantage and business relations. The claims arise out of a November 1998 Preferred Publisher Agreement (the “PPA”) entered into with our Discreet division and relate to the marketing, publishing, development and support of software plug-ins for our 3ds max application. We have counter-claimed against Digimation for, among other things, Digimation’s failure to perform under the PPA. We believe that the ultimate resolution of this matter will not have a material effect on ourAutodesk’s consolidated statements of financial condition, results of operations or cash flows. However, it is possible that an unfavorable resolution of this matter could occur and materially affect our future results of operations, cash flows or financial position in a particular period.

Generally, weWe are involved in various legal proceedings from time to time arising from the normal course of business activities. In our opinion, resolution of thesepending matters is not expected to have a material adverse impact on our consolidated results of operations, cash flows or our financial position. However, depending on the amount and timing,it is possible that an unfavorable resolution of a matterone or more such proceedings could in the future materially affect our future results of operations, cash flows or financial position 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 2003.2004.

Executive Officers of the RegistrantEXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information as of January 31, 20032004 regarding our executive officers:

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., and Cisco Systems, Inc., and the New York Stock Exchange. Prior to joining Autodesk, Ms.

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Bartz held various positions at Sun Microsystems, Inc., including Vice President, Worldwide Field Operations from July 1990 through April 1992.

Joseph H. Astroth joined Autodesk in January 1996 and serves as Executive Vice President, Location Services Division. Previously, he was Executive Vice President, InfrastructureGIS Solutions Division from January 1996 to December 2000. From September 1989 through December 1995, Mr. Astroth held various positions with Graphic Data Systems Corporation including Director, Environmental Market Group, from January 1993 to June 1994, and Vice President of Product Management, Engineering, from June 1994 to December 1995.

Carl Bass joined Autodesk in September 1993 and serves as Senior Executive Vice President, Design Solutions Group. From August 2001 to February 2002, Mr. Bass served as Executive Vice President, Emerging Business and Chief Strategy Officer. From June 1999 to July 2001, he served as President and Chief Executive Officer of Buzzsaw.com, Inc., a spin-off from Autodesk. He has also held other executive positions within Autodesk. Prior to joining Autodesk, Mr. Bass was cofounder and Chief Technical Officeris a director of IthacaSerena Software, from May 1986 to August 1993.Inc.

Jan Beckerjoined Autodesk in September 1992 and has served as Senior Vice President, Human Resources and Corporate Real Estate since June 2000 and previously served in other capacities in the Human Resources Department.

Alfred J. Castinojoined Autodesk in August 2002 and serves as Senior Vice President and Chief Financial Officer. Prior to joining Autodesk, Mr. Castino was Chief Financial Officer for Virage, Inc., a video and media communication software company from January 2000 to July 2002 and from August 1999 to January 2000 he served as Chief Financial Officer for RightPoint, Inc., an e-marketing company. Prior to this, Mr. Castino served as Vice President of Finance and then Senior Vice President and Chief Financial Officer at PeopleSoft, Inc., an enterprise software company, where he worked from September 1997 to August 1999.

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., a multimedia software company, from October 1999 to August 2000 and from 1998 to October 1999 he served as President and CEO of TrueSpectra Inc., an image serving software company. From 1995 to 1998 he held various positions with Alias/Wavefront, a 3D graphics software company.

Marcia K. Sterling joined Autodesk in October 1995 and serves as Senior Vice President, General Counsel and Secretary. From September 1982 to October 1995, she practiced corporate and securities law at Wilson Sonsini Goodrich & Rosati, where she was a partner.

Michael E. Sutton joined Autodesk in October 1986 and serves as Executive Vice President, Business Operations. Previously, Mr. Sutton served as Executive Vice President, Worldwide Field Organization and in other capacities at Autodesk. From June 1993 through September 1998, Mr. Sutton served as Vice President, Europe/Europe, Middle East/Africa.

Tom Vadnaisjoined Autodesk in January 2002East and serves as Executive Vice President of Autodesk Professional Services. Prior to joining Autodesk, Mr. Vadnais was President and CEO of Mediaplex, Inc., a digital advertising and customer relationship management company, from April 2001 until Mediaplex was acquired by ValueClick, an internet advertising solutions company. During January 2002, and from May 1999 to January 2001, he served as President and COO of DPRC, a professional services company, until DPRC was acquired by Compuware Corporation, a software development company. Following the acquisition, Mr. Vadnais served as Executive Vice President, Professional Services of Compuware. Mr. Vadnais also served as President and COO of Tascor, Inc., from 1992 to 1999. Mr. Vadnais serves on the board of ValueClick, Inc.Africa.

There is no family relationship among any of our directors or executive officers.

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. These share prices were adjusted for the two-for-one stock split that was effective for record holders on April 4, 2002.

Dividends

Adjusted for a stock split in April 2002, we paid quarterly dividends of $0.03 per share in fiscal 20032004 and 20022003 to Autodesk stockholders. We currently intend to continue paying regular cash dividends on a quarterly basis.

Stockholders

As of January 31, 20032004 the number of common stockholders of record was 857.767. 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

The following selected consolidated financial data should be read in conjunction with our audited consolidated financial statements and related notes thereto and with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this Form 10-K. The financial data for the years ended January 31, 2004, 2003 2002 and 20012002 are derived from, and are qualified by reference to, the audited consolidated financial statements and are included in this Form 10-K. The financial data for the years ended January 31, 20002001 and 19992000 are derived from audited consolidated financial statements which are not included in this Form 10-K.

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The discussion in “Management’sWe begin Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations (“MD&A”) with our overall strategy and the strategy for our major business units to give the reader an overview of the goals of our business and the direction in which our business and products are moving. This is followed by a discussion of the Critical Accounting Policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. In the next section, beginning on page 18, we discuss our Results of Operations for fiscal 2004 compared to fiscal 2003 and for fiscal 2003 compared to fiscal 2002, beginning with an Overview. We then provide an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the sections entitled “Liquidity and Capital Resources,” “Contractual Obligations” and “Off-Balance Sheet Arrangements.”

The MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K, including Item 1: Business,” Item 6: “Selected Financial Data,” and Item 8: “Financial Statements and Supplementary Data.”

The discussion in our MD&A 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. Forward-looking statements consist of, among other things, statements regarding net revenues, revenue mix, costs and expenses, gross margins, allowance for bad debts, level of product returns, gross margins, costsrestructuring activity and expenses, legal contingenciesshort-term and restructuring activity,long-term cash requirements, as well as statements involving trend analyses and statements including such words as “we believe” and similar expressions. These forward-looking statements are subject to business and economic risks. As such, 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, includingbelow, included in “Risk Factors Which May Impact Future Operating Results.”Results” and in our other reports filed with the Securities and Exchange Commission.

STRATEGY

Our goal is to be the world’s leading design software and digital content company, offering customers progressive business solutions through powerful technology products and services. Our focus is to help customers in the building, manufacturing, infrastructure and digital media sectors increase the value of their digital design data and improve efficiencies across the entire lifecycle management processes.

We believe that our ability to make technology available to mainstream markets is one of our competitive advantages. By innovating in existing technology categories, we bring powerful design products to volume markets. Our architecture allows for extensibility and integration. Our products are designed to be easy to learn and use, and to provide customers low cost of deployment, low total cost of ownership and a rapid return on investment.

We have created a large global community of resellers, third party developers and customers allowing us broad reach into volume markets. Our reseller network is extensive, and provides our customers with resources for the purchase, support and training of our products globally in an effective and cost efficient manner. We have a significant number of registered third party developers, creating products that run on top of our products, further extending our reach into volume markets. Our installed base of millions of users has made Autodesk products a worldwide design software standard. Users trained on Autodesk products are broadly available both from universities and the existing work force, reducing the cost of training for our customers.

Our growth strategy derives from these core strengths. We continue to increase the business value of our desktop design tools for our customers in a number of ways. We improve the performance and functionality of existing products with each new release. Beyond our general design products, we develop products addressing specific vertical market needs. In addition, we believe that migration from our 2D products to our 3D products presents a significant growth opportunity. While the rate of migration to 3D varies from industry to industry, adoption of 3D design software should increase the productivity of our customers. However, this migration also poses various risks to us. In particular, if we do not successfully convert our 2D customer base to our 3D products, then sales of our 2D products may decrease without a corresponding conversion of customer seats to 3D products, which would harm our business.

Additionally, we are creating products to address our customers’ needs for better design information management tools, also known as lifecycle management. We believe that for each author of design information, there are 5 to 10 users of that information, whom we call downstream users. We are developing and introducing products that will allow downstream users, both within and external to our customer enterprises, to manage and share their designs. Our large installed base provides a unique opportunity to grow from design and engineering departments to adjacent departments and into the supply chain.

Expanding our geographic coverage is a key element of our growth strategy. We believe that the rapidly growing economies in China and Eastern Europe present significant growth opportunities for the company. In support of our growth efforts in China, we opened our China Application Development Center during fiscal 2004. With a level of understanding of

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local markets that could not be obtained from remote operations, the Center will develop products to specifically address the Chinese market. In addition, we believe that our products will have a competitive advantage as a result of being engineered locally. Our ability to conduct research and development at various locations throughout the world allows us to optimize product development and lower costs. International development, however, involves significant costs and challenges, including whether we can adequately protect our intellectual property and derive significant revenue in areas where software piracy is a substantial problem.

A significant part of our growth strategy is based upon improving the installed base business model. A key element of this change is our current plan to release major products on at least an annual basis. Strong annual release cycles have a number of benefits. In particular, it permits us to deliver key performance and functionality improvements to the customer on a regular and timely basis. Annual releases also drive annual product retirement programs, thereby reducing the volatility of revenues we have experienced in the past, as both the release of the new version and retirement of the oldest supported version happen annually. Volatility may also be reduced through the Autodesk Subscription Program, as revenue is recognized ratably over the subscription contract period.

We are continually focused on improving productivity and efficiency in all areas of the company. Doing so will allow us to increase our investment in growth initiatives. During fiscal 2004, we conducted a rigorous study of our cost structure. Through the services of a top consulting firm, we benchmarked Autodesk metrics against averages of other companies as well as other leading software companies. As a result of the study, we are implementing efficiency initiatives throughout the company. Each division has short term and long term efficiency targets.

We believe that increases in our efficiency and productivity will allow us to increase investment in our growth initiatives while improving our profitability. We are committed to achieving annual operating margins in the 18% to 20% target range by fiscal year 2006. This goal is based upon current generally accepted accounting principles and makes no attempt to consider the effect of future changes to those principles, including the potential expensing of stock options which would have a material adverse effect on our operating margins. Longer term, we will continue to balance operating margin targets with revenue growth opportunities.

Autodesk generates significant cash flow. Our uses of cash include a $0.03 per share quarterly dividend, share repurchases to offset the dilutive impact of our employee stock plans, mergers and acquisitions, and investments in growth initiatives. We continually evaluate merger and acquisition and divestiture opportunities to the extent they support our strategy. Our typical acquisitions provide adjacency to our current products and services, specific technology or expertise and quick

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product integration. Additionally, we continue to invest internally in growth initiatives including lifecycle management and Autodesk Location Services.

Design Solutions Segment

The Design Solutions Segment consists of the following industry specific divisions: Manufacturing Solutions Division, Infrastructure Solutions Division, Building Solutions Division and Platform Technology Division and Other, which includes our Autodesk Consulting and Autodesk Collaboration Services.

For the Manufacturing Solutions Division, our focus is to enable our customers to rapidly adopt 3D design, create designs in a simple 2D/3D environment, manage design data for additional business processes and share design data across the enterprise with the supply chain. Our primary solution offering is the Autodesk Inventor Series, which delivers Autodesk Mechanical Desktop, based on AutoCAD software, and Autodesk Inventor, a 3D mechanical design software with built in collaboration and design management tools, in one solution.

For the Infrastructure Solutions Division, our focus is to enable our customers to compile, analyze and maintain digital design information, manage physical infrastructure projects and securely distribute information to remote locations. Our primary offerings are Autodesk Map for precision mapping and geographic information system analysis in the AutoCAD environment and Autodesk Land Desktop, our land development design tool for the AutoCAD environment.

For the Building Solutions Division, our focus is to enable our customers to create high quality designs and documentation, securely distribute digital design data, accurately estimate project costs, manage project workflow and securely collaborate with project team and downstream users. Our primary offerings are Autodesk Architectural Desktop, based on AutoCAD software, and Autodesk Revit, a platform providing a complete architectural design and documentation platform supporting all phases of design and all the architectural drawings and schedules required for a building project.

For the Platform Technology Division our focus is on providing CAD design tools and technologies that allow our customers in multiple markets to create, manage, and share design data. Our primary offerings are AutoCAD, AutoCAD LT and Autodesk Buzzsaw.

Discreet Segment

The Discreet Segment serves the digital media sector. Our strategy is to provide powerful and sophisticated solutions that enable our customers to extend the use of digital content, increase their creative capability, increase their productivity and enable content distribution across multiple media and formats. Our primary offerings include visual effects solutions, editing and color grading solutions, 3D animation for next generation games development, design visualization solutions and media mastering and streaming solutions.

Location Services Division

For the Locations Services Division focus is on providing a technology platform designed to deliver location-based applications to wired, mobile and wireless users. Our primary offering is LocationLogic.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S.United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, net revenues, costs and expenses and related disclosures. We regularly evaluatere-evaluate our estimates and assumptions. Actual results may differ from these estimates under different assumptions or conditions.

We believe that of our significant accounting policies, which are described in Note 1, in the Notes“Notes to Consolidated Financial Statements,Statements”, the following policies involve a higher degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition. Our accounting policies and practices are in compliance with Statement of Position 97-2, “Software Revenue Recognition,” as amended, and SEC Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.”

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectibilitycollection is probable. However, determining whether and when some of these

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criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report.

BasedFor multiple element arrangements that include software products, we allocate and defer revenue for the undelivered elements based on their vendor-specific objective evidence (“VSOE”) of fair value, which is the price charged when that element is sold separately or the price as set by management with the relevant authority. We are required to exercise judgment in determining whether VSOE exists for each undelivered element based on whether our pricing for these elements is sufficiently consistent.

Our assessment of likelihood of collection is also a critical element in determining the sale istiming of revenue recognition.

Our product or service related, we recognize revenue as follows. Product sales to distributors and resellers are generally recognized at the time of shipment as long astitle to our product passes to the distributor or reseller, provided all other criteria for revenue recognition are met. This policy is predicated on our ability to estimate sales returns. We are also required to evaluate whether our distributors and resellers have been met. Subscription, customer supportthe ability to honor their commitment to make fixed and determinable payments, regardless of whether they collect cash from their customers. If we were to change any of these assumptions or judgments, it could cause a material increase or decrease in the amount of revenue that we report in a particular period.

In addition to product sales, Autodesk recognizes maintenance revenues from our subscription program and hosted service revenues are recognized ratably over the contract periods. Customer consulting and training revenues are recognized as the services are performed.

Allowance for Bad Debts. We maintain allowances for doubtful accountsbad debts for estimated losses resulting from the inability of our customers to make required payments. At January 31, 2003, we had aOur bad debt reserve ofwas $9.7 million and $9.2 million.million at January 31, 2004 and 2003, respectively.

Estimated reserves are determined based upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with specific problem accounts. The use of different estimates or assumptions could produce different allowance balances. While we believe our existing reserve for doubtful accounts is adequate and proper,appropriate, additional reserves may be required should the financial condition of our customers deteriorate or as unusual circumstances arise.

Product ReturnReturns and Price Adjustment Reserves. With the exception of contracts with certain distributors, our sales contracts do not contain specific product-return privileges. However, we permit our distributors and resellers to return product in certain instances, generally when new product releases supercede older versions. At January 31, 2004 and 2003, we had aour product returns reserve ofreserves were $20.6 million and $19.8 million.

In the past three years, productmillion, respectively. Product returns as a percentage of applicable revenues have beenwere 5.4% in the range offiscal 2004, 5.5% in fiscal 2003 and 6.0% in fiscal 2002.

For certain distributors in Europe, we offer incremental discounts, or price adjustments, ranging from less than 1% to 4% to 7% annually. During fiscal year, for certain qualifying sales. At January 31, 2004 and 2003, product returnsour price adjustment reserves were $4.2 million and $4.1 million, respectively. Price adjustment claims as a percentage of applicable revenue was 6%. revenues were 3.1% in fiscal 2004, 2.0% in fiscal 2003 and 0.3% in fiscal 2002.

The product returnreturns and price adjustment reserves are based on estimated channel inventory levels, the timing of new product introductions, channel sell-in for applicable markets, historical experience of actual product returns and price adjustment rates and other factors. The greater the channel inventory level or the closer the proximity of a major new product release such as AutoCAD 2004, the more product returns we expect. Similarly, the higher the applicable channel sell-in or the higher the channel inventory level, the more price adjustment claims we expect. During fiscal year 2003,2004, we recorded a reserve for product returns of $33.3$39.3 million and a reserve for price adjustments of $5.9 million, both of which reduced our gross sales.revenue.

While we believe our accounting practice for establishing and monitoring product returns and price adjustment reserves is adequate and proper,appropriate, any adverse activity or unusual circumstances could result in an increase in reserve levels in the period in which such determinations are made.

Realizability of Long-Lived Assets. We reviewassess the realizability of our long-lived assets and related intangible assets annually during the fourth fiscal quarter, or sooner whenevershould events or changes in circumstances indicate the carrying values of such assets may not be recoverable. We consider some of the following factors important in decidingdetermining when to perform an impairment review: significant under-performance of a business or product line relative to budget; shifts in business strategies which impact the continued uses of the assets; significant negative industry or economic trends; and the results of past impairment reviews.

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In assessing the recoverability of these long-lived assets, we first determine their fair values, which are based on assumptions regarding the estimated future cash flows that could reasonably be generated by these assets. When assessing long-lived assets, we use undiscounted cash flow models.models which include assumptions regarding projected cash flows and discount rates. Variances in these assumptions could have a significant impact on our conclusion as to whether an asset is impaired or the amount of the impairment charge. Impairment charges, if any, result in situations whenwhere the fair values of these assets are less than their carrying values. During fiscal 2004, we recognized an impairment charge of $1.8 million related to technology acquired as part of the software division of Media 100, Inc. (See Note 10, “Business Combinations”, in the Notes to Consolidated Financial Statements for further discussion).

In addition to our recoverability assessments, we routinely review the remaining estimated useful lives of our long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter when such determinations are made, as well as in subsequent quarters. This situation occurred during the fourth quarter of fiscal 2003 resulting in additional amortization expense of $0.3 million.

We will continue to evaluate the values of our long-lived assets in accordance with applicable accounting rules. As changes in business conditions and our assumptions occur, we may be required to record impairment charges.

Goodwill. On February 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”.Assets.” Therefore, we no longer amortize goodwill. We test goodwill for impairment annually in the fourth quarter or sooner whenevershould events or changes in circumstances indicate potential impairment. As changes in business conditions and our assumptions occur, we may be required to record impairment charges.

Deferred Tax Assets. We currently have $27.2$17.6 million of net deferred tax assets, mostly arising from net operating losses, tax credits, reserves and timing differences for purchased technologies and capitalized software offset by the establishment of U.S.US deferred tax liabilities on unremitted earnings from certain foreign subsidiaries. We perform a quarterly assessment of the recoverability of these net deferred tax assets, which is principally dependent upon our achievement of projected future taxable income of approximately $70.0$46.0 million in specific geographies. Our judgments regarding future profitability may change due to future market conditions and other factors. These changes, if any, may require possible material adjustments to these net deferred tax assets, resulting in a reduction in net income in the period when such determinations are made.

Restructuring Expenses Associated with Office Closures.Expenses. In November 2003, the Board of Directors approved a restructuring plan that involves the elimination of between 550 and 650 positions and the closure of a number of offices worldwide. This plan is designed to further reduce operating expense levels to help achieve our targeted operating margins as well as redirect resources to product development, sales development and other critical areas. The restructuring charge under this plan is estimated to be up to $37.0 million and is expected to be substantially complete by the end of the third quarter of fiscal 2005.

During the fiscal year ended January 31, 2003,2004, we recorded gross restructuring charges of $25.9$4.9 million of which $12.5$3.6 million related to the elimination of positions in the fourth quarter of fiscal 2004 under the fiscal 2004 restructuring plan, $0.2 million related to the closure of several domestica facility under the fiscal 2004 restructuring plan and international offices. These$1.1 million related to the office closures effected during previous years. The office closure costs were based upon the projected rental payments through the remaining terms of the underlying operating leases, offset by projected subleasingsublease income. The projected

subleasing sublease income amounts were calculated by using information provided by third-party real estate brokers andas well as management judgments and were based on assumptions for each of the real estate markets where the leased offices were located. Should real estate markets worsen and we are not able to sublease the properties as expected, we will record additional expenses in the period when such determinationsrental payments are made. This situation occurred during fiscal 2002, and 2003 and 2004; we therefore recorded additional charges as a result of the inability to sublease abandoned offices. If the real estate markets subsequently improve, and we are able to sublease the properties earlier or at more favorable rates than projected, we will reverse somea portion of the underlying restructuring accruals, which will result in increased net income in the period when such determinations are made.sublease becomes effective.

Legal Contingencies. As described in Item 3. Legal Proceedings3, “Legal Proceedings” and Note 7, Commitments“Commitments and Contingencies,Contingencies”, in the Notes to the Consolidated Financial Statements, we are periodically involved in various legal claims and proceedings. We routinely review the status of each significant matter and assess our potential financial exposure. If the potential loss from any matter is considered probable and the amount can be reasonably estimated, we record a liability for the estimated loss. During the fourth quarter of fiscal 2003 we recorded a $2.5 million reserve related to the Spatial matter. Because of inherent uncertainties related to these legal matters, we base our loss reserves on the best information available at the time. As additional information becomes available, we reassess our potential liability and may revise our estimates. Such revisions could have a material impact on future quarterly results of operations.

Stock Option Accounting. We do not record compensation expense when stock option grants are awarded to employees at exercise prices equal to the fair market value of Autodesk common stock on the date of grant.

Had we recorded compensation expense, our net income would have been substantially less. In addition, if we are required to record compensation expense, our ability to achieve our target operating margins will be adversely affected. The impact of

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expensing employee stock awards is further described in Note 1, “Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements.

Recently Issued Accounting Standards

During November 2002,In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 expands upon existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. A variable interest entity is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period ending after December 15, 2003. Disclosure requirements apply to any financial statements issued after January 31, 2003. The adoption of this statement had no effect on our consolidated financial position, results of operations or cash flows.

In April 2003, the FASB issued Statement of Financial Accounting Standards BoardNo. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” (“FASB”) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34” (“FIN 45”SFAS 149”). FIN 45 elaborates onSFAS 149 amends and clarifies the existing disclosure requirementsaccounting for a guarantorderivative instruments, including certain derivative instruments embedded in its interimother contracts, and annual financial statements about its obligationsfor hedging activities under guarantees issued. It also clarifies that at the time a guaranteeStatement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS 149 is issued, the guarantor must recognize an initial liabilitygenerally effective for the fair value of the obligations it assumes under the guarantee and must disclose that information in its financial statements. The initial recognition and measurement provisions apply on a prospective basis to guarantees issuedcontracts entered into or modified after DecemberJune 30, 2003 and for hedging relationships designated after June 30, 2003. Adoption of SFAS 149 did not have a material impact on our consolidated financial position, results of operations or cash flows.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”) which requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2002,2003, and otherwise was effective at the disclosure requirements apply to guarantees outstanding as of December 31, 2002. We adopted the provisions of FIN 45 effective January 31, 2003. Somebeginning of the software licenses we grant contain provisions that indemnify licenseesfirst interim period beginning after June 15, 2003. The adoption of this statement had no effect on our software from damages and costs resulting from claims alleging that our software infringes the intellectual property rightsconsolidated financial position, results of a third party. We have historically received only a limited number of requests for indemnification under these provisions and have not been required to make material payments pursuant to these provisions. Accordingly, we have not recorded a liability related to these indemnification provisions.operations or cash flows.

Overview of Fiscal 20032004 Results of Operations

(in thousands)